Ford’s Electric Strategy Backfires: $3.6 Billion Market Value Drop Following Tesla’s Path

Ford’s decision to follow Tesla’s playbook by increasing production and lowering prices for the F-150 Lightning electric pickup leads to a substantial market value decline.

• Ford’s decision to triple production and lower prices for the F-150 Lightning electric pickup mirrors Tesla’s successful strategy.

• The move aims to increase economies of scale, lower costs, and make EVs more affordable for a broader consumer base.

• However, investors responded negatively, causing a significant decline in Ford’s market value and raising concerns about potential oversupply in the EV market.

Ford Motor Co. is adopting a strategy reminiscent of Tesla’s playbook by tripling production and reducing prices for the F-150 Lightning electric pickup. This move is intended to capitalize on economies of scale, decrease costs, and broaden the accessibility of electric vehicles (EVs). However, this decision caused a dramatic $3.6 billion drop in Ford’s market value within a single day.

Tesla’s successful approach of ramping up production and lowering prices has yielded substantial results, with the company’s stock price more than doubling this year. Ford is now following a similar trajectory, increasing production rates for the F-150 Lightning and implementing price cuts. During a period of parts shortages and inflation in battery raw materials, both Tesla and Ford initially raised prices. However, with an improved chip supply and decreasing costs of battery inputs like lithium and nickel, Ford can now pass on these savings to consumers.

Despite aligning with Tesla’s successful strategy, Ford’s stock experienced a significant decline of 5.9%, marking its largest drop in five months. The markdowns, including discounts of up to 17% for the cheapest F-150 Lightning Pro model, contradicted CEO Jim Farley’s previous statements about focusing on EV segments with “serious pricing power” and avoiding commoditized markets. Nevertheless, Ford’s base model still maintains a price approximately $10,000 higher than the original plan from two years ago, and the electric pickup will be sold at a premium compared to its gas-powered counterpart, starting at $33,695 in the U.S.

Ford, General Motors, and Stellantis face the critical challenge of maintaining their dominance in the full-size truck segment during the electric age. Full-size pickups have represented Detroit’s stronghold in the combustion era, with Japanese brands attempting but failing to penetrate the market dominated by American giants. Ford’s quick conversion of the gas-fueled F-150 to battery power provided it with a head start over competitors such as Rivian and Tesla. However, Tesla’s recent production announcement of its Cybertruck, delayed by two years, and Rivian’s increased output have intensified the competition.

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Ford relies on the sustained demand for combustion F-Series trucks, the best-selling vehicle line in the US since the Reagan administration, to transition successfully to electric versions. After reopening its Michigan factory next month, Ford aims to achieve an annual run rate of 150,000 F-150 Lightning units. Furthermore, the company plans to introduce a second-generation electric pickup in 2025, with a new factory in Tennessee capable of producing up to half a million vehicles per year.

Investors exhibited significant unease with Ford’s decision to reduce prices significantly and at an early stage of its transition to electric trucks. Concerns arose regarding potential oversupply in the US EV market. Analysts speculate that the price cuts could be influenced by both demand and supply factors. The market impact and Ford’s ability to navigate the transition to electric trucks will become clearer with time.