Tesla launched an EV price war. How Ford is firing back

In January, Tesla Inc. launched the opening salvo in what experts have described as an EV price war when it slashed its pricing by as much as 20%.

Last week, Ford Motor Co. fired back.

On Monday the Dearborn, Michigan, automaker announced across-the-board price cuts on the all-electric Mustang Mach-E. The cuts ranged from $600 to $5,900, with the largest reduction bringing the price of the GT extended range version of the Mach-E down to $63,995. The vehicle's pricing now ranges from $45,995 to $63,995. Previously, it topped out at just below $70,000.

Existing Mach-E customers who are waiting to take delivery of their vehicle will automatically receive the reduced price, Ford said. The automaker will reach out directly to customers with a sale date after Jan. 1, 2023, who already have their vehicles. Meanwhile, Ford's financing arm, Ford Credit, will offer interest rates as low as 5.34% on Mach-Es ordered by April 3.

The move follows a previous price increase on the Mach-E last year, and as Ford has boosted prices on its all-electric F-150 Lightning. Ford also said it would be boosting Mach-E production at its Cuautitlán, Mexico, plant to 130,000 units this year from 78,000 units in 2022.

"At Ford, we want to make EVs more accessible, so we’re increasing #MustangMachE production & reducing prices across the Mach-E lineup," CEO Jim Farley said in a statement on Twitter. "Scaling will shorten customer wait times. And with higher production, we’re reducing costs, which allows us (to) share these savings with customers."

Ford's stock closed down 2.86% to $12.89 per share Monday.

“Wall Street might fret about it, but it’s a necessary near-term pain for long-term gain," said Dan Ives, an equity analyst at Wedbush Securities. "Tesla has a lot more flexibility on the margin front, but Ford, their back’s against the wall. They need to do the price cuts.”

Sacrificing margins for volume

The move, while applauded by some analysts, may raise some questions among investors about profitability, as Ford executives previously have said that higher commodity costs wiped out the Mach-E's profitability. Like Tesla, Ford is aiming to make up for it by boosting volumes.

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