Ford CEO Jim Farley is warning Tesla about “product freshness” as he believes Tesla’s electric cars are at risk of becoming commodities.
Last summer, Farley accurately predicted that a price war in the EV market would be coming soon. Tesla started it in early January, and Ford followed with price cuts to its Mustang Mach-E electric SUV; but it didn’t end there, as Tesla kept slashing its prices across its entire EV lineup all year.
Farley commented on the situation again (via Insider) and compared what Tesla is doing with what happened with Ford when it became a mass-producer of cars itself:
“Go read ’1913,’” Farley said, referring to a book that features a close look at the year Ford became a mass-producer of vehicles. “This has all happened before.”
The CEO believes that cutting costs and prices is only part of the equation to create demand as he warns Tesla CEO Elon Musk that if they focus only on that, they will have a problem with “product freshness”:
I think what he’s going to learn is product freshness means a lot. The product gets commoditized and then you lose your pricing premium. That’s a really dangerous thing.
On Tesla’s most recent earnings call, Musk said that Tesla’s goal is to adjust prices to ensure demand matches the automaker’s increased production capacity.
Electrek’s Take
Tesla has always said that making its products the best they can be is a top priority, so it’s not like Tesla is not trying to keep its products fresh.
However, Farley has a point. Some of Tesla’s products have become a bit stale. The lineup as a whole certainly is, with only four models and no new models since 2019, though the Cybertruck is going to partially fix that.
Model 3 is certainly the one in need of a refresh, and apparently, one is coming next quarter, but we don’t know yet how significant it will be. A big change so far appears to be a new front-end.
But Model Y is Tesla’s most important product, and yes, there’s an argument to be made that it is becoming a commodity at the current volume Tesla is producing it. It has become all about pricing.
I think one of the problems with Tesla right now is that the automaker is extremely focused on its Full Self-Driving product, which it is convinced it can achieve while increasing the value of all the vehicles in its fleet.
In the meantime, and for the people who are not convinced this is a certainty, it looks like Tesla is slipping on other aspects of the business.
Author: Fred Lambert
Source: Electrek
Top comment by W- K- W
Liked by 11 people
Tesla’s mission – “Accelerate the transition to sustainable energy”. Commodity products (iPhone, Model T, F-150, Jeep Wrangler, laptop computers, etc.) change people’s behavior. Tesla is TRYING to commoditize EVs by lowering prices so the masses can afford them all while making incremental improvements in HW and function (MCU, castings, heat pumps, etc.).
Elon has previously stated (I forget which earnings call) that he expects cars to become commodities and number of brands to reduce. I think he cited cell phones. Anyway, as others have said, M3 and MY are fairly new and are about to get exterior and interior refreshes.
Regarding 1913, Ford eventually gave in to different paint colors. He was very stubborn about design refreshes though, so hopefully Tesla doesn’t wait 20+ years before refreshing their designs…:-/.
IMO, Model S still looks great, while MX should be stretched. M3 and MY need new front and rear designs. I never liked fish lips or taillights.
View all comments