Ford Killing Passenger Cars: Brilliant Idea Or Horrible Mistake?May 2, 2018
The Ford Motor Company recently announced that it will cease production of all its US passenger car models at the ends of their cycles, with the exception of the Mustang. Within the next few years, we will see the disappearance of the subcompact Ford Fiesta, the mid-size Ford Fusion, the full-size Ford Taurus, and the North American-built compact Ford Focus. From what we know at this point, the entire Ford lineup will consist of pickup trucks, SUVs, the Ford Mustang, and the Ford Focus Active (a Subaru Crosstrek-type vehicle, which is to be imported from China).
Why is Ford killing passenger cars? Is this a good idea? What could be the consequences of dropping these nameplates? Lets take a closer look at the automotive market forces that have led to this decision on Ford’s part.
Cars Are Not Selling As Well As They Used To
For more than two-thirds of today’s new car buyers, the vehicles of choice are trucks and SUVs. The remaining one-third share that cars currently have is steadily shrinking. If things continue this way, the outlook for future car sales is a bleak one.
Ford’s Cars Are Long In The Tooth
Compared to its competitors, Ford has not refreshed and renewed its cars often enough. The current generation of Ford’s Fusion goes back to 2013. The Focus was new in 2012. The Fiesta’s current platform was introduced in 2010. The Taurus also came out back in 2010. Do you see a pattern here? All of these Ford cars are way overdue for an update, but it’s too late. They have grown old and undesirable, and now no one wants them.
Trucks And SUVs Are Much More Profitable
Given the choice, most manufacturers would prefer to build and sell trucks and SUVs. Most SUVs are built on an existing car’s platform, yet they sell for thousands of dollars more than the comparable cars they are based on. That’s pure profit, and everyone along the automotive food chain likes that. Pickup trucks are the same way, selling for high prices and making huge profits. The profit margin on a high-end heavy-duty pickup, or a large, truck-based luxury SUV like a Cadillac Escalade, can be $20,000 or more.
Ford Is Not The First To Do This
Killing off your car lines is not a radical departure for a Detroit manufacturer. FCA has recently done this with their Dodge Dart and Chrysler 200 mid-size sedans. They were introduced, they did not sell well, and Fiat Chrysler decided to pull the plug. That company’s focus on and investment in new Jeep and Ram models has been very successful, in terms of both sales and profits. So this strategy can work.
But Some Manufacturers Are Making – And Selling – Great Cars
Regardless of the shrinking percentage of car sales, there are still millions of sedans and hatchbacks sold in the US each year. Manufacturers like Honda and Toyota have made the decision to go after a bigger slice of a shrinking pie.
The mid-size Honda Accord and Toyota Camry sedans are completely new for 2018, and represent a major step forward. These cutting-edge cars compare very favorably to the prestige brands in terms of advanced technology, performance, and quality.
And What Happens If Gas Prices Shoot Up Again?
Gas prices are cyclical. They go up, they go down, and then they go up again. The events of the recent past have taught us that gas prices will not stay low forever. What happens if and when gas prices go past $4.00/gallon, like they already have in California? What will the reaction be if the price hits five dollars? All it takes is a little instability in the Middle East…
We have seen this movie before, and it did not end well. People dumped their trucks and large vehicles, while small, economical cars were in short supply and sold for top dollar. It could happen again. What will Ford do if it has no high-mileage small cars to sell?
A New Lineup Of Non-Cars Is Coming – But When?
Ford has promised to come out with new vehicles that will blend utility with good fuel economy, and that will also be priced to attract entry-level buyers. But Ford tends to take a very long time to bring new vehicles to market. Can they get them here in time, and will Ford customers remain loyal until they do?
Ford Needs To Execute Its Plan Perfectly
If no one wants to buy your cars, then why sell them? Ford has itself to blame for a large part of this problem. They have not kept their cars up to date, and the market has voted thumbs down. Ford killing passenger cars is just the final step of that process.
Meanwhile, Ford’s big investment in the new aluminum-bodied F-150 pickup truck has paid off in spades, keeping their full-size pickup in the top spot, and generating huge profits. Ford’s complete lineup of SUVs, from the tiny EcoSport to the huge Expedition, is selling well, too. If they can apply this principle to the rest of their lineup, developing exceptional products and getting them to market quickly, they should do very well. If not, there are plenty of other vehicle brands that will be very happy to take the money of former Ford customers.