Traditionally U.S. car buyers have had an aversion to paying more than minimal prices for small cars, essentially preferring to "pay by the pound." That has posed a problem for automakers trying to meet fleet average fuel economy standards. If they can't sell enough smaller cars to pull up their fleet average, they have to spend a lot more money to raise the efficiency of bigger vehicles to compensate. The only way they have been able to sell small cars to Americans has been at rock-bottom prices which means they lose money on every car. A large part of the cost of cars is tied up in areas like engineering, labor and tooling. Those costs are pretty much the same regardless of whether you're building a Toyota Yaris or a Lexus. The cost of extra materials has been less than the price differential that customers have been willing to pay.
In recent years though, Americans have started to show a willingness to pay more for a small car if it's equipped with the all features they expect, has high quality appointments and decent, if not outstanding, performance. The success of cars like the MINI and the Mazda3 looks like it might be an inspiration to Ford. The new Fiesta that's coming to the U.S. market is actually expected to be profitable from the start. Part of that is due to economies of scale from making a global small car. The stylish little car has drawn raves for its looks inside and out and Ford expects to be able to sell it for a price higher than they would if it was just a stripped down economy car. Ford design director Peter Horbury believes that selling the Fiesta at the same specification levels as the Euro model will allow the car to succeed both financially and from an efficiency standpoint.
[Source: Just-Auto, Sub. req'd]
1. Holy crap, you mean if they make it fun to drive and equip all cars well to keep option lists short (and drive up economies of scale) then market it as a fun var with value it will sell well?
Brilliant!
On a serious note, the new Fiesta looks like it may actually be a nice fun to drive little car in exactly the way the new Focus is *not*. I'm really hoping Ford pulls this off and makes money on it.
Posted at 4:52PM on Mar 7th 2008 by Bancho