In a month's time, Ford is cutting the RRPs on all its medium and small cars, as it did in April with its large ones. And it has cut dealer margins too, with the stated aim of making “the whole purchase process more transparent and the value of Ford cars more obvious."

This represents a bit of an about-turn for Ford. It has not been alone in raising prices in the last year or so. My Trend Tracker colleague Chris Oakham's noted in his column in Automotive Retail Bulletin recently that the Ford Fiesta 1.25's list price had risen 32.6% in twelve months, while other Ford prices had risen 19% (Mondeo1.6) and 17.6% (Focus 1.6). Reporting these price rises, What Car? also noted that dealer discounts had been falling. (See Chris' column in his 1 July blog on this site, Are new cars overpriced?

New car price increases in 2009 (and Ford's weren't the only examples) were justified by the weakness of sterling and the inflationary impact of $75/barrel crude.

The affordability of base model Fiestas (defined as list price divided by months of national average gross pay) has veered between six months when the first Fiesta was launched 34 years ago, just over four months back in 2006, and recently, back up to over five.

Ford's move in the UK won't, it seems, make Fords more affordable. Right now, a Ford dealer is offering 24% off the list price of a 3-dr Fiesta Studio. Ford's new RRP for this model will be 17% lower than the present one. The lowest dealer price will probably rise a bit as margins shrink.

As we wait to find out whether the recession will be a double-dip model, all acknowledge that it's going to be increasingly hard to sell almost any new car. Dealers should prize any wriggle-room to cut a deal. It's at the dealership that transparency is valued, rather than on the manufacturer's website, and there are enough price comparison sites around now to reduce the significance of manufacturers' RRPs - except to dealers.

Successful pricing strategies always involve effective balancing of demand and supply. Few volume car brands can strangle supply in line with demand falling at the rate we can now expect.

Given the weakening post-scrappage market, this week may not have been the ideal time for Peugeot to launch its Just Add Fuel, “completely transparent peace of mind motoring package”, wherein monthly payments include finance, insurance, servicing, road fund, warranty and roadside assistance.

“Completely transparent” is a questionable claim, inasmuch as bundling items makes price comparisons tricky, and new-car warranty cover was in any case never a chargeable item. “Peace of mind” in Peugeot's concept refers to fixed prices eliminating inflation, which is not the greatest of our concerns at present. And finance, insurance and servicing can be acquired easily, and possibly more cheaply, from third-party suppliers.

Toby Procter

Trend Tracker Limited

0870 421 4350

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