It’s highly unusual for a car manufacturer to slash the MSRP of a vehicle after a launch. But that’s exactly what’s happened to the four best-selling electric vehicles in the U.S. now that Ford has joined Tesla in announcing major price cuts.
Could this be the start of a full-fledged electric car price war? The two manufacturers’ moves certainly put pressure on other players in the EV industry to make cars more affordable, according to Alain Nana-Sinkam, SVP of business development at the automotive pricing company TrueCar.
“There hasn’t been a whole lot that’s been conventional about the way Tesla has gone to market in selling vehicles, but the concept that there would be significant changes in manufacturer-suggested retail prices in the middle of the model year is a very uncommon thing in our industry, especially at these levels — thousands of dollars,” he says.
Whether Ford and Tesla’s competitors will announce price cuts of their remains to be seen. The overarching trend in the market is actually the opposite: Prices have been rising steadily, and the average new car is now selling for an all-time high of nearly $50,000.
Price cuts aren’t the only way to make cars more affordable. The more traditional way to accomplish that and entice buyers is with incentives, which can take the form of financing deals or cash rebates. However, the option of cutting sticker prices has particular appeal in the EV market because cars that cost over specific amounts (which depend on the type of vehicle) aren’t eligible for new EV tax credits of up to $7,500.
With Ford slashing the MSRP for its F-150 Lightning pickup trucks by nearly $10,000, the 2023 EV price wars are truly heating up.
New electric vehicle prices are down nearly 20% overall in the past year as a growing list of manufacturers are lowering sticker prices or offering rebates or cash incentives to increase sales.
Recent data indicates that dealerships are becoming oversupplied with electric cars — a twist following a prolonged period when the availability of EVs was limited. As the market shifts, lower prices are in store for consumers.
Major price cuts from Tesla kicked off the competition among automakers at the start of 2023. Ford just made its second big countermove, cutting prices on the Lightning truck by nearly $10,000 for some trims after previously lowering the manufacturer’s suggested retail price (MSRP) for its other flagship EV model, the Mustang Mach-E SUV.
One of the top-rated vehicles of the year, the 2023 Ford Lightning, now has a starting MSRP of 59,974 before the price cut. Buyers can also qualify for up to $ 40,000 price, which the company touted when it introduced the first version of the vehicle in 2022.
Ford officials said high material costs and supply constraints forced them to increase prices in 2022 and 2023. But now the company can accommodate more demand because a plant is undergoing final upgrades that will soon enable production at a pace of 150,000 units of electric trucks per year.
The Lightning price cuts likely won’t be the last EV reductions this year. EV experts note that automakers across the industry are getting access to cheaper batteries, which gives them room to cut sticker prices.
At the same time, they’re facing more pressure to stimulate demand with competitive pricing amid high auto loan interest rates and lacklustre demand for certain EVs. That means some automakers will likely try to sweeten the deal for customers with lower prices as EV production rises and a flurry of new models hit the market.
EVs with Reduced Prices in 2023
Several EVs have become more affordable due to price cuts or cash incentives:
- Ford Mustang Mach-E: The starting price has been reduced to $42,995, with other trims experiencing even more significant MSRP reductions.
- Tesla Model 3: The current base trim price reflects an overall cut of $6,750 from the beginning of the year.
- Tesla Model Y: The long-range trim of the Model Y SUV is now $15,500 cheaper than it was at the start of the year.
- Tesla Model S: The base trim has seen a price reduction of $16,500 since the beginning of the year, with two separate cuts in January and March.
- Tesla Model X: The base price of the Model X luxury SUV has dropped by $22,500.
- Hyundai Ioniq 6: Shoppers can enjoy a $5,000 cash incentive in July on select trims of this electric sedan, reducing the price to $36,600.
- Kia EV6: Kia offers a $3,750 cash incentive for its EV6 SUV, lowering the price to $38,850.
- Audi e-tron GT: Audi is providing a substantial $12,500 purchase credit in July, reducing the price to $92,400.
The next step – Will EV Prices Fall?
The big question now is whether other EV manufacturers will cut sticker prices. A few companies have already said they don’t have plans to do so, but the situation is still developing.
General Motors CEO Mary Barra said in an earnings call Tuesday: “We think, right now, we’re priced where we need to be. Of course, we’re going to monitor it, and we’ll make sure we remain competitive.”
Volkswagen Group CEO Oliver Blume made similar comments to a German newspaper, explaining the company believes in its current EV pricing and is focused on reliability.
Brian Moody, executive editor for vehicle valuation company Kelley Blue Book, says some brands may soon find that cutting prices is necessary, noting that interest in Teslas surged on its website in January. “Considering Tesla’s substantial price cuts, other automakers will likely follow. They may not say Tesla is the reason for the price cuts, but that certainly adds pressure,” he says.
What It Means for Consumers of Electric Vehicles
In light of the price cuts and the new tax credits, Pat Ryan, CEO of the car shopping app CoPilot, says, “There’s probably never been a better time to buy an electric car.”
The Tesla price cuts will likely force competitors, including Ford, to lose money on at least some of their electric cars to gain market share, which is great news for buyers, he says.
Shoppers who wait, however, will have many more vehicles to choose from, especially with GM and BMW’s ambitious plans for launching dozens of electric cars by 2025 between the two of them, Ryan says.
If you’re considering a used EV, those prices have also declined significantly. “For the first time since November 2021, the average used EV on the market is below 48,700, so prices have come down,” Ryan says. Lower gas prices and Tesla’s cuts on new vehicles have contributed to the softening.
The Changing Landscape of Electric Cars
In summary, the electric car market is witnessing a remarkable shift as Tesla and Ford lead the way in reducing prices, potentially sparking a price war among EV manufacturers. These unprecedented price cuts are making electric vehicles more accessible to consumers and come at a time when the market is experiencing oversupply and increasing competition.
While some automakers may resist immediate price reductions, the pressure to stay competitive in this evolving market may lead to more price cuts in the near future. As electric vehicles become more affordable and diverse in choice, consumers stand to benefit from this dynamic transformation in the automotive industry.