We’re raising our eyebrows at Ford ‘s (F) new price cuts on its popular electric pick-up truck. The move appears to challenge the automaker’s claims that the F-150 Lightning is in high demand. Ford announced Monday it will cut prices on the Lightning between 7% and 17% depending on the model. The base, which was originally at $59,000, will now come down by $10,000. When the F-150 EV first debuted in April 2022, its starting price was $39,974, before some price hikes due to supply constraints and sharply higher costs for the minerals used in the batteries. The automaker said it can offer lower prices to customers because it has increased plant capacity and lowered the cost of production while improving battery costs. Jim Cramer called Ford’s price cuts “counterintuitive” given the robust demand the F-150 Lightning has been seeing so far this year. “It is hard to believe that you can have a long list of people who want the F-150 Lightning yet at the same time you cut the price,” Jim said Monday during the Investing Club’s Morning Meeting. The market seemed confused by the move too as shares of Ford fell more than 5% on Monday to roughly $14 apiece. In July, Ford reported quarterly gains in U.S. car sales during its second quarter of 2023 but EV sales were down by 2.8% for the quarter. Still, demand for Ford’s electric pick-up truck was strong with F-150 Lightning sales up 119%. In early June, Ford increased its production goal of the EV pick-up to 150,000, up from its previous goal of 130,000 by the end of 2023 to meet customer demand and reduce wait times. Ford has overcome a series of challenges this year. In February, the company had to pause production and shipments on its electric pickup truck due to a potential battery issue. This came after Ford delivered a messy fourth quarter as it transitioned into a new EV business structure. But as of late, there’s been a pivot for the American car company to accelerate its position in the competitive EV landscape through strategic partnerships. At its Capital Markets Day in May, Ford unveiled agreements with some of the world’s prominent lithium producers to enhance electric vehicle production. Last month, the Club holding surprised investors by partnering with Tesla (TSLA) to gain access to the Elon Musk company’s supercharging network. Ford is set to receive a historic loan from the government valued at $9.2 billion in a joint venture with a South Korean battery maker to finance three new battery manufacturing plants in the U.S. The automaker’s price cuts come as rival Rivan Automotive ‘s (RIVN) electric pickup truck, the R1T is outpacing the F-150 Lightning as the bestselling EV pickup this year. Ford invested in Rivian back in 2019 to partner in building EVs. That partnership came to an end when Ford liquidated most of its stake in the EV startup in 2022. Meanwhile, there’s more competition brewing as Tesla over the weekend announced it finally built its first Cybertruck Even with an outperforming F-150 Lightning, there are several strong players in the EV market vying for more market share. This could mean that Ford may see lower EV prices as a way to shore up more demand as prices for cars comes down. The average price Americans paid for a new vehicle in June increased 1.6% year-over-year or just 0.3% month-over-month, according to an analysis by Kelley Blue Book . That was the smallest year-on-year increase since the start of the pandemic. Meanwhile, prices for new electric vehicles were down 20% for the month driven by Tesla’s EV price cuts earlier this year. Morgan Stanley on Monday said slower EV sales and rising inventory is a “new reality” among Tesla EV competitors that “may force a ‘recalibration’ of legacy auto EV strategies even sooner than expected.” The analysts point out that “all of this is happening despite a rather stale Tesla product line up and before substantial new capacity comes on stream by Tesla and other automakers.” Bottom line Ford said price cuts on its popular F-150 this is about taking advantage of increased plant capacity and continued work on scaling product and cost. However, we wonder if demand is a factor, too. Now that people have more options on what pickup EVs they can buy, it’s only natural for Ford to become more competitive on price to maintain demand. Looking back at the F-150 Lightning’s history, Ford aggressively raised prices last year when supply was scarce. Now in anticipation of capacity increasing at a lower cost to make them, Ford is reducing prices back to levels closer to when the Lightning first went on sale. Remember, benefits from scale and lower battery costs are two of the three big swing factors in Ford’s margin bridge from down 40% in 2022 to up 8% by year-end 2026. In some respect, news around Ford’s cost structure improving from increased efficiencies from scale and lower battery costs matter more in the long term than short-term price fluctuations. We still wonder why there is a need to lower prices if in theory there is plenty of demand. And we are concerned that one round of price cuts will lead to more in the future. However, we don’t want to overlook the fact that Ford’s costs are coming down at a time when it is tripling production. The automaker under the direction of CEO Jim Farley has come a long way in turning around the business while accelerating its transition into EVs. Its forward-looking steps to partner with lithium producers to reduce battery costs, its partnership with Tesla to allow Ford EV customers access to more charging stations and the record loan from the US government to help ramp up EV production are all positives. (Jim Cramer’s Charitable Trust is long F. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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Ford CEO Jim Farley poses for a photo at the launch of the all-new electric Ford F-150 Lightning pickup truck at the Ford Rouge Electric Vehicle Center on April 26, 2022 in Dearborn, Michigan.
Bill Pugliano | Getty Images
We’re raising our eyebrows at Ford‘s (F) new price cuts on its popular electric pick-up truck. The move appears to challenge the automaker’s claims that the F-150 Lightning is in high demand.