Ford Takes $3.6 Billion Hit for Following the Tesla Playbook
Comment of the Day

July 18 2023

Commentary by Eoin Treacy

Ford Takes $3.6 Billion Hit for Following the Tesla Playbook

This article from Bloomberg may be of interest to subscribers. Here is a section: 

Tesla Inc.’s script for popularizing electric vehicles — ramp up production, leverage economies of scale to lower costs and make automobiles affordable enough for a mass market — reads a lot like the one Ford Motor Co. first drew up over a century ago.

Following this game plan has paid dividends lately for Tesla. The stock has more than doubled this year, even as the carmaker has slashed prices. For Ford, taking a page out of this playbook just wiped away about $3.6 billion in market value in one day.

The maker of the best-selling F-Series announced it’s going to triple the production rate for its first electric pickup, the F-150 Lightning, which it initially planned to sell for just shy of $40,000. Like Tesla, Ford jacked up prices during a prolonged period of parts shortages and battery raw-material inflation. Now that chips are more plentiful and the cost of battery inputs including lithium and nickel have eased, Ford is lopping thousands of dollars off what it’s charging customers.

“Everyone loved it when Tesla did it,” said David Whiston, an auto analyst at Morningstar. “As long as they’re truly making improvements in production costs and input costs, then giving some of that back to the consumer makes sense.”

Eoin Treacy's view

The big bet in the auto sector is on when the Tesla cybertruck will be delivered. The company has been taking deposits for several years but with little to show in terms of a marketable product. Rumours are brewing that the first will finally be delivered at the end of this year and large scale production will begin next year.

Tesla began the EV price war and other companies are under pressure to follow suit. Ford is likely cutting prices now in an attempt to poach some of Tesla’s potential pickup truck market.

Ford failed to sustain the break above $15 in 2022 and came back down into the underlying range. It is now firming in the region of the upper of the base formation.

Tesla remains on a recovery trajectory and is back testing the $300 level. A break in the sequence of higher reaction lows will be required to question the recovery. 

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