Ford Sees Nissan's Bluff, Raises

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Ford (NYSE: F  ) will see your bluff, Nissan, and raise you one more.

Ever since Nissan announced its entry into the electric car race, the company has dominated headlines with its bold pronouncement: Unlike GM's vaunted Volt at $40,000-plus, or Tesla Motors' six-figure pocket electric rocket, when Nissan puts the Leaf electric car up for sale, it will sell for no more than what a small family sedan will cost -- call it $25,000 to $30,000.

Nissan made good on the boast last week, pricing the Leaf at just $33,000, $25,000 after federal incentives, and as low as $21,000 in California and Georgia thanks to state "green" tax credits. The shockingly low price tag promises to drive a stake through GM's electric heart. But unlike GM, Ford's not going down without a fight.

In addition to announcing its electric charging partnership with Microsoft (Nasdaq: MSFT  ) last week, Ford made a bluff of its own. Encouraging buyers to wait before paying greenbacks for green Leaves, Ford announced that its electric offering (an electric Focus) will be price-competitive with the Leaf.

Ford's pole position
Nissan's lowball price may persuade potential GM shoppers to delay purchasing a few weeks (the Volt is due out this November, the Leaf in December.) Ford, in contrast, isn't expected to have its Focus out until next year. But if price parity isn't enough to make buyers wait, Ford has one more trick up its sleeve. Before the Leaf hits the road, Ford will begin delivering electric "Transit Connect" delivery vans in the fourth quarter (including one batch that AT&T (NYSE: T  ) has already laid claim to), giving buyers a sneak peek at its version of the technology.

Foolish final thought
Will fielding an electric van-guard pave the way for future Focus sales? And even if it does, can Ford afford to sell a "limited" run of electric cars -- sans scale-of-production efficiencies -- at only $30,000 a pop? For that matter, can Nissan? And can GM make a profit on these electro-buggies even at $40,000 apiece?

It doesn't matter. With the Obama administration mandating an average 35.5 mpg throughout automakers' fleets by 2016, production of zero-gas-usage electric cars becomes a necessity. Sell an "electric Focus" at 0 mpg, and you free up the road for F150's to squeeze past the mpg tollgate.

Never mind that these electric cars do use energy. (Not gasoline, per se, but Peabody (NYSE: BTU  ) coal, brought to your car by way of the friendly electricians at American Electric Power (NYSE: AEP  ) , for example.) The important thing is that they boast "0 mpg."

It may not help the planet much, but could still do good things for your portfolio.

Fool contributor Rich Smith has no position in any stocks named above. Microsoft is a Motley Fool Inside Value pick. Ford Motor is a Motley Fool Stock Advisor choice. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.

Read/Post Comments (5) | Recommend This Article (10)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 05, 2010, at 3:40 PM, Retired31B5M wrote:

    Shouldn't that be "infinite MPG' vs "0 MPG?"

    The last vehicle I had that produced '0 MPG' was a M1A1 Tank. (Fortuneatly, I did not have to pay for the JP-8 fuel.)

  • Report this Comment On April 05, 2010, at 7:09 PM, TMFDitty wrote:

    Hmm. You have a point.

    The closest I ever got to "0 mpg," under your more correct definition was my 1969 GMC Custom. We used to say it got nine gallons to the mile.


  • Report this Comment On April 05, 2010, at 7:54 PM, xferjenx wrote:

    A golf cart is cheaper...

  • Report this Comment On April 06, 2010, at 10:15 AM, TMFDitty wrote:

    A golf cart used to be even cheaper than that, ferjen. Last year, federal and state tax rebates pushed the price of road-certified golf carts in certain states (OK and FL, among others) into negative territory.

    You could literally get the cart for free, and put extra cash in your pocket.


  • Report this Comment On April 16, 2010, at 5:45 PM, GlennBeard wrote:

    If the goal is to reduce C02) emissions to reduce global warming, then electric cars will help. Electric power can and is generated from sources that do not produce C02 (solar, wind, hydro), and even when fossil fuels like coal is used, the efficiency of the electric power plant is greater than the efficiency of your gasoline power car, so you still wind up with a net reduction in C02 emissions.

    But I agree, the real big advantage of the electric car is that they can greatly boost the average fuel economy raitings of the car company. Depending on how generous the government is how it calculates an equivalent mpg for electric cars, it may make sense for car companies to sell a small number of electric cars to boost their average fuel economy ratings.

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