It’s been 15 years since the Tesla Roadster came out, a nascent model in an emerging segment. Since then, the Tesla brand has established itself as the global leader in all matters of fully electric vehicles, with new competitors emerging just over the past few years.
The market has seen models come and go, including the Mitsubishi i-MiEV, CODA Sedan, THINK City, and a host of full-electric versions of the Honda Fit, Smart ForTwo, Ford Focus, and the Chevrolet Spark. Each of these models was cheaply priced, but driving range and battery life ensured that few consumers would be interested.
The one attribute of most first-generation electric cars was their affordability. Along with a federal tax credit and local incentives, EV prices were competitive with gas models. But the sub-100-mile range of most models, including just 62 miles for the Mitsubishi, made little sense for commuters.
Next-Generation Electric Vehicles
As the market matured, old models gave way to new ones along with longer vehicle ranges. Tesla followed the Roadster with the Model S sedan, supplying a range of up to 265 miles. The Nissan Leaf, arguably the first pure electric car for the masses, has stayed around as its low price and expanding range limit kept it competitive. Indeed, the Leaf’s initial 73-mile range is now pegged at 149 miles, with one version reaching 226 miles.
Today, manufacturers are striving to achieve a 250-mile range, with the current set of competitors attaining that threshold but at a steep cost to affordability. It’s the batteries that add to the cost of electric vehicles, by far the most expensive component in any EV.
Consequently, today’s EVs easily cost $40,000, with $50,000 or more as the likely price point. And these prices are from such mainstream brands as Volkswagen, Ford, Hyundai, and Kia, with premium brands costing tens of thousands of dollars more. Even with federal tax credits, the cost for a comparable gas model is lower, making it difficult to justify a purchase. Add in other factors such as inflation, availability, and the persistent materials shortage, and the EV headwinds remain strong for most Americans.
Tesla Throws Down the Gauntlet
Tesla remains the market leader in the EV segment, selling nearly 1.4 million models worldwide in 2022. Of that number, an estimated 491,000 vehicles were sold in the United States. That figure represents eight times the amount of EVs Ford sold, the number two EV seller in America. Tesla, though, is counted as a premium brand with such competitors as BMW, Cadillac, Lexus, and Mercedes-Benz to cross-shop. Thus, Ford is the top-selling mainstream EV producer.
Tesla wields immense influence and recently flexed its muscles to lower prices across the board, upwards of 20 percent on some models and trims. However, Tesla didn’t do that to merely pass savings to consumers, but to make its vehicles eligible for consumers to claim the $7,500 federal tax credit. That credit is limited to $80,000 for SUVs, but $55,000 for cars. There are other restrictions in play, but Tesla has met them already.
Ford Lowers Prices
With Tesla lowering prices, other manufacturers are bound to follow or risk losing sales. This month, Ford did just that by lowering the cost of its Mustang Mach-E utility vehicle. Further, Ford announced that it will sharply increase production “…to help reduce customer wait times and to take advantage of streamlined costs to reduce prices across the board.”
Specifically, Ford is lowering the price of the Mach-E by $600 to $5,900, depending on the grade. For example, its base Select RWD Standard Range model falls by $900 to $45,995. On the top end, the Mach-E’s GT Extended Range model now retails for $63,995, falling by nearly $6,000. Likely, Ford’s move will pressure its main competitors to do likewise or risk Ford gobbling up increased market share.
EVs may yet play a small, but growing part in the new vehicle marketplace, but with lower prices available, the segment is certain to enjoy robust gains. Wait lists, though, remain long for some models, while all-new models continue to arrive throughout the year.
Credits for New Clean Vehicles Purchased in 2023 or After. Internal Revenue Service.
(2023, January 30). Ford to Significantly Increase Production of Mustang Mach-E in 2023, Reduces Prices Across the Board. Ford Media Center.
Photo by Alexander Mils, courtesy of Pexels.