Among a broad-based decline in the markets today, investors are clearly pricing in greater uncertainty. Whether it’s electric vehicle (EV) makers like Ford (NYSE:F) or a host of other growth stocks, investor concern over the upcoming Federal Open Market Committee (FOMC) meeting is pushing significant selling pressure in the market. Today, Ford stock is down about 2% on news that the company will slash prices for the Mustang Mach-E.
This move follows similar cuts for Tesla’s (NASDAQ:TSLA) line of EVs earlier this month. As the competitive landscape shifts, Ford has noted the need to keep pace with car buyers’ expectations that prices will come down. Indeed, as one of the largest EV makers in the United States, Ford appears to be willing to play the cost-cutting game to maintain and grow its market share over time. However, it’s unclear how these moves will affect margins moving forward.
Let’s dive into what investors may want to make of today’s Ford stock news.
Ford Stock Tumbles on Price Cuts
The price cuts proposed by Ford appear to reflect roughly 9% discounts for car buyers. Indeed, for those interested in buying a Mach-E, this is the sort of announcement that may make the vehicle more attractive. Additionally, for car buyers looking to make add-ons, this cut will ensure that a greater proportion of buyers may be eligible for government incentives. Currently, the Inflation Reduction Act specifies rebates of up to $7,500 for vehicles priced under a certain threshold.
Thus, this news should result in a volume increase for Ford. However, for a company with less gross margin to work with relative to Tesla, analysts remain uncertain about how positive these cuts will be.
Worries about a “price war” in EVs are also concerning investors right now. Although great for car buyers, this is the sort of environment that could make the sector more difficult to invest in.
For now, I think the EV sector is clearly under pressure. Higher interest rates have hurt demand, leading to less interest in EV stocks across the board. Accordingly, the decline in Ford stock appears to be warranted given today’s news.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.