Falcon to feast on LPG

FORD has blamed “the perfect storm” of economic conditions for the new FG Falcon’s lacklustre initial sales performance, but says its volume-seller’s increased popularity in October is evidence of a turnaround that will not be complete until it reclaims its rightful 35 per cent of the large-car market segment.

In his first monthly media briefing since assuming the presidency of Ford Australia on October 1, Marin Burela said lower fuel prices and interest rates will improve the fortunes of Australia’s sagging large-car segment and in particular the new Falcon, which he believes will be the biggest winner to emerge from the federal government’s increased LPG vehicle subsidy.

Falcon sales were 12.6 per cent up month-on-month in October, while its nearest rivals in Holden’s Commodore and Toyota’s Aurion were down a respective 14.2 and 31.7 per cent on the same month last year.

Honda’s Accord was the only other sub-$70,000 large car to be up (by 5.5 per cent) in the segment during October, when the Commodore claimed a dominant 44.3 per cent of the category, compared to the Falcon’s 31.9 and the Aurion’s 14.5 per cent.

The Commodore remains both Australia's favourite model and the top-selling large-car with 41,315 sales to October (down from 49,081 during the same period last year), versus 26,802 Falcons (down from 28,021 in 2007).

in 2008“Falcon is now starting to gain some traction,” said Mr Burela. “(It gained) a 32 per cent share last month and we’re building on that. I think we’re now slowly starting to get the message out that the Falcon’s such a fantastic car.

“Usually we would expect to see more following a major new model. Unfortunately we had a bit of a slow start, but we’re now slowly starting to build some momentum again. Falcon is now starting to get its fair share.

“I don’t think that I’ll be satisfied in terms of its fair share until we get somewhere around the 35 per cent plus. Once we get into that category then I think it’s going to start to put a different perspective on the things we’re doing,” he said.

Ford’s Falcon achieved its largest ever share of the large-car segment (35.6 per cent) in 2003, but as a proportion of overall new-car sales the category has been in free-fall since it comprised 43.4 per cent of all new passenger cars sold in 1996.

Australia’s once-dominant large-car segment slipped 19.1 per cent overall in October to remain down by 15 per cent so far in 2008, when 95,485 sub-$70,000 car sales represented just 11.1 per cent of the total new-car market.

The Accord is the only shining light in the segment in year-to-date terms (up 12 per cent), with Falcon sales down 4.3 per cent this year, Aurion down 11.6 per cent and the Commodore 15.8 per cent less popular.

Asked if he thought the Falcon would benefit from lower fuel prices, which are expected to return to as low as one dollar per litre just six months after some industry experts had predicted prices as high as $2/litre, Mr Burela said: “I think it will.

”The LPG thing I think is a great thing for us and we’re going to work hard on that… We’re going to work very hard in communicating to the market that we’re the only ones that have got a factory-fitted dedicated LPG Falcon… particularly now with the new government incentive that doubles the retail buyers’ incentive to go and buy one.

“The (Falcon LPG) option price is about $1400, the incentive to get one is $2000 and when you got to Western Australia the state government offers another incentive on top of that.

“So we see that as a huge opportunity for us and I’m moving my team very strongly… to really focus on that over the next few months.

“I feel quietly confident that what we may be looking at is a pivot point. Previously with the $1000 incentive it was still costing people money to go to LPG in terms of the option.

“Now, it actually benefits the consumer by about $600 and then on top of that your running costs are actually going to be lower. So when you put that all together, if you’re not focussed on trunk package (boot size) and if that isn’t a key criteria for you this could become a very viable choice for you.

“We’ve sold so far somewhere in the order of 80,000 LPG units, but the vast majority of those have been to fleets. I think our sales in the private sector have only been in the 1600-2000 sector, so you can see that this really presents a huge opportunity for us,” he said.

Mr Burela declined to estimate how many incremental sales the Falcon might attract as a direct result of the increased LPG subsidy, but said he expected Australia to follow the lead of some European markets in term of increased LPG vehicle sales.

“I really wouldn’t want to put a number on it. I think we need to go out and communicate this, prepare the market, make sure that our marketing plans show the alternative is a viable one and then we’ll see what happens from that. It’s hard to say – it’s just a bit too early to put a number against it.

“Markets like Italy, Germany, Holland are really starting to move to LPG and the reason is running costs are significantly lower and their starting to get nice incentives from government to move in that direction, which is changing the dynamics of the markets.” Mr Burela said he was hopeful sustained lower fuel prices would improve sales in the large-car segment.

“The industry in the large car segment is obviously feeling the pinch. (But) It will be very interesting to see what actually happens as we move into 2009 if fuel prices stabilise at the levels were seeing now and lower.

“Oil yesterday or this morning was running at $US54-55 a barrel,” said Mr Burela on Thursday (November 13). “I can’t remember when it was last at that level.

“It will be very interesting to see what that does to bowser prices of fuel and how much of that gets flowed through and what that does for the D/E segment.

“I’m particularly keen on seeing how some of the things that are taking place, eg fuel prices, will affect the large car segment, because I think there are two dynamics going on here.



“One was the cost of ownership was high, so people were moving out of large cars, and the second is that choices were being made on lifestyle and some of the demographics, but I think that there could be a levelling off and potentially an upkick based on things that are going on around the world and certainly in Australia.” Asked why the newest Falcon since the 1998 AU of a decade ago was not an instant sales hit despite positive media coverage, Mr Burela said: “It’s a good question. It’s the same question that I’m exploring with the team now because it’s something that, once we fully understand the detail behind it, we can’t afford that to happen to us again.

“It’s almost like a perfect storm. We had all of the market issues going on – the stock market, we had interest rates, we had fuel prices. When you look at all of that and you’re then launching a car into that environment, the whole thing becomes very, very tricky.

“Some of the things that I think we faced you couldn’t necessarily predict, some of them even if you could you couldn’t actually change the launch timing because you were locked into it, so I think we just have to face the reality and battle on and we have and I’m pleased that we’re now making real progress.” In overall market terms for October, Toyota increased its market share by 1.01 per cent to 23.6 per cent, followed by Holden on 12.9 per cent (up 0.7 per cent) and Ford on 10.8 per cent (up 1.64 per cent).

“There were only two companies that showed any sort of winning trend versus October lat year and that’s ourselves and Nissan. Nissan had an uplift of 755 and we had an uplift of 751. Even Toyota was down in the month of October, which is unusual for them and they were down significantly.

“Holden had another negative month… and that seems to have been a continuous trend for them throughout 2008.” YTD, Toyota is unassailable with a dominant 23.4 per cent share (up 1.06 per cent), ahead of Holden on 12.7 per cent (down 1.49 per cent) and Ford on 10.4 per cent (up 0.1 per cent). That equates to an increase of 108 vehicles for Ford, an increase of 7433 vehicles of Toyota and a decrease of 13,947 vehicles for Holden.

“From our perspective (it’s) very pleasing that Ford is one of the very few number of companies whose sales have actually gone up for the month of October, but also year to date.

“Year-to-date we’re up a glorious 108 units. Even one unit YTD up is a good news story, so we take this as a good news story - particularly when one takes into consideration all the pressures that are in the market. So we’re holding our own in a very difficult environment at the moment.

“Even though Holden has some of its issues its market share is still up by 0.1 per cent (in October). We feel really good about this because we’ve jumped up 1.6 per cent.

“(YTD) We’re marginally up – by 0.1 per cent – while Toyota is clearly the strongest leader here – they’ve had a significant uplift of 1.1 per cent, but Holden is having a tough old time.

“Their share has dropped 1.5 points which clearly they wouldn’t be happy with.

Our passenger share is up YTD as a result of FG Falcon, while Holden is down by two percentage points and Toyota is off by 0.5 of a per cent.” Mr Burela said he expected the overall new-car industry to remain in decline over the coming months and well into 2009, but Ford continues to forecast total sales of more than one million vehicles in 2008 and for sales to stabilise at around 950,000 in 2009.

“Our forecast for the industry for the year… (is) around the 1,020,000 (mark). Our forecast for 2009 is that the industry will level out and come back to about 950,000.

“It’s a tough industry. We’re faced with unprecedented global and local issues and pressures, but at the same time the industry’s still from my perspective pretty buoyant.

“You know, when we’re talking about… a million plus units for the year for a country the size of Australia, I would like to think that is a reasonably strong industry for us to be operating in.

“I think the other dynamic that we’re challenged with that maybe some other locations around the world may not be is that we have 59 different brands competing for the 950,000 units and that’s where it then gets a lot more complex.

“But we’ve got what we’ve got and what we now need to so is make sure that we identify and are very clear on where our strengths are and we play to our strengths and move forward. We think it’s a strong industry - we just need to make sure we’re competitive in all of the segments so that we participate appropriately.

“My sense of the situation is that things are going to settle down. If you look at things around the world, all governments are putting in appropriate measures to try and stabilise the financial markets.

“Interest rates are going down globally, Australia has taken its interest rate down and there’s discussion around another half to three-quarters of a point coming our way, fuel prices have gone down… they’re all talking about it (the price of oil) stabilising at around the $US60 dollar mark moving into 2009.

“So if you look at all the external indicators… the first six months I think are going to be tough, but (in) the second six months, if the stability in fact gains traction, we could start to see an uplift.”

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