Ford Motor Company (NYSE:F)’s strategy of focusing on the hybrid car segment is working phenomenally for the company. The second largest US automaker hit record high hybrid sales back in 2010 by selling 35,496 units. However, it did not take very long for the auto giant to beat its own record. The Dearborn-based carmaker is estimated to sell approximately 37,000 hybrid cars through May. The company’s hybrid sales are going so strong that it scarcely took five months to overtake the 2010 record. Ford Motor Company (NYSE:F)’s strategy to concentrate in the hybrid segment and fight Toyota Motor Corporation (ADR) (NYSE:TM)’s dominance there is paying off well.
Encroaching on the leader
Ford Motor Company (NYSE:F) showrooms are accounting for the highest conquest rates. Most of these customer additions are coming from Toyota’s list of buyers, who are now turning to Ford vehicles. Buyers are particularly drawn by the C-Max and the Fusion, which are enjoying the highest conquest sales of 63% and 67%, respectively. The company’s Group Marketing Manage,r C.J. O’Donnell, says that the automaker is designing fuel efficient vehicles without compromising on ‘the design, technology and comfort.’
The Dearborn auto giant is still way behind Toyota in the hybrid market. But the good news is that Ford Motor Company (NYSE:F)’s market share shot up to an all time high of 15.5% in the first four months of 2013, up from 3% in the prior year. Both Toyota and Honda Motor Co Ltd (ADR) (NYSE:HMC) are feeling the heat even in California, which is a strong market for these Japanese giants. Toyota sold 15,661 Prius’ in the first quarter of the year in California, marginally beating the Honda Accord, which recorded sales of 15,369 units. In comparison, Ford sold only 3,000 Fusions in California through April 2013. However, it’s a noteworthy jump from the 400 units that it sold in the prior year period.
But competition in this segment is getting tougher than ever. Honda proposes to introduce the revamped version of its Accord in the US as it is experiencing record sales in its biggest overseas market. Honda Accord was the top selling model in US for the month of April as the company sold 33,538 units, beating Toyota which sold 31,710 units of Camry. Other than releasing the latest version of Accord, Honda is also cutting down the lease price of its electric Fit hatchback from $389 to $259 for 36 months, and that too without any down payment to encourage the demand.
Both Toyota and Honda may have a stronger foothold in the hybrid segment, but as per surveys conducted by J.D. Power and Associates, Ford tops when it comes to customer satisfaction on fuel economy. Let’s get into a bit of details to know what exactly led to such remarkable improvement in Ford’s hybrid sales.
The driving forces
Ford says that the increase in sales for the first five months is over 375% compared to the same period last year. In 2010, the Escape Hybrid, Fusion Hybrid, Mercury versions, and the Lincoln MKZ Hybrid led record sales for the automaker. This time the entire credit goes to Ford’s recent batch of hybrid cars, including the C-MAX Energi, C-MAX Hybrid, Fusion Energi, Fusion Hybrid and Lincoln MKZ Hybrid.
The Ford Fusion Energi, which was launched in February, is expected to post its best month since the launch. In addition, the Fusion Hybrid also posted May as its best ever month. In fact, the Fusion Hybrid is recording the best turn rates of just 14 days in Ford’s showrooms. In prime markets like Los Angeles the turning rate is as good as 10 days. Automakers consider turn rates of below 60 days to be decent, which automatically makes Fords conversion rate to be exceptional. In fact Ford is unable to keep its supply in pace with the enormous demand for its hybrids as it is selling faster than it manufactures these vehicles.
O’Donnell said that the company dealers are quickly running out of the hybrid stock in showrooms. Ford assembles its hybrids at the huge Michigan Assembly Plant, which is the only production facility of the company which can make five distinctive fuel efficient powertrains using one assembly line. The automaker is working very hard to bring as many hybrids as possible in the market so that it is able to meet the robust demand. The company’s sales analyst at US Erich Merkle said that the hybrid success ‘is energizing the whole company’.
My takeaway
Auto giants are witnessing solid sales in this segment, but what remains to be seen is if these numbers will remain unaffected once the government subsidies and other incentives offered by the automakers stop. Ford is posing a threat to Toyota’s legacy of being the top hybrid seller. The war of the hybrids is now not only restricted to the fuel economy of the cars, but has extended to better styling, pricing and comfort as well. It will be interesting to see how Ford arms itself to unseat Toyota and Honda, the rulers of hybrids.
The article Ford’s Feat in the Hybrid Segment is ‘Energizing the Whole Company’ originally appeared on Fool.com and is written by Rajesh Marwah.
Rajesh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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