How Ford Motor Company Will Take On Toyota's Prius

An all-new Ford hybrid will be aimed directly at Toyota's big-selling Prius.

Aug 24, 2014 at 3:15PM

Images

You'd know that shape anywhere, wouldn't you? That distinctive look has helped make Toyota's Prius the world's best-selling hybrid by far. Now, Ford is aiming to give it some serious competition. Source: Toyota 

Ford (NYSE:F) is finally planning a head-on challenge to the world's best-selling hybrid.

Trade publication Automotive News reported this past week that Ford will introduce an all-new line of hybrid cars. The new models are expected to arrive late in 2018. 

The new model will be Ford's first "dedicated" hybrid, a vehicle designed from the ground up -- like Toyota's (NYSE:TM) Prius -- as a gasoline-electric hybrid. 

But Ford already has hybrid versions of the Fusion and C-Max, and they sell fairly well. Developing an all-new dedicated hybrid model will mean a big investment for Ford.

It could cost a billion dollars or more to bring this new model to market. Why does Ford think it's worthwhile?

Why Ford is targeting the Prius
To understand that, let's start by taking a look at hybrid sales in the U.S.

Ford's hybrids sell pretty well, but the Prius sells a lot better. Over the last few years, Toyota has expanded the Prius into a family of three models, but the original Prius sedan is still the top seller.

F Vs Tm Hybrid Sales

Models marked with an asterisk (*) include sales of plug-in versions. Source: Toyota, Ford

Ford's C-Max holds its own against the big Prius V, which is its most direct competitor. And the Fusion hybrid has always posted solid sales numbers. 

But sales of both are dwarfed by those of the Prius sedan, which has been the world's best-selling hybrid by far for years now. 

Why? In part, it's because the Prius is simply a great product. It's not exciting to drive, but it's an affordable, friendly vehicle that does exactly what it claims -- delivers great mileage with Toyota reliability.  

But it's also because the Prius is unique: Inside and out, it looks like no other car. 

That's important. Here's why.

Why the Prius is the best-selling hybrid
At least in terms of its shape, the Prius sedan is an automotive version of the Birkenstock, the homely but-comfortable sandals that are popular among green-minded outdoorsy types. 

Through three generations, the Prius's styling has always been kind of endearingly homely, like Birkenstock's sandal. But -- also like the Birkenstock -- it's distinctive. And it makes a statement.

The side profile shape of the Prius practically shouts, "This is a hybrid!" (In fact, it's so distinctive that Honda (NYSE:HMC) practically copied it line-for-line with its own dedicated hybrid, the Insight.) 

Why is that important? Because lots of people choose vehicles that reflect their ideas about themselves.

Hybrid

Ford's Fusion Hybrid is a handsome sedan, but it doesn't shout "hybrid" like the Prius does. Source: Ford Motor Co.

Those people don't just buy hybrids, it turns out, because they want to save money on gas. They want to show that they're concerned about the environment, that they think reducing their gas consumption is important. 

Put another way, they want people to know they're driving a hybrid. 

The distinctive shape of the Prius accomplishes that in a way that a hybrid version of a mainstream model like the Fusion doesn't. (And inside, the Prius's futuristic dash and unique control layout help remind passengers -- and the driver -- that this isn't just another car.) 

How Ford will challenge the Prius
By developing a dedicated hybrid, Ford won't just gain the advantage of having a car designed from the ground up around a hybrid drivetrain. Ford will also be able to give the car its own unique look. 

It's a safe bet that this new Ford hybrid will be distinctive -- and Ford's marketing for the model will make it clear that it's special. (It's also a safe bet that, like the Prius, Ford will sell its new hybrid all over the world.) 

The Automotive News report noted that Ford may offer a family of several dedicated hybrid models, just as Toyota does with its Prius. And like the Prius (and like Ford's current hybrids), there are likely to be premium-priced plug-in versions that can be charged up to give a limited electric-only range.

Images

Ford's C-Max Hybrid has done well against the big Prius V, but it hasn't come close to challenging the Prius family in overall sales. Source: Ford Motor Co.

It's an interesting move for Ford. While rivals like General Motors (NYSE:GM) and Nissan (NASDAQOTH:NSANY) seem to be moving more toward pure-electric cars, and Toyota, Honda, and Hyundai (NASDAQOTH:HYMTF) experiment with hydrogen fuel cell models, Ford seems to be placing its biggest green-car bets on conventional hybrids.

That may turn out to be a smart plan, at least in the near term. Well-executed electric cars like Tesla Motors' (NASDAQ:TSLA) Model S and Nissan's Leaf have sold fairly well, but recharging stations are still few and far between -- and neither has come close to the sales numbers posted by the Prius. 

That's because the Prius combines a unique look (and an affordable price) with extremely simple functionality: You just fill it up at a gas station like any other car.

That formula has been a tremendous success for Toyota. And now, it looks like Ford is betting that it can use the same formula to find some success of its own.

Warren Buffett's worst automotive nightmare (Hint: It's not Tesla Motors -- or Toyota!)
A major technological shift is happening in the automotive industry. Most people are skeptical about its impact. Warren Buffett isn't one of them. He recently called it a "real threat" to one of his favorite businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to ride this megatrend. Click here to access our exclusive report on this stock.

John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers