Prices of almost everything are going up.
This was the case before Russia invaded Ukraine, as the pandemic disrupted global supply chains. But in the three weeks since the invasion, things have been getting worse.
Crude oil prices soared, driving up raw material prices. Prices of nickel and other key metals for batteries used in electric vehicles are at very high levels. Russia is responsible for 6% of global aluminum supply and 7% of mined nickel. As a result, wars and sanctions could further limit global metal supplies.
Even if the prices of these materials stabilize in the coming weeks, their rise will increase the cost of batteries. Logically, the price of electric vehicles will also rise.
Tesla CEO Elon Musk (TSLA) – Get Tesla Inc reportsummed it up in a recent tweet that saw the price of Tesla vehicles surge the next day.
“Tesla and SpaceX have recently seen massive inflationary pressures in raw materials and logistics,” Musk wrote in a letter to his millions of followers. It’s a warning to Tesla and SpaceX customers that prices are about to rise.
Except for Tesla, GM (GM) – Get General Motors Corporation Report Chinese automaker BYD has also raised vehicle prices, citing soaring raw material costs. So there’s reason to expect other automakers to follow suit and protect their profit margins.
Ford won’t raise EV prices anytime soon
One EV maker, however, will be an exception: Ford (F) – Get Ford Motor Company Report.
TheStreet reached out to the Dearborn, Michigan-based organization to find out if it also plans to raise prices on its electric vehicles. Ford’s response was clear:
A spokesperson told TheStreet in an emailed statement: “There is nothing that would specifically increase pricing at this time.”
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The spokesman explained that the auto group is closely monitoring developments in pricing.
“As you might expect, we have been monitoring and managing fluctuations in raw material and component supplies and prices – as we have done for the past two years,” the spokesman said.
The spokesman also said that Ford has limited exposure to raw materials mined or shipped through Russia and Ukraine: “It is important to note that we have very limited direct sourcing of raw materials from Ukraine and Russia.”
“However, the situation in Central Europe could exacerbate supply chain issues across the industry, including Ford,” the spokesman said.
In addition, the group, led by CEO Jim Farley, one of Wall Street’s newest darlings, said it had secured nickel supplies within months. In the short term, that has prevented Ford from passing on the spike in nickel prices to customers. Nickel is a key metal in electric vehicle batteries.
“We have nickel supply contracts over the next few years in support of our ambitious electric vehicle goals,” the company told TheStreet. “Other than that, we do not intend to provide real-time updates on individual materials and components.”
Q1 report to be updated soon
Ford said on April 27 when it reported first-quarter earnings, the spokesman said. It will provide all the necessary information on how supply chain disruptions affect automakers and their future expectations.
Ford currently sells two electric models: the Mustang Mach-E and the E-Transit all-electric commercial van. The company is about to begin production of the long-awaited F-150 Lightning electric pickup.
Ford has said on various occasions that demand for all three models is very strong. It’s especially high for some Mach-E variants and the F-150 Lightning.
For example, TheStreet reported on March 7 that Ford is no longer taking orders for two versions of the Mach-E electric SUV — the Premium and California Route 1 Mustang models.
Ford is one of the legacy automakers accelerating the transition to electrification.
In a sign of this strategic importance, the group has recently undergone a radical restructuring, creating two distinct divisions: Ford Blue, which now focuses on gasoline-powered vehicles, and Ford e, which focuses on battery-powered electric vehicles.