Car Buyers Face Fewer Choices, Higher Prices
Jalopnik’s Erin Marquis talks about the future of cars (or lack thereof).
People who prefer cars to trucks and sport-utility vehicles will have fewer options to buy in a few years.
Ford Motor Company plans to stop selling four car models in North America by 2022–the Taurus, the Fusion, the Fiesta, and the C-MAX hybrid. Fiat Chrysler has already eliminated two of its cars (the Chrysler 200 and the Dodge Dart), and General Motors could be next to join the trend.
Jalopnik Managing Editor Erin Marquis says it comes down to this: American consumers want bigger vehicles.
“Cars are down across the board,” she says, adding that the U.S. has been down this road before.
“People seem to think that gas could never go over $4 a gallon again. This is where we were in 2008, with gigantic vehicles, not a lot of smaller vehicles, and everyone scrambling.”
When the housing “bubble” burst a decade ago, the economy went into recession. General Motors and Chrysler filed for bankruptcy. Ford avoided bankruptcy and did not get a financial bailout from the government, but it still had huge costs to cut. CEO Jim Hackett says he wants to cut $25 billion in costs over the next four years, and that’s why Ford is cutting four car models now.
“Ford says it’s better-prepared because they’ll have hybrid and electric options,” Marquis says. “They think that if gas goes up, people will buy electric or hybrid.”
The problem with that calculation, she says, is that it assumes battery prices will go down. If they don’t, those options will be more expensive.
“You’re losing your cheap cars,” she says.
MORE FROM WDET: Why Is Ford Killing Its Cars?
If cars do become more expensive, how will people who want one pay for it? For years, the maximum loan term was five years. Marquis says dealers are financing new vehicle purchases up to six or seven years. She says that’s a risky investment in a hybrid or electric.
READ: “84-Month Auto Loans Are Becoming More Common” on Jalopnik (by Ryan Felton)
“You’re looking at getting an electric vehicle for 84 months in payments without knowing what’s going to happen with gas prices,” Marquis says. “You’re stuck paying for a car for seven years. You don’t know if that car’s going to last seven years, especially when you’re talking about a hybrid or an electric. Those batteries aren’t proven, and they’re expensive to replace.”
Marquis says Ford appears to be trying to model its business after another electric car manufacturer, Tesla.
“Tesla moves fast,” she says. “It’s a little overvalued on Wall Street. But Wall Street is basically making these business decisions. So they’re going with electric cars, hybrid cars, and higher-priced cars, and to create a business model that moves faster and feels more modern.”
Ford plans to continue making and selling the Mustang in North America. It will also offer a crossover version of the Focus.
Click on the audio link to hear the conversation with WDET’s Pat Batcheller.
