Sales have cooled as company doubles incentives to as much as $1,000 per vehicle.
John D. Stoll / Dow Jones - March 08, 2006
DETROIT -- Ford Motor Co. is pumping millions of dollars into a marketing push and offering a fresh round of incentives to generate momentum for sales of sport utility vehicles with hybrid engines, as demand for the vehicles shows signs of fatigue.
Ford dove into the segment in 2004 with the launch of its Escape Hybrid SUV in a bid to woo buyers concerned about gasoline prices and environmental issues. Hybrid vehicles use both a gasoline power plant and an electric motor that powers the car when it idles and accelerates.
The automaker's effort to emphasize hybrids is in its nascent stages. It built 19,000 hybrids for the North American market last year and sold 17,000, accounting for less than 10 percent of total hybrid sales in the United States. By 2010, Ford plans to produce as many as 250,000 hybrids a year.
But hybrid sales have cooled off this year, according to sales reports from Ford and interviews with many dealers. So far this year, Ford has sold about half of the hybrids it has capacity to make, and the company recently doubled cash incentives for buyers to as much as $1,000 a vehicle. In the first two months of this year, Ford sold only about 2,000 hybrid-equipped vehicles.
Ford, which had a loss of $1.6 billion in its North American automotive operations in 2005, can't afford a misstep on hybrids. The No. 2 U.S. car producer has put billions of dollars into creating its own brand of hybrid technology and plans to offer the technology on an array of models.
Ford recently launched a marketing campaign featuring the company's chief executive, Bill Ford Jr., and Muppets character Kermit the Frog to promote its "green" image and remind consumers that Ford offers hybrids. The strategy appeared to pay off in February, as Ford sold about 1,200 Escape hybrids during the month, up from about 800 in January.
Building on the momentum is crucial if Ford is to make inroads in a segment dominated by Toyota Motor Corp. and Honda Motor Co., which together account for about 90 percent of the hybrid market in the United States. While Toyota continues to report growth for its most popular hybrid -- the Prius -- the waiting lists that first accompanied Ford's hybrid have evaporated. Toyota's sustained growth is often attributed to strong marketing and a steady stream of new hybrid models.
The technophile crowd willing to open pocketbooks for an American-made hybrid has already been satisfied, said Acton Ford President David Abatsis in Acton, Mass. Abatsis said consumers were initially willing to swallow the $3,000-plus premium charged for a hybrid, but "that group is gone."
Now, dealers say, hybrid buyers are looking more like the average consumer, hunting for a bargain and searching for a standout automobile. Ford's $27,000 Escape Hybrid, and its low-volume $30,000 Mercury Mariner Hybrid, are posting weak results as many buyers compare the vehicles with nonhybrid versions of the same car that sell for as little as $17,000 when incentives are factored in and get respectable gasoline mileage.
Ford spokesman Jim Cain said the company has no plans to cut sticker prices or offer more-competitive lease rates on its hybrids.
"We're just starting to flex our muscles in the hybrid market," he said, noting the company plans to introduce at least seven new hybrids by decade's end.
He said factors such as a new federal tax credit for hybrid buyers and another potential surge in gasoline prices could increase demand for Ford hybrids in the near term.
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