As part of the Ford Investor Day, company executives discussed the rough shape of the future Ford, which expects to see more sales of utilities in all sizes by 2020, as well as the small segments gaining ground over the large segments.
IHS Automotive perspective | |
Significance | Ford has plans to increase its global sales from 6.1 million units in 2013 to 9.4 million units in 2020, while shifting from 14 platforms in 2014 to eight in 2016. Included in the target is a continuing shift towards increasing the small vehicle proportion of sales, with large vehicles declining, as well as an expected acceleration in the shift from car to utilities within Ford's sales volumes and global sales. The company is also making efforts to adjust the retail experience and engage with consumers throughout the ownership cycle, which it expects will increase loyalty and opportunity for after-sales parts and service, particularly in emerging markets. |
Implications | Ford is looking to largely continue developing the vehicle range it has, although with more efficient and cost-effective tailoring of products to regional demands and tastes. The indication is that additional products would be region-specific or promoted through market expansion, like the Mustang going global. The company did not reveal launch cadence, but Ford largely has the small and medium markets covered in terms of offerings within the global portfolio. |
Outlook | Ford's presentation of product development and strategy shows the company largely executing faster and leveraging emerging technology to improve its product offerings. Ford is expected to improve on execution of the global platform strategy, which includes the ability to regionalise vehicles when there is sufficient demand, without breaking the commonality of the global platform. Keeping the showroom fresh will enable the company to introduce new technology faster, especially in developing markets. |
Raj Nair, Ford group vice-president of global product development, and Jim Farley, executive vice-president of marketing, sales, and service, delivered the company's vision for product development and the retail environment. The company's basic product vision has not been altered. Ford products are to have bold, emotive exterior designs; be great to drive; be great to sit in; deliver exceptional fuel economy; be unmistakably Ford in look, sound, and feel; and deliver exceptional value and quality. The values needed to get there include industry-leading showroom freshness; benchmark product-development efficiency; a world-class One Ford team; and quality, green, safe, and smart leadership.
Nair addressed the company's recent quality issues with statistics on what went wrong, showing improvement in all regions from 2013 to 2014. All regions saw a spike in 2013, with declines in 2014. Among the most impressive gains were those in Asia-Pacific; in 2009, there were 2,266 faults per 1,000 vehicles. The number dropped to 806 in 2012, though bounced up to 941 in 2013 and has since fallen to 917 in 2014.
In terms of fuel efficiency, Ford is in the mid-term phase of a sustainability blueprint developed several years ago, focusing on substantial platform weight reduction and expanding electrification. Lightweighting will continue, with the F-150 only the beginning of the company's application to increase aluminium use. Nair announced that the next-generation Super Duty pick-up, due in 2016, will leverage the aluminium architecture of the all-new Ford F-150. With the use of aluminium, Ford says the reduced weight is enabling the F-150 to tow more, haul more, accelerate quicker, and stop shorter, all with improved fuel economy. Ford sees itself changing the competitive landscape by being an "industry leader in the invention and implementation of aluminium sheet forming and heat treatment for high-volume, aluminium-intensive, body-in-white applications".
Ford has leveraged all types of electrification into mainstream platforms, resulting in a second-place share of the US electrified vehicle market behind Toyota. Further electrification is expected in the same pattern, as Ford can adjust production more easily to demand. It is a similar story for the connectivity blueprint: the near-term building of Sync and introducing MyLincoln mobile has been accomplished, so now the company is focused on connected vehicles and expanding capabilities. Embedded modems are key to this element. Long term, the company sees fully integrated connectivity (V2V and V2X), with experiences improving over time. The company plans to apply big data and analytics to the product development cycle as well, with Nair suggesting over-the-air updates are on the way, and that they may even be tailored to a given driver.
Nair also announced that Ford is looking to drop to eight platforms by 2020, down from a previously announced goal of nine by 2016; in 2014, the company has 15. In 2016, he said, 99% of the company's volume will be on global platforms, compared to under 90% today, with freshening of vehicles happening more quickly as well. Ford cites the change as supporting its acceleration going forward, and said the refresh rate for 2015–19 for Ford vehicles will be 150% (Nair cited unnamed competitors at 96%, 93%, and 86%).
Ford intends to deliver scale benefits on a global, regional, and local scale. Making the example of vehicles using global platforms but tailored for regions, Nair cited the changes made to the Ford EcoSport compact sport utility vehicle (SUV) for Russia. Developed in Brazil, that vehicle is in the process of global deployment. Nair says the regional volume needs to enable the company to more easily meet local market requirements, without developing a new platform or vehicle. He also cited the Escort for China – riding on the Focus platform, he says the Chinese market C segment is large enough to support regionalisation if necessary. In China, the C-car segment falls into high, medium, and low categories; Nair says the Focus is in the high segment, while the longer, lower cost and lighter-weight Escort slots into the lower segment. By commonising build processes, the company is able to deliver global scale, as well as meet regional material costs and see local scale.
Meanwhile, Ford's Jim Farley talked about the company's overall approach to increasing market share, which is critical to Ford's target of reaching about 9.4 million unit sales globally in 2020, compared to 6.2 million in 2013. Overall, the company's plans to increase global share will come through expansion of the product portfolio, increased capacity, and the strategy for Asia-Pacific.
Farley sees growth opportunities for the company across the small, medium, and large vehicle segments, trucks, and in the luxury segment. The key components of achieving the growth the atuomaker wants will be expanding the current line-up into new markets (adding the Lincoln brand to China, and expanding markets for the EcoSport small SUV are two examples); adding new models and entering new segments; further tailoring products for local markets; expanding capacity where required to meet demand; leveraging the parts and service business globally; and optimising Ford and supplier scale. There is little across the business that Farley does not expect the company to move forward on.
Within the small segment, which includes Focus- and Fiesta-based vehicles as well as the Ka/Figo, Ford is looking to leverage low-cost, global production hubs, add value products (the Ford Escort for China is a good example of this), expand small utilities and increase global deployment, and to continue to focus on tailoring for local markets. Farley told investors that small utilities are the most significant as that segment is forecast to grow from the size of the C/D segment today to rivaling the size of the C segment. For the medium and large car, Ford's C/D platforms, the company is focusing on expanding into new markets more than increasing vehicle count. The Fusion/Mondeo is going global, with the US Fusion-based Mondeo being introduced in China and Europe currently, as well as taking the Mustang global.
Farley is particularly bullish on Ford's opportunity in the utility segments, across all sizes, as the company has off-road and car-based offerings; increasing share in this segment will include expanding an already broad line-up, taking EcoSport and Edge global, and substantially updating existing products, as has recently been done with the Ford Expedition and Lincoln Navigator.
Trucks are a core strength for Ford, and Ford is focused on expansion and ensuring continued profitability. Along with the next-generation SuperDuty going aluminium along with the F-150, Ford will leverage its JMC joint-venture in China for truck growth in that region (demonstrated by the Everest introduced at the 2014 Beijing auto show), leveraging the new and expanded van and Cargo portfolio (including the Transit and Transit Connect), and rolling out new diesel engines across the van and Cargo portfolios.
Just as Ford is looking to rebalance its sales across global regions and improve product contribution, it expects to see its global sales mix shift in size. In 2013, the small category accounted for 50% of sales, medium for 19%, and large for 31%. Ford sees global sales continuing to shift to the small segments, growing to 56% in 2020, and expects the large segment to drop most significantly to 26% of the Ford sales mix, while vehicles in the medium segment will drop to 18%. Ford also sees the shift from car to utilities accelerating rather than slowing. Ford sees the truck segment slipping from 31% of Ford's mix in 2000 to 29% in 2013 and 28% in 2020. Utilities, on the other hand, were 20% of Ford's mix in 2000 and 23% in 2013, but will be 29% in 2020, according to Farley. Cars will drop from 48% in 2013 to 43% in 2020. However, whether discussing this shift of segment or vehicle-type mixes, all will see higher volumes as the overall market grows.
Another area in which Ford is seeing change and embracing a role as first mover is in leveraging consumer and retail trends. At the core of Ford's efforts is transforming the frequency of connection with the consumer during ownership. Rather than relying as heavily on mass marketing, Ford is looking to digital and direct communications that create engagement, and are on a convenient and transparent network. Steven O'Dell referred to the results of this when he reviewed the status of the European market, noting that the brand's improved image in the region came along with an adjusted approach to consumer communication. The company recognises that the best use of the tools at hand is different for various markets. Farley noted that in emerging markets there are more first-time buyers, and the contrast between megacities and rural is more dramatic; therefore, there is overcapacity and particular opportunity in the service and used sectors. Unlike developed markets, Farley says the opportunities for Ford to generate new business in the after-sales service and parts arena are significant.
Outlook and implications
Ford is looking to largely continue developing the vehicle range it has, but with more efficient and cost-effective tailoring of products to regional demands or tastes. The company did not reveal launch cadence, but it already largely has the small and medium markets covered in terms of offerings within the global portfolio – though not every vehicle is offered in every region. While Lincoln's portfolio has room to grow, Ford's is relatively full.
The company, at the mid-point of the sustainability and fuel-efficiency blueprint it laid out in 2006, is largely executing faster and leveraging emerging technology to improve product offerings. The automaker is expected to improve on execution of the global platform strategy, which includes the ability to regionalise vehicles to local demands without breaking the commonality of the global platform. Keeping the showroom fresh will enable the company to introduce new technology faster, especially in developing markets.
The development of the F-150 could highlight the company as a leader in lightweight solutions, which should be deployed to next generations, but wide-spread use is likely to come beyond 2020 and beyond the scope of the strategy review, but not beyond the scope of the management team's planning activities. In terms of technology for automated driving, Ford is currently in step with the industry, offering a few items others have not picked up on yet, but not yet ready to talk about a mid-term automated driving solution along the lines of the on-market Mercedes-Benz S550 or Cadillac's upcoming Super Cruise.
Among the interesting elements of the strategy update was the focus on innovative mobility solutions. Nair presented these as being developed through accelerated business and product innovation, connectivity, consumer experience, and automated driving. That Ford has set searching for innovative mobility solutions as a significant component of its initiatives and strategies could leave the company able to faster respond to changes in the market, particularly patterns of vehicle ownership in emerging and developing markets.