Ford promises cheap electric cars by 2026 that will trigger a price war

The executive director of Ford, Jim Farleyaffirms that the global automobile industry is heading for a great price war in the next years. As the manufacturing costs of electric cars come down, brands will sell electric vehicles at a price of around $25,000.

The declarations by Jim Farley coincide with the company’s announcement of a $3.7 billion investment to upgrade three of its factories, creating 6,200 new jobs.

A price war in the electric car segment would be beneficial to the consumer by driving prices down. In general, a price war is carried out to eliminate competitors from the market or to gain an advantage, such as a larger market share, over them by selling products and services at a lower price.

When the cost of acquiring products is reduced, customers prefer to buy at a lower price, which increases the company’s income. Customers benefit from this process as they pay less for products.

In this case, Jim Farley is telling his shareholders that Ford could start that price war. And in fact, Ford is preparing for it, first separating the business unit electric cars (Model E) from the rest of Ford, reducing the distribution costs of its cars, and reducing marketing spending on electric cars seeking to emulate Tesla and its zero dollar investment in that aspect, for example.

Jim Farley, CEO of Ford

But also by designing new platforms that are easier to manufacture and therefore cheaper, or even using existing platforms, such as the MEB the Volkswagen from this same 2022.

However, it is not for tomorrow. Currently, it costs much more to make an electric car than one with a gasoline engine, Farley said.

Farley gave as an example, the Mustang Mach-EStarting at about $44,000 in the U.S. but typically selling for more, it costs about $25,000 more than a comparable Ford Edge gasoline SUV, he said.

Ford Mustang Mach E

And it is that the costs are still exorbitant compared to a gasoline model. Single Mustang Mach-E battery costs $18,000and the shipper adds another $3,000.

While new battery chemistries arrive, which use less precious, expensive and scarce metals, such as nickel and cobalt, and which should significantly reduce costs, the price of raw materials and especially those necessary for the manufacture of batteries, they are going back up.

The price of electric cars not to go up, with one exception

Chevrolet Bolt

In the United States, brands like Tesla and Cadillac, as well as Rivian and Lucid, have increased the prices of their electric cars. General Motors warned that the cost of its raw materials in 2022 will reach $5 billiondouble what the manufacturer had previously anticipated.

And it is precisely at that precise moment of widespread price increases that General Motors goes and drop the price of your Chevrolet Bolt and Bolt EUV (the crossover version of the Bolt) in 6,000 dollars. That brings the access version to $26,595, up from $32,495 previously. See thus approaching the 25,000 dollars predicted by Farley.

Chevrolet Bolt

Why that move from GM? General Motors has to make up lost sales in 2021 due to recall of over 140,000 bolts due to a risk of fire, going so far as to stop manufacturing and selling the car from April 2021 until the beginning of 2022. And that year, Bolt sales were well on their way, reaching 24,828 units in just over four months.

In a context of a general rise in prices and strong demand for electric cars, proposing an electric car at just over $25,000, when most exceed $35,000 is equivalent to declaring a price war. When all similar products are expensive, being cheaper is a huge advantage.

It is true that GM does not do it so much to monopolize the market as to make up for lost time and sell the car again with the same success as before the massive recall and the crisis in the reputation of the car that it caused, with alarming requests from GM.

Perhaps it is just a conjunctural exception to the situation of the Bolt, but if the move goes well for General Motors (and for this it must have very well controlled finances), other brands could be tempted to do the same. And there, we would have our first price war in the United States in the electric segment.

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I started to play with tech since middle school. Smart phones, laptops and gadgets are all about my life. Besides, I am also a big fan of Star War. May the force be with you!

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