Electric cars - Farley (Ford): "Prices will drop and the price war will return"

Price war and consolidation are two topics that have now completely disappeared from any discussion on the present and future of the automotive sector: the first is because the manufacturers, also thanks to the generalized scarcity of products, have acquired a “pricing power”, the power of determination prices, so high as to make a continuous run-up to win customers with amazing discounts and promotions useless as in the past; the second because today all attention must be focused on the consequences of the ecological transition. In this sense, the statements of the major representatives of the auto industry are unambiguous. Yet there is an exception, a voice out of the chorus: it is that of Jim Farley. For the CEO of FordIndeed, the return of both the price war and consolidation is now around the corner. And as has already been feared by many, the Chinese will benefit.

Ev prices will drop. During a conference of the investment bank Bernstein, the American executive explained that the current situation, characterized by low inventory levels and strong demand and therefore high price lists, is about to undergo substantial changes. Farley, contrary to what some of his counterparts like Carlos Tavares by Stellantis o Luca de Meo of Renault, foresees an imminent reduction in the production costs of cars on tap to a level that will allow prices to drop to around $ 25,000, at least for some types of models. “I believe that our industry is heading towards a gigantic price war,” said the manager, noting that today Ford has the Mustang Mach-E at about 45,000 dollars: the battery pack alone has a production cost of 18,000 dollars and therefore there is no room to lower the price list.

New platform, costs down. However, significant improvements in the spending structure associated with accumulators are on the way, and Ford is also developing a platform for next-generation electric that should lead to “significant reductions in manufacturing costs.” “Half the finish, half the workstations, half the welds, 20% fewer fasteners – we designed it to radically change manufacturing capabilities,” added Farley, explaining that the Blue Oval, to compete on prices, it is also ready to reduce distribution costs and advertising expenses. In this regard, the Dearborn number one criticized the disbursements for the commercials of the SuperBowl and praised Tesla’s marketing policies and direct selling model, which he believes costs $ 2,000 less per vehicle than Ford spends on its dealer network. Farley therefore said he was convinced of the need to abandon traditional marketing strategies in the sale of electric and reserve the related resources for incentives or upgrades and customer service.

China and consolidation. Obviously, the question of prices is directly linked to the structure of the sector and the possibility of a new consolidation. The transition to mobility on tap, according to the American executive, will force houses and suppliers to proceed with mergers and acquisitions in the coming years, abandoning the preferred time path of collaborations and joint ventures. Furthermore, the enormous amount of investments in new technologies will push smaller companies into the arms of the larger ones and put pressure on startups already struggling to obtain new financing: “They are focusing – explained Farley – on a market that is not big enough to justify their valuations and the capital they are spending ”. Traditional manufacturers and suppliers “will absolutely consolidate,” he continued. “There will be some big winners, some will make it and some will not. Many of the small operators cannot afford to face this transition ”. For sure, the Chinese will be among the winners: “Something shocking is coming and I feel it will favor many of China’s new entrants.”

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