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Non-Tech : Ford Motor Company
F 11.78-0.6%Jun 18 4:00 PM EDT

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From: Savant7/18/2023 9:19:21 AM
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Ford slashed prices on its electric F-150 Lightning pickup truck by up to nearly 17% Monday, the latest sign that swelling inventories and fierce price competition are softening the market for the technology the auto industry is betting its future on.

Ford Motor said Monday 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.

The Lightning is one of Ford's highest-profile EV launches yet and is key to its growth plans as it aims to transition more of its lineup away from the gasoline-powered vehicles that continue to drive the bulk of its profits.

Automakers globally have been investing hundreds of billions of dollars to create new electric models, build battery factories and construct new EV plants. The capital binge -- in part prompted by tightening carbon-emissions requirements -- has over the years generated enthusiasm among investors seeking a growth opportunity in the wake of Tesla's meteoric rise in stock value.

Along the way, auto executives have touted strong consumer interest in their latest EV entries, as the companies set ambitious targets for converting their lineups to electrics. Now, Ford's Lightning price cut is the latest development raising questions about the strength of the budding EV market.

The pace of sales overall on EVs -- while much stronger than the broader car market -- slowed in the first half of this year. Meanwhile, some car companies are already reporting excess inventory, a reversal of a year earlier when many newly released models had multimonth wait lists.

Some automakers also have been cutting prices on some top-selling EV models.

Tesla -- which had 60% U.S. market share in electric vehicles this year through June, according to Motor Intelligence -- reported a surge in second-quarter deliveries that was helped by sharp price cuts and discounts rolled out earlier this year. Also over the weekend, Tesla began production of its Cybertruck nearly four years after the prototype was introduced.

Ford in January responded to Tesla's price cuts by lowering the price on its Mustang Mach-E electric SUV, a direct rival to Tesla's top-selling Model Y. The Dearborn, Mich., car company reduced prices yet again on the Mach-E in May.

When first introduced, the Lightning had a starting price tag of around $40,000. However, Ford several times hiked the sticker price during a period of strong demand and to help offset higher expenses related to materials and the battery inputs.

Shares of Ford fell 5.9% Monday, following news of the EV pickup's price cuts.

Ford Chief Executive Jim Farley has expressed reticence about price cuts on EVs, citing concern that it hurts resale values and brand image. Ford has been able to raise Lightning prices over the past year in part because there are few EV truck options on the market.

"There's a limit on how far we'll go," Farley said of the company's price cut strategy at a Wall Street Journal event in May. "I think it's a worrying trend."

EV pricing has softened throughout the year as some automakers have followed Tesla's lead. Industrywide, the average price buyers paid for an EV decreased nearly 20% from June 2022 to last month, according to research firm Cox Automotive. For gas-engine vehicles, prices have remained steady over the same period, increasing slightly to $48,808.

Electric cars have begun to back up at U.S. dealerships. There were 92 days of unsold EV inventory at the end of June, a measure of stock availability based on recent sales trends, compared with a 51-day supply across all types of vehicles, according to Cox.

The inventory numbers don't include Tesla, which sells directly to consumers. In the first quarter, the value of Tesla's finished goods -- a measure that reflects unsold vehicle inventory and those in transit to customers, among other products available for sale -- increased to roughly $4.6 billion, up from less than $1 billion the year before, securities filings show.

Boosting sales of the EV truck has become even more important as Ford aims to significantly increase production. Ford has twice increased its factory output target for the Lightning in the past couple of years and now aims to build about 150,000 electric trucks a year at its plant in suburban Detroit.

Tesla, too, is aiming to beef up the rate at which it churns out EVs, recently applying for approval to double the size of its factory near Berlin in order to produce up to one million EV cars a year.

The auto industry is under pressure to sell more EVs in part because of stiffening government regulations, not only in the U.S. but also in Europe and China. The Biden administration in April proposed some of the nation's toughest-ever restrictions on car pollution, laying out new rules that analysts say would require about two-thirds of all new vehicles sold be EVs by 2032.

Ford is already losing money on the EVs it sells. It projects that this part of the business could lose $3 billion this year, a figure that it expects to be offset by the profits earned on its gas-engine business.

Tesla, which continues to dominate the electric-vehicle market globally, has been aggressive in its efforts to grow sales, even if it has come at the expense of near-term profitability.

Throughout the year, it has released a series of price adjustments that have effectively taken down the cost of its vehicles between 14% and 28%, depending on the model. Tesla has more wiggle room to lower prices because its operating margins are higher than those of its rivals, including Ford.

Industrywide sales of electric vehicles in the U.S. surged by 50% in the first half of the year, cooling from a 71% rise in the year-earlier period.

Ford's EV sales increased 12% in the first half of the year, but executives say the growth rate would have been higher if the two plants building the Mach-E and F-150 Lightning weren't temporarily shut down for expansions.

-- Will Feuer contributed to this article.

Write to Nora Eckert at nora.eckert@wsj.com
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