Ford is poised to raise its new car prices in the United Kingdom by an average of four percent across the board. Their reasoning for this raise is the weakness of the pound against the euro. This increase will be the third of its kind this year, having risen 4.7 percent in February and 3.75 percent in April. This means the Ka, Fiesta, Focus and Mondeo will all increase by at least £600. The price increase will be in effect for vehicles ordered after June 30.
Many of the vehicles Ford sells in the United Kingdom are produced in Germany and Spain, this means the cost of production is paid for in Euros while the selling price is paid in pounds, meaning the cost of construction has gone up in comparison to the selling price. Ford’s most recent increase is being implemented to even out costs versus profits to the prior levels.
The three price increases implemented by Ford over the beginning months of this year will cancel out most of the savings from the government’s ‘scrappage scheme’. The basics of this scheme are that in order to induce the trade in of old, less environmentally friendly vehicle, the government gives customers £2,000 off new cars when a ten year or older car is traded in. The census so far is that the scrappage scheme is having a positive impact, but the customer demand for new vehicles is still quite weak. When the scrappage scheme was first introduced, dealerships of all kinds saw an increase in window shoppers and tire kickers; they also saw a smaller increase of actual sales.
Ford’s move to raise their prices for the third time this year is likely to reduce the number of customers willing to trade in their older, less environmentally friendly, but in all probability paid off vehicles for a new, shiny, environmentally friendly vehicle with a Ford logo on its grill, taking on more debt for a vehicle that at the beginning of the year cost a good bit less.
With the price raise having been implemented on all vehicles ordered after June 30th, the resultant reaction from the general public should be calculable within a few months. So is Ford doing itself a disservice by raising prices? Time will tell how consumers will respond to the third raise this year. The competition is likely to be poised to lure Ford’s unhappy clientele over to their nameplate.