Americans love big expensive equipment. And cheap cars have fizzled. Ford, which threw in the towel on its cheapest cars, is trying again, this time with a small “truck.”
By Wolf Richter for WOLF STREET.
Look, I think it’s a good idea to sell new vehicles with lower price tags that the less-well-off consumers can afford and like to drive. It’s like the biggest no-brainer in the history of mankind, given that these consumers today are shuffled off to the used vehicle market because they’ve been locked out of the new vehicle market.
But the idea has been had before. And it has failed every time. The lesson is always the same: Americans love big and expensive equipment, and it’s easy to sell and easy to make money with; and small and cheap is very hard to sell, and nearly impossible to make money with for automakers and dealers.
So Ford is trying again. It announced today its latest effort, the Maverick, a four-door front-wheel-drive pickup truck, with a tiny bed in the back – I mean, is this still a “truck?” The model is smaller than the Ranger and “starts under $20,000.” This will be the cheapest vehicle in Ford’s line-up for the 2022 model year.
This comes after Ford just threw in the towel on its cheapest car in the US, the Fiesta. It also threw in the towel on all its other sedans. The only car it keeps around is the Mustang.
The Fiestas were nicely equipped for what they were, and started at around $15,000 MSRP. That’s still a lot of money for a lot of people. In 2019, Ford sold 60,000 of them, compared to 900,000 F-series trucks and 241,000 Escape SUVs. And it’s on trucks and SUVs where the big-fat profit margins are.
When I was still in the business, Ford sold the similar sounding Festiva in the late 1980s and early 1990s, a Korean-made car. It was basic. You paid extra for dealer-add-on AC. Power windows not available. But you could put a whole bunch of stuff in the back. And it got about 50 mpg. We tried hard to sell them, occasionally even at $4,999, but we sold only a few, and lost money at that price. This wasn’t fun.
Meanwhile, pickups have gotten bigger and more expensive and sophisticated. Crew cabs (four doors) used to be rare and expensive. Now they’re common and a lot more expensive. And the beds have gotten smaller. The basic version of the F-150, the XL, starts at $29,000, and hardly anyone buys them other than fleets. If you try a little to spec out a high-end F-350 Crew Cab, you can get close to $100,000. The F-series is the bestselling vehicle in the US. In 2018, Ford sold a record 910,000 of them. They have big-fat profit margins and are immensely profitable and important for Ford.
The Ranger, a mid-size truck that Ford revived in the US for the 2019 model year, starts at $25,000. And they’re not red-hot. Last year, Ford sold 101,000 of them, compared to 787,000 F-series. And maybe some of those Ranger sales cannibalized F-150 sales.
So now Ford has this compact truck Maverick in the pipeline. It has a hybrid powertrain that drives the front wheels. Ford said it’ll get 40 mpg in the city, which is not unusual for hybrids because they charge up their battery with the regenerative braking system. It will likely have the electronics you’d expect in a modern vehicle.
The promo video shows a bunch of young people “doing stuff,” such as carrying two cups of to-go coffee while talking on the cellphone while approaching the door of the truck. So this is who the vehicle will be marketed to. And that’s a great thing.
The question is: Will Americans buy it in large enough numbers, given their long history of spurning small and low-cost new vehicles, and given their well-established record of clamoring for the biggest most expensive new equipment they can afford. And if they cannot afford it new, they’ll rather buy it used, than buy something small and cheap that’s new.
The stock market didn’t go for it. After the Maverick was announced, Ford’s shares [F] fell 1.5%. This comes after weeks of EV hype that had driven, so to speak, the shares to multiyear highs. OK, the message was mixed. The Maverick had to compete with news from Ford about the semiconductor shortage, which keeps on keeping on.
I would like to see cheaper new vehicles become popular in the US in a big way. Automakers have tried with various low-cost models, and you can see them in the rental fleets, and you can buy them on the used vehicle market after they come out of the rental fleet, but they’re just not popular as new vehicles on dealer lots.
So now Ford has switched strategy. Instead of selling a low-end car, it’s selling a low-end truck that is quite a bit more expensive than its low-end car was before it was retired.
Ford will likely be able to make more money on a $20,000 Maverick than on a $15,000 Fiesta, and so it will likely spend more on marketing the Maverick.
Ford has left cars for dead, other than the Mustang. Everything else it sells in the US going forward are compact SUVs, SUVs, pickups, or vans. The writing has been on the wall for years: Americans love SUVs and trucks, even if the SUV is based on a car chassis.
With its front-wheel drive configuration, the Maverick may be closer to a car chassis than a truck chassis. And it gets the fuel economy of a car.
Maybe Americans will go for it this time, since it has a bed in the back and isn’t a “car” but a “truck.” But it’s still $5,000 more expensive than the cheapest vehicle was in Ford’s lineup that it replaces.
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