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.
Top comment by TheMorningLine
I think there are a few takeaways here.
Traditional car companies make small visual tweaks each model year, and do more significant visual changes every 4-5 years. It gives the appearance of new-ness, even if it is purely visual and not functional. I always found it odd how concerned people are about the looks of their car, when you barely see the exterior compared to the interior, but car buying is as much driven by aesthetics as it is about functionality. Like it or not, most people judge things by appearances. As Tesla matures as a company, they need to adapt and make more regular visual updates to their vehicles.
It does highlight a positive aspect of marketing. Hear me out! Tesla hasn't needed advertising so far, and I'm glad they've devoted resources to making their cars better instead. But advertising is also a way to communicate things to prospective buyers, such as new features. Those who are plugged into the EV community, like most of us on this site, hear about and know about new features when they are released. But the public at large doesn't see all the new stuff coming out, and that contributes to that stale feeling.
There are some things to learn from traditional OEMs, like visual refreshes. I don't know how long Tesla can continue to eschew marketing altogether, but they might need to reconsider how they communicate updates and new features to the public going forward.
Tesla just needs to continue to adapt and innovate and they'll be fine.
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.
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