After hobnobbing with the media at a recent event for the 2012 Ford Focus, it's become clear that the Blue Oval's new compact is going to be a shockingly good entry for the segment. The thing is, even though the Focus will offer more than enough content to justify its base MSRP of $16,995*, that number is going to be on the high end of the segment's pricing spectrum. In and of itself, that's no problem. As the 2011 Ford Edge is showing, people are ready and willing to pay a premium for a premium Ford. But it does make things difficult for customers who want a more basic approach to transportation while still being able to buy a Blue Oval product.
(*This is the starting price used by Ford on its customer-oriented retail website, and interestingly, it includes the $725 destination charge. Every other product on the site showcases an MSRP without that charge. It's almost as if Ford were purposely trying to make the Focus look more expensive than it is.)
Prices, Customers Continue
to Edge Higher
Let's get back to the Edge here to illustrate the situation. With a comprehensive refresh for the 2011 model year, including the addition of an EcoBoost engine, the latest Edge started hitting dealerships in significant numbers in September, and the result was a significant sales increase. Ford reported a 186.2 percent jump in Edge customers last month, with volume increasing from 4,477 units in September 2009 (held down somewhat by the post-Cash for Clunkers effect) to 12,815.
Looking at the Edge's year-to-date performance, the numbers show a 35.2 percent increase over the same period last year. But on a volume basis, September's 8,338 extra sales over September 2009, taken on its own, was responsible for some 36.7 percent of the Edge's entire year-to-date increase. In other words, the vehicle's recent enhancements seem to have hit the mark.
And what that means is that a lot of people are ready to pay at least $27,220 for a Ford crossover (excluding destination charges). This is no doubt excellent news for Ford, but what if you can't quite pony up some $30,000 for a new crossover/SUV?
The Growing Crossover Divide
What we're seeing in the medium crossover segment is a gulf between two different approaches. Along with the Edge, products like the Nissan Murano are taking a premium route to the marketplace as up-level vehicles that wear similarly up-level price tags: The 2010 Murano, for example, starts at an Edge-topping $28,340. But many other mainstream companies are pricing their midsize crossovers in the low $20's: The Chevrolet Equinox opens at $22,745, the Toyota RAV4 at $21,925, the Mazda CX-7 at $21,700 and the Kia Sorento at $22,595.
The philosophical difference between the two groups of vehicles is that the members of the latter bunch are positioned as the crossover versions of their makers' mid-size sedans. That is, vehicles designed to appeal to the mass market. The Edge and the Murano, on the other hand, are more like stand-alone halo-type vehicles like the Nissan 370Z or Ford Mustang'” except that instead of adding extra performance not available to the mainstream, the crossovers add extra premium features that aren't designed to appeal to the mainstream.
The Baby Boom Sales Boom
Now, for the near-term future, there's a lot to be said for the Ford approach, at least among the crossovers. The country's changing demographics are such that the majority of new-vehicle buyers are baby boomers: There are simply more of them than in any other age cohort and they have more money, too.
Yet in the long term, all automakers need to capture younger buyers to ensure future sales, and Ford stands out among the full-line manufacturers for its lack of entry-level products. You can get into a Nissan Versa with air conditioning and anti-lock brakes for as little as $11,240. The least expensive Fiesta starts at $13,320. Moving up to the Nissan Sentra, the price of admission to the base model, which includes A/C and power windows/locks, is $15,520; the bargain-basement Focus opens at $16,270 with less content.
Again, as I hope I've made clear, the new Fords are excellent cars and still provide a nice value proposition because you are, in fact, getting plenty of vehicle for your money. But I can't help thinking the Blue Oval will eventually regret its decision to drop out of the entry-level segments.