Ford said it will cut the price of its 2023 Mustang Mach-E crossover by $US600-$US5900 ($A840-$A8260) –  depending on the trim – as it boosts production to push to retain second spot as the US’s biggest EV maker (Tesla holding top spot).

Tesla last month announced price cuts of up to $US13,000 ($A18,300) on its Model Y in the US. 

In Australia, prices fell by $A1600-$A3400 depending on the model and trim. For example, the entry Model 3 is now $A63,900, down from $A65,500. The entry Model Y is down $A3400 to $A68,900. 

The price cuts have led to a spike in demand for Tesla which Ford hopes will be replicated in its camp as well.

Wedbush analyst Dan Ives said Tesla’s price reductions could increase global deliveries by 12 per cent to 15 per cent this year and shows that CEO Elon Musk is on the offensive.

“This is a clear shot across the bow of European automakers and US stalwarts [GM and Ford] that Tesla is not going to play nice in the sandbox with an EV price war now underway,” Mr Ives said in an interview with Automotive News.

Ford Mustang Mach-E

“Margins will get hit on this, but we like this strategic poker move by Musk and Tesla.”

Tesla said that it was able to provide its cars at a more accessible price because cost inflation was “normalising”.

“At the end of a turbulent year with interruptions to the supply chain, we have achieved a partial normalisation of cost inflation, which gives us the confidence to pass this relief onto our customers,” a spokesperson for Tesla Germany said in a statement.

In saying why it has followed suit, Ford’s chief customer officer for the EV unit, Marin Gjaja, said in an interview that: “We have to compete. It’s a competitive marketplace, and it just got a lot more competitive because of what Tesla did. We’re not going to cede ground to anyone.”

Ford said it plans to build 130,000 Mach-Es globally this year, 67 per cent more than the 77,959 it produced in 2022.

The largest price cut comes on the GT extended-range model, which will be $US65,495 ($A91,740), down from $US71,395 ($A100,000) including shipping.

Ford said it’s decreasing the price to upgrade to an extended-range battery by $US1600 ($A2240) to $US8600 ($A9240). Prices for the Nite Pony appearance package and GT performance package are remaining the same.

Ford also said Mach-Es ordered between January 30 and April 3 are eligible for special rates through Ford Credit as low as 5.34 per cent.

It said existing Mach-E customers awaiting delivery of their vehicle automatically will receive the adjusted price. It said it would reach out directly to customers who already have a Mach-E they bought this year.

Mr Gjaja told Automotive News the Mach-E is not profitable, although Ford was benefiting from the crossover and other first-generation EVs because they are drawing new customers to the brand and helping the company better hone software and battery technology.

“Mustang Mach-E is not profitable and it’s not going to be profitable, although by trim series it does vary a little bit,” he said. 

“We’d like to be more profitable, and we’re working furiously to get the costs out of these vehicles.”

Volkswagen Group, however, has no plans to offer discounts for its EVs to counter price cuts by Tesla, CEO Oliver Blume told German newspaper Frankfurter Allgemeine Sonntagszeitung.

He said Volkswagen will not take part in a price war with Tesla and the company has “a clear pricing strategy and are focusing on reliability. We trust in the strength of our products and brands.”

He said that Volkswagen wants to be a global leader in EVs but this should be achieved through profitable growth.

“The price cut is coming faster and more brutal than expected. Tesla could be aiming to push competitors out of the market,” said Automotive News Europe’s interview with Antoine Weill, a partner at consultancy Simon-Kucher & Partners.

Besides Volkswagen, Renault has no plans to cut prices for its EVs in response to Tesla.

Renault brand boss Fabrice Cambolive said: “If you cut sales prices by 10 per cent or more within a week’s time it weighs on residual values and hurts existing customers.”

“What counts for us is stability. But it’s foreseeable that prices for EVs will come under scrutiny,” he said.

While Volkswagen won’t cut prices, its sister manufacturer Porsche is considering increasing its vehicle prices by up to 6 per cent, according to dealer sources.

In Germany, a Porsche spokesman said: “Price adjustments at the change of model year are standard industry practice.”

“The prices valid for the coming model year are expected to be published in March.”

Tesla’s Model 3 and Model Y cars were the No. 1 and No. 2 sellers in the German market in December, amid a big push by automakers and dealers to get full-electric cars registered ahead of a change in the incentives given to battery-driven models.

Tesla Model Y

By Neil Dowling