New EVs target demand for crossovers

Even before it reaches dealerships this fall, the Ford Mustang Mach-E is getting a price cut of up to $3,000.

It's a testament to the looming competitiveness of a segment — battery-electric crossovers — that barely even exists at the moment. Ford, Volkswagen, Hyundai and Nissan are joining Tesla's Model X and Model Y by shifting their electrification focus from cramped compliance cars to more-appealing crossovers and SUVs that hit at the heart of today's internal-combustion market.

"It's the next frontier," Karl Brauer, executive analyst at ISeeCars, told Automotive News. "EVs were always kind of little econoboxes that happened to be powered by electric motors.

"But I think a lot of people started to realize, these vehicles are never going to have a chance at going mainstream unless they move beyond the traditional small car and into larger crossovers that have a lot of compelling features."

Unlike earlier electric vehicles, it's not a matter of weaker-than-expected demand. Reservations for the top-end Mach-E First Edition sold out in days and quickly filled again after Ford doubled the production allocation. Ford says the sticker reductions will help the vehicle "remain fully competitive in a segment that is seeing dynamic price changes."

Volkswagen soon will launch its compact ID4 with a starting price roughly $2,000 less than that of the Mach-E and a base model that can go 20 more miles on a charge than what Ford will offer. Tesla this year slashed Model Y prices by $3,000, bringing the crossover's least expensive version to less than $50,000. Next year, the Hyundai Ioniq 5 and Nissan Ariya will further saturate the market with products featuring similar price points.

The Mach-E started out as another bland compliance car before executives halted the project and ordered a redo. Jim Farley, now CEO, encouraged the team to build a more exciting product and to "think Mustang."

The automaker's executive chairman, Bill Ford, last year said the old way of thinking was that there had to be a "trade-off" with EVs.

"It was either going to be green and boring and no fun, or really exciting but burn a lot of fossil fuels," Ford said. "Electrification has come to the point that you can do both."

Credit Tesla for that, Brauer said. "From day one those vehicles were fast, compelling cars powered by electricity."

Nissan executives say they benchmarked the Model Y when developing the Ariya, which has a spacious "lounge-like interior" and is slated to go on sale in the U.S. late next year.

Now, automakers are targeting more than just performance and looks as they seek to design EVs that can finally generate meaningful volume, too.

Brauer said the Chevrolet Bolt EV and luxury offerings such as the Jaguar I-Pace and Audi E-tron have failed to "move the needle" on demand for battery-electric powertrains.

Upcoming EVs aim to change that by homing in on the compact-crossover segment that now leads U.S. new-vehicle sales. Automakers sold more than 2.8 million compact crossovers in the U.S. in 2019, according to the Automotive News Data Center.

Scott Keogh, CEO of Volkswagen of America, said the company sees a major opportunity in the segment because it doesn't yet contain a compelling electric offering, even though many compact-crossover customers "have an interest in the environment."

Tesla CEO Elon Musk has predicted the Model Y, which went on sale in March, eventually will outsell the rest of Tesla's combined lineup.

It's an open question, though, whether customers will be willing to pay a premium for an EV instead of opting for less-expensive gas or hybrid models. And Brauer cautioned that an increase in demand isn't a given just because numerous automakers are targeting a popular segment.

"It's an important step, but with multiple crossovers out there powered by batteries, we can see that in and of itself is not enough," he said. "There's still multiple steps: cost, range and fueling time. You're not going to get internal-combustion-like sales of EVs until you get parity."