Ford’s UK unit will reduce the list prices of the Ka, Fiesta, Focus and Kuga on 2 August in a bid to remain competitive in the UK market following large price increases during 2009, forced by a poor euro exchange rate with the pound.
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The cuts mark the second round of reductions for Ford. Prices of large cars were cut in April.
The second stage of the project, that is internally called ‘Blue Tag’, will see list prices move closer to transaction prices, according to Ford’s fleet sales director Kevin Griffin.
The average price cut across the smaller models will be 11%, he added.
Ford’s aim is to improve the attraction of its models to company car buyers who are taxed at the list price, not at the previously discounted transaction price. The list price also affects the level of National Insurance tax that businesses pay.
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By GlobalDataGriffin told just-auto: “We needed to give a better offering. We needed to get transaction and list price closer because that helps confidence in the brand.”
Commenting on last year’s price hikes, Griffin added: “The exchange rate hurt us when it dropped at the end of 2008 and through 2009. There was a 30% difference, so we took the critical decision in the UK to raise prices.
“When we priced in December 2009 and the competition didn’t follow, that cost us, but I’m not sure by how much.
“The Euro’s at 83p now, it was at 90p at its highest and back in 2008 it started at 60-70p.
“The pricing change accounts for a 20% saving and 10% is cost efficiency savings.”
Griffin claimed the first round of list price cuts had worked well with increases in sales for the Mondeo, S-Max and Galaxy which is why the firm was now replicating the price cuts on the smaller cars.
He added that Ford had considered other pricing strategies to improve sales but had dismissed them as either too “complex” or that would harm the brand, in the case of low-specification variants.
In a statement, Ford dealer council chairman Kevin Quigg said: “There was an immediate effect in the showroom as a result of the lower list prices on large cars. Dealers are delighted to see the company continuing to lead the market by applying the initiative across the entire car range.”
Seasonal promotions with discounts of up to 15% were first introduced to maximise trade in the critical March sales month when the latest ’10’ registration plates were introduced. Launched in early February and advertised in the media and on the website, these temporary promotions resulted in strong sales.
In April, these promotions effectively became permanent on large cars and now they have been applied across the entire car range.
Ford of Britain managing director Nigel Sharp said: “The traditional way that the car industry has operated in the UK – with high recommended list price matched to high discounts – is causing confusion for consumers.
“Together with our dealer partners we are determined to change that formula and make the whole purchase process more transparent and the value of Ford cars more obvious.”
At the same time as reducing the recommended list price on its small and medium cars, Ford is reducing dealer discounts.
