EV Price War: Ford Cuts Prices On Its F-150 Lightning Pickup

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The softening in EV prices, driven by the correction in key raw material prices has reached the US markets with a jolt. Ford stretched the price war in the EV industry by announcing a sharp cut on the prices of its F-150 Lightning trucks on July 17. This includes a 17 per cent cut for the base model. The firm aims to boost its share of the EV market dominated by Tesla.

Ford said that the reductions, which effectively dropped the Lightning’s starting price by almost $10,000, to $49,995, were the result of lower material costs and the company having more factory output. Some versions will get a steeper price cut than others.

Price Wars

Amidst the EV price war initiated by Tesla a few months ago, legacy automakers are facing a buildup of EVs at dealerships due to slowing sales. Tesla has been consistently reducing prices, and now Ford has joined in by offering discounts on the F-150 Lightning.

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In a tweet on Monday, Tesla CEO Elon Musk commented, “The Ford Lightning is a good vehicle, just somewhat expensive, especially given the high-interest rates these days for any kind of loan.” Last week, Tesla announced that it finally produced its first Cybertruck at its plant in Austin, Texas, following a two-year delay.

In response to Tesla’s price-cutting strategies, Ford started with slashing the price of the Mustang Mach-E by around $10,000. Tesla had previously lowered its car prices in October of last year after its Q3 2023 deliveries fell short of consensus estimates. The company repeated this pattern when the Q4 2022 delivery report also missed estimates, leading to further price reductions.

While the ongoing price war makes EVs more appealing than ever, it might make early adopters feel a little shortchanged, and perhaps even make many prospects delay purchases, hoping for further drops. Resale values have followed with declines though, which might tempt more people to jump in. Ford has devised a plan to reimburse early Mach-E owners, many of whom shared concerns about the loss in value.

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Price Drops in Key Commodities

In recent times, there has been a noticeable decline in the prices of essential metals that are utilized in the production of electric vehicles (EVs). The price of lithium, a crucial component in EV batteries, has experienced a significant decrease, dropping by half since its peak last year. This decline can be attributed to a slowdown in EV demand within China, the largest market for electric vehicles. China controls over 85% of the market for refined lithium.

According to China’s National Bureau of Statistics, the growth in the production of new energy vehicles (NEVs) has slowed down in the first two months of 2023 compared to September 2022. This slowdown in demand can be primarily attributed to the expiration of EV subsidies in China at the end of the previous year.

As a result, the prices of key EV commodities have been affected, with lithium carbonate, which serves as a benchmark for lithium prices, reaching its lowest level in approximately 19 months, averaging 177,500 yuan ($24,500) per tonne from mid-to-late April. This represents a 69 per cent decrease from the peak observed in November 2022.

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Furthermore, European spot prices for cobalt, which serve as an international benchmark, were recorded at around $15.25 per pound by the end of June 2022, marking the lowest level since August 2020. These prices have declined by 62 per cent from their peak in May 2022.

In just January alone, there has been a significant decline in lithium prices, with a decrease of approximately 20 per cent. Other crucial battery components, such as cobalt, have experienced an even more substantial drop of over 50 per cent, while copper witnessed a dip of roughly 20 per cent during the same period. Consequently, the United States observed an average reduction in electric vehicle (EV) prices of about $1000 between January and February.

Subsequently, as producers curtailed their output, the prices started to rebound but eventually stabilized in June. The decreased prices of battery metals are expected to facilitate the widespread adoption of EVs. The International Energy Agency (IEA), in an outlook released in April, stated that if the decline in lithium prices persists, it could result in lower battery prices. Given that batteries account for one-third of EV production costs, the impact of reduced prices will be substantial.

Simultaneously, there is a projected surge in lithium demand in the long term. The IEA anticipates that if net-zero greenhouse gas emissions goals are achieved by 2050, the demand for lithium will increase approximately thirteenfold compared to 2021 levels. Additionally, the agency predicts that cobalt prices will triple, and nickel prices will double.