Ford Cuts Mustang Mach E Prices, Following Tesla Move

Text size

The automotive pricing wars are on. Investors aren’t thrilled.

Ford Motor

(ticker: F), on Monday, cut prices for its Mustang Mach E electric vehicle, just a few weeks after

Tesla

(TSLA) cut prices for its vehicles, including the similar sized Model Y.

The range of prices for the Mach E lineup now goes from about $46,000 to $64,000. The prior range was about $47,000 to $70,000.

The basic model is a rear-wheel-drive Mach E with a standard-range battery that gets about 220 miles per charge. The top of the line Mustang Mach E is a GT edition that comes with an extended range battery. Larger battery packs can be purchased at all trim levels.

With the price cuts, most Mach Es should qualify for the $7,500 purchase tax credit that went into effect in 2023 as part of the recently passed Inflation Reduction Act. The Internal Revenue Service, which is responsible for implementing the new credit, essentially considers the Mach E a sedan-like car. That means it needs to be priced below $55,000 to qualify, while trucks and SUVs can be eligible with prices up to $80,000.

Tesla

also cut the prices of the base and performance Model Y, the vehicles most comparable to the March E, in part so that the base model would qualify for the credit. The IRS treats the Model Y the same as a Mach E.

The base price of a Model Y is now about $53,000, while a Model Y performance edition costs about $57,000. The base price of a Model Y was about $66,000 at the start of 2022; a performance edition started at about $70,000.

The Model Y is the best-selling EV in the U.S. with roughly 252,000 units purchased in 2022. The Mach E is third, with just under 40,000 units sold in 2022.

Ford says it is increasing production of the Mach E “significantly” to reduce customer wait times.

Coming into Monday trading, Tesla stock was up about 55% since the company cut prices in the U.S. on Jan. 12. Investors believe that the company is profitable enough to be able to lower prices to generate more demand. Tesla’s operating profit margin in 2022 came in above 16%, while the comparable figure for Ford is expected to be about 7%.

Tesla CEO Elon Musk said on the company’s Jan. 25 earnings conference call that the price cuts led to a surge in ordering activity. That is is keeping pressure on competitors to match pricing, and lower their costs to build EVs.

Ford, of course, makes a lot more than EVs, which accounted for roughly 3% of its U.S. sales in 2022. The Mach E price cuts shouldn’t greatly affect what Ford charges for its trucks and SUVs.

Total EV penetration of new U.S. car sales in 2022 amounted to a little less than 6%, which implies there is ample room for both Tesla and Ford to sell electric cars.

Still, investors seem to be reacting with a little nervousness. Ford stock was down 1.7% in early trading Monday. The

S&P 500
and

Dow Jones Industrial Average
were off about 0.7% and 0.1%, respectively. Coming into Monday trading, Ford stock was up about 14% so far this year.

Investors can ask management about the cuts and the impact on profitability when Ford reports its fourth-quarter earnings on Thursday afternoon. Management has scheduled a conference call for 5 p.m. Eastern time.

Write to Al Root at [email protected]