Ford (NYSE:F) announced Monday a price cut on its F-150 Lightning electric truck. A move that has reignited discussions about the future demand and pricing of electric vehicles. Up until now, Tesla's (NASDAQ:TSLA) bold price reductions have allowed them to sustain impressive year-over-year growth while preventing other original equipment manufacturers (OEMs) from securing significant market share. However, Ford’s price cut sends a clear message that established OEMs might need to compromise on pricing in order to compete in the EV market, despite negative EBIT margins.
“We continue to expect the average transaction price (ATP) for EVs to decline over time and ultimately converge with ATPs for ICE vehicles.” wrote Bank of America analysts. “Our assumption is that OEMs are willing to lose money on EVs for now in order to build sufficient scale to bring production costs down over time.”
Bank of America considers the upcoming release of Chevrolet's new Equinox as “the key litmus test” to help gauge demand for mass-market EVs. The new Equinox will be a good product that is more comparable to existing ICE small/mid CUVs on the market in terms of design, comfort, quality and price, but with an electric instead of a gas-powered engine. They believe that the new Equinox will provide valuable insights into whether everyday consumers prefer EVs over traditional ICE vehicles when most other factors are balanced out.
Shares of F are down 0.21% in premarket trading on Wednesday.