Ford CEO Jim Farley thinks the electric vehicle (EV) industry is set for an upcoming price war where automakers will be competing for sales of EVs under $25,000.
Farley made the comments at the Bernstein Strategic Decisions Conference on Wednesday, saying the catalyst for the price war will be costs reductions in building an EV.
Farley said it currently costs Ford an extra $25,000 to build a single Mustang Mach-E compared to a comparable gas-powered Ford Edge SUV. The majority of those extra costs arise from the battery and charger, which Farley says adds $21,000 alone.
However with new and cheaper battery chemistries coming, and as automakers catch up to Tesla and become more proficient in building EVs, those costs will come down in the next few years.
“So I believe there will be our industry is definitely heading to a huge price war,” Farley said. (via ABC)
It is not just the cost of the battery that cuts into Ford’s EV margins compared to Tesla. Farley said the automaker will also need to cut distribution costs ($2,000 more per vehicle than Tesla), cut down on advertising (currently $500 to $600 per vehicle), makes their EVs more aerodynamic so they can use smaller batteries, and to also simplify production.
“Half the fixtures, half the work stations, half the welds, 20% less fasteners. We designed it, because it’s such a simple product, to radically change the manufacturability,” Farley said.
Farley said their next-generation of EVs will be launching in 2026 as the company builds out its infrastructure, but he hopes to make some of these changes before then to help improve their bottom line.
“It’s going to take a little while, but I’m putting pressure on myself to get to making money on these vehicles,” Farley said. “It’s going to be a good investment.”
Jim Farley says Ford doesn’t have the expertise to take on Tesla, but change is coming