In Fighting the Foes
Rajesh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There has been lot of activities in the US automobile sector which seems to have revved up after it got heavily hit in the 2008-2009 financial crises. While the Japanese and Korean counterparts are rejoicing their strong comeback, the Detroit carmakers are digging in an effort to reinforce their dominance. This August saw small cars sales grow 47 percent in the economy compared to the previous year’s numbers. In addition, there are several models that automakers are planning to roll out this fall. The market is getting extremely competitive with carmakers introducing versions using better technology and offering premium features with higher fuel efficiency. In all this, Ford (NYSE: F) looks the best managed among Detroit’s Big Three. This car manufacturer was the only one which survived the 2009 crises without the government bailout.
The US automaker has been in news of late for different reasons that include the Chief Executive Alan Mulally’s expected departure, weakening European sales and the company’s new set of line ups this fall.
Tackling the European market
Europe, from where the company generates approximately 23 percent of its total revenue, is Ford’s next major market after North America. The macroeconomic condition surrounding Europe has been troubling the Blue Oval, and earlier this quarter the carmaker increased its loss estimation in this market from $500 million to $1 billion. According to the European Association of Automobile Manufacturers, in August the registration of new cars slipped 8.9 percent against the previous year. Even Germany’s car sales were hit by 4.7 percent for the same period.
The auto manufacturer has been suffering from a sales decline in the region which is resulting in excess stock. Losses are piling up in this market and the company is preparing to put an end to it. It has plans for a fresh set of line ups for the European market so that losses are covered up with time. This will help in pulling up the struggling sales numbers and poor revenue figures.
While this is the case with its second largest market, let’s take a look at what its top market is up to.
What’s on the road for the top revenue contributor?
North America accounts for 60 percent of the carmakers top-line. The company introduced quite a number of cars in the first half of the year which include the Ford Focus Electric, New Escape, Mustang V6, Flex and Taurus. This is not all, as there are more to come in the second half of the year. Ford’s product launch this fall includes the All New C-Max Hybrid, C-Max Energi, All-New MKZ and a super duty truck.
Apart from this, there is a lot of buzz regarding the Ford Fusion 2013 in the mid size sedan market segment. Fuel efficient cars are now-a-days desired more than ever particularly for the sluggish and recessionary scenario. This is exactly why Ford Escape drew in 32 percent higher sales figure over the last year. Fuel efficiency is a big plus point for Ford Fusion 2013 which is branded to be the Camry killer. Foreign counterparts have been disturbing Detroit’s Big Three: General Motors (NYSE: GM), Ford and Chrysler as they are losing their market share. With Ford Fusion 2013, Ford has the opportunity of boosting its sales and enhancing its brand in the mid-size sedan segment forms 26 percent of the industry’s revenue.
However, the company should be prepared to face cut throat competition from Toyota (NYSE: TM) Camry, Honda (NYSE: HMC) Accord and Nissan Altima. Toyota Camry earned the name of being the best selling US car, witnessing a jump of 37 percent to 280,536 this year. Camry was followed by Honda Accord which reported a sales number of 218,665 cars and Nissan Altima which posted 209,592 units. Toyota is expanding the deliveries of Camry while Honda is concentrating its resources and targeting to sell 350,000 Accords annually in US.
It looks like the Fusion is prepared to face them. The Detroit automaker boasts its new offering to be certified by the U.S. Environmental Protection Agency as America’s Most Fuel-Efficient Mid-size Sedan. The company proudly claims of beating Toyota Camry Hybrid by 8 mpg highway and 4 mpg city giving a fuel economy of 47 mpg. The vehicle offers a good quality interior with smart design. Not only this, the Blue Oval has slashed the price of the car by $1,575 for 2013. The carmaker has done a fantastic job in increasing the mileage together with lowering prices.
Not only Ford, the other Detroit carmaker GM is also coming up with its Chevrolet Malibu to regain its lost market share in this sizzling mid-size segment which has been dominated by Toyota and Honda. However, the features, technology and fuel efficiency of Ford Fusion are more attractive than GM’s offering and so it stands a stronger chance. This being said, the mid-size stalwarts Toyota and Honda must get ready for their face off with Detroit. The Japanese automakers should bear in mind that Fusion’s gain will come at the cost of their pain.
Ford is resting its hope on the restyled Fusion and considering it to be the most important vehicle that can turn things around for the Detroit company. The elegant design of the revamped model has raised the company’s expectations to combat the perennial leaders, Camry and Accord. The mid-size sedan is presently the hottest segment and is expected to grow for another decade at least. While it’s essential for Ford to fix the European operation, it is also important to take care of its domestic operation which is being eaten up other auto players. One can only wait and watch how things move with the launch of the revamped Fusion.
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