Ford Sales Chief: Consumers Will Pay for Fuel Efficiency, Within Limits

Ford’s global head of sales and marketing is thinking a lot about fuel efficiency, gas prices and the economy these days. “Consumers know tomorrow they could wake up and gas could be $4 a gallon,” Farley told The Detroit News. “The uncertainty about fuel prices has changed the mindset of customers.”

Ford's Jim Farley

Jim Farley with the new 2011 Ford Explorer. Farley said he thinks consumers will pay more for a smaller engine, such as the EcoBoost four-cylinder in the new Explorer. The EcoBoost Explorer is priced above the V-6 version.

That’s why Ford plans to make its so-called “EcoBoost” engines the core powertrains across all of its model lineups. Ford uses Ecoboost as the sub-brand to describe downsized engines with turbocharging and direct inject to increase fuel economy by around 5 miles per gallon. Ford sees a “substantial” market for Ecoboost.

On the other hand, as we reported, Ford’s Jim Farley last week said that consumers are less likely to buy a hybrid. “You can’t sell a hybrid in today’s market,” he said.

Farley was talking about the depressed economy and sales targets for the new Lincoln MKZ Hybrid, which is the first hybrid vehicle offered at exactly the same price as the conventional version of the car. Despite this distinction, Farley expects Ford to sell fewer than 1,000 MKZ Hybrids per month. (Actually, that’s not a low number for a luxury hybrid.)

Farley believes that hybrids are getting consumers to think about break-even calculations for cars that offer more miles to the gallon. Yet, he contends that consumers will only buy if they see a payback in two years or less—a calculation that works for EcoBoost but not for hybrids (and presumably not for electric cars).

All along, Ecoboost has been the first line of defense for Ford—followed in order of importance by conventional hybrids, plug-in hybrids and electric cars. These electrified vehicles could make up as much as 25 percent of Ford’s global fleet by 2020. Based on Farley’s comments, the much bigger piece of the efficiency pie will come from regular ol’ gas engine cars—optimized to give more mpg for the buck.


  • Shines

    Yes folks on this site can complain about the slow pace of hybridization but most folks aren’t going to pay the premium for it. There is still the issue of hybrid = a more complicated less reliable vehicle. ( It is interesting that the manufacturers that seem to care the most about reliability (Toyota, Ford and Honda) are producing the most hybrid vehicles). At least the ice engines are also becoming more efficient. When fuel prices become high enough a greater number of buyers will start switching to hybrids and plug ins.

  • veek

    Jim Farley is right. Fuel prices are rarely the most significant number when buying a new car, or when considering whether to buy a new or a used car. Importantly, state and local governments could do far more to increase the viability of hybrid or fuel-efficient cars, and they could do this by tax policy rather than subsidization.

    Depending on your state, sales taxes and registration fees may equal or exceed fuel expenses. For example, in my state (Colorado) we pay a 7.5% sales tax on all new cars, including hybrids, which exceeds what we would save in fuel for quite some time, and which makes driving any used car far more economical. We then pay increased registration fees for three years, which also exceed what we would save in fuel costs by buying a hybrid rather than a three or four year old used car, whether a hybrid or not.

    State and local governments could do far more to help hybrids or fuel-efficient cars by lowering the registration and sales tax fees for these cars, and they could make this revenue-neutral by increasing those taxes on high-consumption cars.

  • Yegor

    Corporate fuel economy standards are still too relaxed but it is going to change starting next year. 2010 – 25 MPG, 2011 – 27 MPG, 2012 – 28.5 MPG, 2013 – 30 MPG, 2014 – 31.5 MPG, 2015 – 33.5 MPG, 2016 – 35.5 MPG.
    Hybrids and plug-ins market share will grow from year to year.
    Also gas cost is so low because of global economic recession. When economy starts to recover gas cost will go up and Hybrids sales will go up as well.

  • Charles

    Shines,

    It is interesting that the hybrid versions of the Ford Escape, Toyota Camry, Nissan Altima and Chevrolet Tahoe are the most reliable versions. The Escape Hybrids are rated “Better than average” by Consumer Reports, where as the non-hybrids are just average. The Camry and Altima Hybrids are rated “Much better than average”, the four cylinders at “Better than average” and the six cylinders at just average. The Tahoe Hybrid is average, but the pure ICE version is “Worse than average”.

    The Ford Fusion is more complicated. All two wheel drive versions are rated “Much better than average”.

    The Honda Civic Hybrid breaks the trend a bit. The hybrid, coupe, hatchback and si are all rated at “Better than average”, but the sedan is rated at “Much better than average”.

    So from this limited data it looks like the added complexity of the hybrid is not showing up as poor reliability. In fact it looks like being a hybrid makes the car more reliable. There maybe other explanations, such as the companies put more experienced workers on the hybrid line, or hybrids are low volume and not pushed through the line as fast. Who knows?

  • jmbrendel

    We haven’t found our hybrids (2008 and 2009 Prius) to be any less reliable than our ICE-only vehicles were. But admittedly, let’s see how they fare as the batteries age.

  • 55mpg

    I have noticed that the build quality of our 2010 Prius is much better than our 2008 Corolla. The ride is much better and there is hardly any outside noise in the Prius.

  • HappyOldMan

    I will not pay a premium for it. I turned down buying the Ford Fusion based on cost to value. And there is no way I will buy the Volt. Over the life of the car I will never buy that much gas. They are trying to get all of their R&D out right away. They are trying to economically rape us for being eco conscience.

  • Yegor

    To my surprise I have discovered that Ford right now actually does not meet CAFE (Corporate Average Fuel Economy) requirements.
    CAFE requirement for light trucks and SUV for 2010 year is 23.5 MPG.
    http://en.wikipedia.org/wiki/Corporate_Average_Fuel_Economy

    So far Ford sales this year:
    Ford Trucks: 469,734. Most of it F-series that have at best average MPG of 17.
    Ford SUV and Crossovers: 290,783. The best of it is Ford Escape with average 23 MPG (128,507). Ford Edge is at best average 20 MPG (74,320).
    http://media.ford.com/images/10031/August10sales.pdf
    So Ford light trucks average MPG is around 19 MPG only!!! Wow!!! It is 4.5 MPG below CAFE standard!!!

    Let’s see how much penalty Ford will pay.$5.50 USD per 0.1 mpg under the standard (see CAFE link above). It is $247.5 per truck. Guys this amount is ridiculous!!! What is $247.5 per $22,000 truck. No wonder that as of model year 2006, Chrysler and Volkswagen choose to pay penalty instead of obeying. Now Ford chose to do the same – it is more profitable!!! Or man! CAFE standards are useless – the market is self regulating right now – the only reason people are not buying bigger cars and trucks they fear the potential of higher gas prices.

    The CAFE penalty should be at least 20 times more!

  • Charles

    Yegor;

    If the goal is to sell fuel efficient vehicles, I think CAFE should really just go away. It is a really bad way to distort the market. People are going to buy what they want. CAFE does nothing to change the want side, just the supply side. If we taxed fuel in a responsible way, people would want fuel efficient vehicles. So given a choice I would prefer distorting the market with a CO2 tax, and not CAFE.

  • Samie

    Charles, I have given thought on CAFE distorting markets but three things keep me from believing that we should do away with CAFE regulations.

    1. Consumers do not pay for hidden costs associated with petroleum or CO2 (that in itself is a market distortion). Stronger CAFE regulations does do a good job of keeping disparities somewhat predictable, unlike a market where the consumer truly decides what mpgs is right from them. This would shift most of the burden on those who can’t afford a luxury vehicle or those who do not fall for marketing schemes like the ones from the SUV craze a few years back.

    2. Automakers generally make more profits with less fuel efficient technology. Things like ECO boast, or full to part hybridization does add costs that can be avoided if producers are no longer required to add fuel efficiency that eats into profit margins.

    3. Shifting the burden onto the consumer ie. CO2 tax away from the producer is a bad idea. In this day of political nut jobs and short-term thinking, any long-term “tax” would be disrupted by political cycles and in the moment type of legislation or deregulation. Regulating a few dozen auto-manufactures is a lot easier than regulating millions of drivers who vote and can make irrational decisions based on in the moment thinking.

  • Charles

    Samie;

    I am in a really bad mood today, and was a bit short on that post. I should only post when I am in at least on OK mood.

    You are correct that in the current political environment any tax would be be political suicide. So how about a blended approach. Keep and raise CAFE to the level that is needed to prevent catastrophic climate change (as determined by scientific data) and raise the fuel tax slowly based on the fuel’s CO2 contribution as part on an overall environmental law overhaul after we get out of our current economic mess. The proceeds from the tax could be used to fund research for CO2 reduction, green job training and other worthwhile CO2 lowering projects.

    Off topic side note: Please do not vote for the couch this November.

  • veek

    Charles: Good idea on the CAFE standards, but … one problem is that although The Scientific Community generally agrees industrial C02 is contributing to warming, there is NOT much agreement about the magnitude of future warming, whether it will be defined as genuinely catastrophic, or when it is likely to occur (consider listening to Matt Ridley’s great podcast, How Prosperity Evolves, under the “Publications” heading at the terrific New York Academy of Science website, nyas,org). Anyone who says they definitely know the answer to that prediction should not be left in the vicinity of your wallet. Therefore, fine tuning CAFE to meet an unknown amount/date sounds more like a political scheme than a scientific goal.

    CAFE standards, an increased gas tax, incentives for fuel-efficient cars, etc. are still excellent factors because even if we don’t know how the magnitude or timing of climate change, why take unnecessary risks? Our technological leaders and innovators appear capable of improving things, despite our political systems, and they should be encouraged to do this (let’s not forget there has never been a documented case, that I know of, of a DC politician ever knowing how to turn the wrench on any technology which makes our lives better). Let’s also not forget that industrial and technological activity has contributed to the greatest mass distribution of wealth and material well-being the world has ever imagined, even as we know that we all need to take care of higher-level needs.

  • Samie

    Charles
    I think veek is right, CO2 is difficult to measure monetarily in terms of knowing future damages globally but that is no excuse to be complacent.

    I don’t see any gas tax increase politically, unless it was used for repairing and rebuilding most of our highway infrastructure.

    Instead of a federal gas tax increase we should start with ending tax breaks to petroleum companies, make them build in more costs associated with risks from environment and safety issues, and charge a lot more for leasing federal land or permits for offshore drilling (depending on distance from shore, or environmentally sensitive areas). The point is to make the petroleum industry set and dictate their own prices (without federal subsidies) to the consumer in a way that factors in hidden costs.

    Charles your side comment is interesting in that it is so discouraging to have limited voting options (two parties) based on wackos or those who give vague &or misguided short-term promises, while always caving in to those who pay for their elections. Guess it is naïve but I do agree in theory to CO2 taxes and higher federal gasoline taxes but our political system and talking points only makes me discouraged that politicians and many voters who fall for propaganda can’t think for themselves or let alone think long-term. Political leadership is clearly lacking but that is something I should just except as something that will continue to get worse…

  • William

    @ Yegor

    Ford gets a pretty hefty credit for each vehicle the is flex-fuel capable (also called dual fuel), making the CAFE MPG much higher than the EPA estimated MPG.

    You can read about it at http://www.nhtsa.gov/cars/rules/cafe/overview.htm, under the “How are alternative fuel vehicles treated under CAFE?” section

  • Ralph Witkin

    I’ve waited for the 2011 models and want to buy a MKZ Hybrid but can’t find any in dealer’s stock in my area NY/Conn

  • tapra1

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