Ford CEO says Tesla is having a Model T moment — it's Elon Musk's 'next big test'

Ford and
Tesla have been both friend and rival over the past few years as Ford races to electrify and snatch up some of Tesla’s market share.
Associated Press

Ford CEO Jim Farley said Tesla’s price cuts are reminiscent of Ford’s Model T days.
The executive told the Fully Charged podcast that this moment is Tesla’s “next big test.”
Farley and Elon Musk have had an interesting dynamic as the EV-makers compete for market share.

Where Tesla sits right now reminds Ford CEO Jim Farley a lot of the early days of his own auto company. 

Tesla has obviously found success — but this moment in particular could be difficult for the EV market leader given the ongoing price war it started, Farley said on an episode of the Fully Charged podcast published in June.

“I think this is really one of Tesla’s most challenging moments,” Farley told host Robert Llewellyn. “They got through Model 3 and Model Y commercialization in the plant and scaling production. The next big test turns out to be their heavy discounting to stimulate demand, which is a sugar high, and it continues to deteriorate the elasticity.”

Tesla has been hitting record production and delivery numbers in recent quarters, but the company is also staring down shrinking market share and falling profit margin.

“Less and less people are signing up as you cut the price. This is what Henry Ford found out with the Model T — that you commoditize your product when you’re telling people, Hey, the price is what really matters,” Farley added.

“I think we’re basically where we were with Model T,” he added. “Henry Ford was only a year away from going bankrupt.”

Ford and Tesla have been both friends and rivals over the past few years as Ford races to electrify and snatch up some of Tesla’s market share. The executives have tried to one-up each other with the price cuts, but also have found common ground in teaming up on Tesla’s charging tech. 

Farley put some distance between his company and Tesla by pointing to his plans to electrify commercial vehicles, larger, three-row crossovers, pickup trucks, and high-performance vehicles.

“We don’t want to make commodity products,” Farley said. “We want to participate in the part of the market where Ford knows the customer really well and we can innovate on their behalf for things that they don’t know they need.”

At the same time, the auto executive admitted Tesla remains his biggest all-electric competition — in addition to the major Chinese auto players. 

Farley said he sees the Chinese automakers as major competitors, not
GM or Volkswagen.
BYD

“This should be no surprise to anyone. We’ve been watching this for years now play out. I’ve always said that our main competition in the pure electric space is going to be BYD and Geely and Tesla,” Farley said. “It’s not General Motors. It’s not going to be BMW or Volkswagen.”

Farley also emphasized the need for vertical integration in the age of electrification — yet another way many automakers are having to mimic Tesla — as well as reducing the industry’s dependence on China’s battery supply chain.

“We now pretty much vertically integrate all the raw material purchases. We’re going to the mine and buying the raw materials and then arranging for the processing — all the way to our battery plants, that’s all new,” Farley said. “When people buy that electric car, they probably have no idea how much of a shift it is.”

The goal is to ultimately produce more affordable EVs.

“We don’t want to just make another generic, affordable EV, because I think there’s going to be plenty of those,” Farley said. “It’s an open playing field.”