Ford Australia won't engage in price wars with other manufacturers in a "race to the bottom". Instead, to maximise profitability for its model ranges, the company is aiming for buyers at the higher end of the non-premium market.
The most noticeable effect of that strategy was seen last month when Ford announced pricing and specs for its updated Focus range of small cars.
The slow-selling diesel variants were dropped, the entry-level Ambiente was axed, the old six-speed twin-clutch auto was replaced with a conventional automatic and a 132kW/240Nm turbocharged 1.5 litre engine will be the sole engine offering.
Those changes saw the price of entry rise to $23,390 for the Trend hatch manual, which is a few grand above the segment-average base pricing. However, Ford Australia doesn't see this as a problem.
Speaking to TMR, Ford Australia PR head Wes Sherwood said Ford's strategy will instead target buyers who aren't actively shopping for bargains, and funnel them into higher-spec models where profit margins are fatter.
“You’ve got to identify the markets where there’s a sustainable business," Sherwood said.
"We’re not going to keep competing in segments where everyone’s in a race to the bottom price-wise and devalue the brand, devalue the vehicle and ultimately devalue residuals for consumers. That’s not a sustainable business."
"We took out the entry model and we’re starting Focus at a different place now. That’s not to say we won’t have that offer - we have more affordable offerings - but we’ve got to do it markets where it’s not priced to ridiculously low levels."
The Ambiente model that's been cut from the Focus range only accounted for roughly one in ten Focus sales, and diesel share was around three percent.
Meanwhile, the Trend's share of the Focus sales pie has typically been around 60 percent.
With the automatic variants of the 2016 Focus Trend between $100 and $200 more than before - despite the myriad of mechanical and spec improvements - the price realignment isn't expected to have much of a negative impact on sales.
And according to Sherwood, the new sales strategy should translate into an improved brand image for Ford.
"Where our business model previously was to go after price points that were attractive to people to get them in, it didn’t make a brand statement," he said. "There was just people who were hunting around for the best deal at the time."
"We completely overhauled our business to say we’re going to be a brand that places a premium on innovation, technology and fun driving character.
"We’ve invested a lot to do that, and we’re shifting away from attractive price points and we’re moving towards being a brand that actually creates value for people, so people are seeking us out because the brand means something to them, not because we’re able to get the cheapest price out there that week."
Early indications are that the strategy is working, and delivering increased profits to Ford Australia.
"It’s working here," Sherwood told TMR.
"It’s harder to see here because our financial numbers are overwhelmed by the manufacturing elements that incur huge costs, but our operational business, our day-to-day business got better this year.
"What that means is, our sales went down and our profitability went up because we’re focusing on that business which is actually sustainable and healthy."
That means Ford won't be revisiting the microcar segment, which it vacated in 2002 when it discontinued the diminutive Ka two-door hatch.
Though a new Ka is expected to make its European debut in 2016, Sherwood said the company was happy with its present product lineup.
With profit margins exceptionally slim for vehicles of the Ka's size, odds are it simply doesn't have enough meat on the proverbial bone to interest Ford Australia.
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