Ford CEO: Elon Musk is taking a web page from Henry Ford’s playbook along with his EV value struggle

• « This has all occurred earlier than, » Ford CEO Jim Farley stated.
• Musk’s value reducing technique is much like what Henry Ford did in 1913.
• Farley warns Musk about preserving merchandise contemporary.

Ford Chief Government Jim Farley says Elon Musk’s value struggle technique for electrical automobiles is not something new.

Farley informed reporters final week that Musk’s concept to slash costs and shield quantity over revenue margins is a play proper out of Henry Ford’s Mannequin T playbook. 

« Go learn ‘1913,’ » Farley stated, referring to a guide that incorporates a shut have a look at the 12 months Ford turned a mass-producer of automobiles. « This has all occurred earlier than. »

The methods are strikingly related. 

In 1913, when Henry Ford first began utilizing a conveyer belt on his meeting line, he started slashing the worth of the Mannequin T to spice up gross sales as the corporate was in a position to construct extra automobiles in a shorter time period. 

Because the begin of 2023, Musk has lowered the costs of the preferred Tesla fashions half a dozen occasions as the corporate goals to construct 2 million automobiles this 12 months, doubling 2022 manufacturing. The value reducing technique has had an antagonistic impact on Tesla’s revenue margins, spooking some traders, however Musk has insisted he is aware of what he is doing.

« We do imagine we’re, like, laying the groundwork right here, and that it is higher to ship a lot of vehicles at a decrease margin, and, subsequently, harvest that margin sooner or later as we good autonomy, » Musk informed traders on a quarterly earnings name earlier this month.

Farley’s recommendation for Musk

Utilizing Ford’s historical past as a information, Farley had some warnings for Musk.

« I believe what he will study is product freshness means quite a bit, » Farley stated. « The product will get commoditized and you then lose your pricing premium. That is a very harmful factor. »

Ford’s founder ultimately realized that lesson, Farley stated, introducing totally different colours and the Mannequin A. However by then, Chevrolet had taken over as the highest automotive model within the US.

Musk has been below strain to refresh the Tesla fleet, a transfer he has lengthy averted by as an alternative introducing newer fashions and pushing flashy software program updates to maintain the Tesla driving expertise contemporary.

With a rumored Mannequin 3 replace floating round on the web, analysts and traders have stated that updates to the Mannequin 3 and Mannequin Y this 12 months shall be key to preserving gross sales momentum going all year long.