Ford CEO Jim Farley believes that the electric car market is going to soon enter a price war with upcoming $25,000 models.

Thanks to production constraints and strong demand, there’s currently nothing resembling a price war when it comes to electric cars. On the contrary, the low inventory and strong demand are resulting in dealerships charging fat premiums for electric vehicles – but one major player in the industry believes that is about to change.

At the Bernstein Strategic Decisions Conference on Wednesday (via ABC), Ford CEO Jim Farley said that he expects the cost of building electric vehicles to fall in the coming years – low enough to sell some EVs in the ~$25,000 range.

He believes that this will lead to a “huge price war” in the industry:

So I believe there will be our industry is definitely heading to a huge price war.

He noted that the Mustang Mach-E starts at around $45,000, but the battery pack alone costs Ford $18,000 to build. This doesn’t leave a lot of room for lower prices.

Farley believes that significant cost improvements are coming to batteries, and Ford is developing its next-generation EV platform that he believes will bring significant manufacturing cost reductions.

Half the fixtures, half the work stations, half the welds, 20% less fasteners. We designed it, because it’s such a simple product, to radically change the manufacturability.

In order to be ready to be more price-competitive during this possible “price war”, Farley said that Ford is also ready to cut distribution costs and advertising.

Farley didn’t share any specific plan on a $25,000 EV model, but there are already a few projects in the industry.

VW has its ID.Life concept that the German automaker says is a preview its upcoming ~$24,000 electric car. Tesla has also been talking about launching a $25,000 electric car, but CEO Elon Musk recently said that it paused working on the model as the company focuses on ramping up production of its existing vehicles.

Electrek’s Take

That’s an interesting take. I think this year might be one of the rare – if not the only – years where EV battery costs are actually going up due to a bunch of different factors. So when it comes to seeing EV prices going down, I think we may have to wait a little while.

I think Farley’s point is still correct, but it will likely be closer to 2024-25. I believe EV demand will still far outpace EV production at that point, but there are going to be a lot more options, which should create better competition, including on pricing.

What do you think? Let us know in the comment section below.

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