Higher-performance versions of Ford's Mustang, like this Shelby GT350, are super-profitable brand-builders for the Blue Oval. Image source: Ford Motor Company.
Ford Motor Company (F +1.17%) is making aggressive moves to prepare for a future in which self-driving cars are the norm. But it isn't going to give up excitement along the way -- because it turns out that exciting cars are very profitable.
Earlier this month, Ford executives spent a day explaining how the Blue Oval will avoid "disruption" and thrive amid the coming transformation of personal mobility. The gist of the strategy is that Ford will make investments in emerging businesses that it sees as strongly profitable and well-suited to its skill set, while boosting its four existing "profit pillars" to maximize returns to shareholders along the way.
For most Ford shareholders, it's a no-brainer that trucks and SUVs are two of Ford's four profit pillars. But believe it or not, so are performance vehicles -- and CEO Mark Fields said that the Blue Oval is going to make a big high-performance push over the next few years.
Performance vehicles are super-profitable brand builders
Ford's current portfolio of "performance vehicles" includes the hotter versions of the Mustang, of course, along with the rowdy F-150 Raptor, the ST versions of the small Focus and Fiesta, the recently introduced Focus RS, and the exclusive, exotic Ford GT.
Image source: Ford Motor Company.
"Performance is a great business for us," Fields said. "It grows the bottom line in terms of profitability. It builds our brand. It drives excitement. And it creates these brand advocates around the world, which are fantastic. This is a very important part of our business."
Aside from the purpose-built GT, Ford's performance vehicles are essentially well-optioned (and considerably more expensive) versions of mainstream Ford models. They command high prices but don't cost a fortune to develop. That's a recipe for fat profit margins -- and Ford's sales of these profitable vehicles have been growing.
"To put it into perspective, this year, alone, we will probably sell over 200,000 performance vehicles [around the world]," Fields said. "That's more than double three years ago."
What Ford's future performance models might look like
So how will Ford build on its current success in performance vehicles?
Fields and the other Ford executives who spoke didn't go into much detail on specific future products. But as you can see on the slide above, they did promise that Ford would introduce 12 new performance vehicles by 2020.
Some of those will likely be variations on familiar themes -- new high-performance versions of the Mustang, for instance. Others will probably be based on existing models: I wouldn't be shocked to see Ford take its new Fusion Sport one step further, for instance.
But some may be surprising. Ford purchasing chief Hau Thai-Tang, a senior-level engineer who led Ford's high-performance road-car efforts earlier in his career, spoke about Ford's electric-vehicle efforts -- and he said that performance vehicles might become a focus of those efforts:
Commercial vehicles, trucks, utilities and performance, these are sectors where we have iconic nameplate brands, tremendous favorable opinion and more pricing power. It's also going to allow our product development and marketing team to take a different approach in terms of how we go to market and start to showcase the full benefits of electrification beyond just fuel efficiency.
The upshot: Expect more fast Fords
Ford seems to be gearing up to show its customers that fast, fun vehicles don't have to be gas-guzzlers. As Tesla Motors (TSLA +2.10%) has shown us, battery-electric vehicles can be exciting performers. So could the right kind of plug-in hybrid: Imagine a Mustang GT that ran on electricity in normal driving, but that started its big gasoline V8 instantly when the battery ran low -- or when the driver floored it at a stoplight.
Long story short: As with trucks and SUVs, Ford is going to build on its strong position in performance vehicles to help fund its future-technology efforts -- and to generate good returns for its shareholders. It should be good news all around.
