Price adjustments at Tesla and Ford | Fundamental trend in electricity or illusion?

The recent price adjustments decreed by Tesla and Ford – for the Mustang Mach-E model – could suggest that a backstory is emerging in the electric vehicle niche. However, everything indicates that we will have to be patient before we see a general pullback in prices.

Some automakers, such as Volkswagen, have publicly stated that they have no intention of following in the footsteps of their competitors. Other auto giants are struggling to ramp up production, forcing consumers wanting to purchase an electric vehicle to wait on a waiting list.

“There are only a few companies that can boast of making a profit and selling at lower prices,” analyzes Simon-Pierre Rioux, president of the Association of Electric Vehicles of Quebec (AVEQ).

Tesla gets the ball rolling

Tesla found itself in the spotlight when it slashed its prices last month. With a Manufacturer’s Suggested Retail Price (MSRP) of $54,990—reduced by $5,000—the Model 3 vehicle is once again eligible for the $5,000 federal rebate. If the provincial incentive of $7,000 is included, the car qualifies for a reduction of $12,000.

Then, on Jan. 30, Ford slashed prices for versions of the Mustang Mach-E — a Tesla Model Y rival — from $4,750 to $8,500. The American manufacturer wants to step on the accelerator and produce more.

“I’ve read the same things as you and in the brands we offer, we don’t see that,” replies Norman John Hébert, President and Chief Operating Officer of Groupe Park Avenue, when asked about Tesla’s recent announcements and Ford. “We don’t see any further price cuts. I think it’s a bit early. »

For several manufacturers, supply remains an issue. The pressure on battery manufacturers is high. Despite everything, certain trends are encouraging and point to some easing when supply meets demand. For example, the cost of a battery pack continues to decline. According to a study by the US Department of Energy, the average manufacturing price – when a company can produce at least 100,000 battery packs per year – has declined by about 90% since 2008 to below $200. US.

“This decline is due to improvements in technologies, products, as well as the increase in production volume,” explain the American authorities.

Early adjustments, but…

A reduction in production costs, once supply problems are resolved, could drive prices down. However, some automotive giants still have a crust to eat when it comes to electricity production. The Mustang Mach-E, which started selling towards the end of 2020, is a good example. Ford recently discovered that the vehicle had 1.6 km of excess wiring, which had significant financial implications.

“We didn’t know the vehicle weighed around 70 lbs. [32 kg] too much and that it cost $300 more per battery,” admitted the CEO of the American multinational, Jim Farley, on February 4, in a conference call with financial analysts.

According to the president of the AVEQ, Ford nevertheless reduced the price of the vehicle by anticipating cost reductions in the longer term.

The next year will mark the arrival of new electric models at dealerships. Among these is the Chevrolet Equinox, which will retail for $35,000.

With government rebates, the electric version will be cheaper than the gasoline version. The reason: General Motors (GM) has developed a platform – Ultimum – which will be found on its other electric models, such as the Blazer, the GMC Hummer and the Cadillac Lyriq.

So there are economies of scale that are anticipated by GM.

“From one manufacturer to another, we see that it is really different and uneven,” remarks former PQ environment minister Daniel Breton, currently president and CEO of Electric Mobility Canada. “As long as we are unable to meet demand, there is no reason to lower prices. »

The dealers interviewed by The Press foresee a fluctuation in the prices of electric vehicles in the longer term. But most agree on one thing: at the rate things are going, it’s not for tomorrow.