Photo Credit: Ford.
One of the things I enjoy about my job covering the automotive industry is taking events that are typically overlooked and putting the facts in line for investors to understand why those events are important. This is a perfect example of such a time: Recently Ford (F +0.37%) announced that its SYNC and MyFord Touch were sold on nearly 80% of its 2013 Ford vehicles. That doesn't seem like a big deal, but what if I told you that that development will aid Ford in two of the most important factors when it comes to potential investors?
Future bloodline
An investor looks at many factors when choosing companies to buy a stake in. It's great to find an amazing company at a low price, and then hold on to it for the long term. It's even better when that company has an industry-leading executive team. Ford delivers on all these factors. The next thing that an investor wants to see is proof of a future bloodline and sustainable profits – that's where the recent sales increase of SYNC and MyFord Touch comes in to play.
It's a well-known fact that, for many reasons, young people are driving less. Cars are expensive, and so is gas. In addition to that, my generation is bogged down with massive amounts of school loan debt, and find themselves in a job market that, while improving, still presents difficulties. It's a scenario that keeps Detroit automotive executives up at night.
One way that Ford has been battling this situation is with new advertising campaigns that harness the power of social networks to attract younger consumers in a way that they can relate to. Considering all the technology that millennials have grown accustomed to, tech options inside vehicles are growing to attract millennials that want to connect their automobiles to a part of their social identities.
By the numbers, 80% of Ford's vehicles this year are equipped with the technology to attract its future bloodline, which is double the sales mix of infotainment systems sold in Toyota or Honda vehicles. Moreover, as these vehicles are used for years then traded in, it gives Ford a used car with better value than it has seen in a decade, and a chance to attract yet another young consumer buying her first vehicle. More Ford vehicles in the used car market down the road will be better positioned to continue the growth of its future bloodline – a great thing for Ford investors.
This is not just hype; it's working. Ford's Fiesta is drawing a younger audience composed of 46% form generations X and Y, compared to the Toyota's (TM +0.78%) equivalent subcompact, the Scion, at 36%. According to Ford, another statistic to back up the importance of SYNC in the Fiesta was provided in a survey: 54% of consumers said an important factor in buying was the car's connectivity technology – its SYNC and MyFord Touch – compared to 37% for Toyota.
Customers with vehicles that have the MyFord Touch have a higher rate of satisfaction with overall vehicle quality – a fight that Ford and other Detroit automakers have been waging for years to dispel stereotypes that they make low-quality vehicles. Ford isn't stopping there – since its launch it has already improved the MyFord Touch quality by 50% and still has another planned upgrade for this summer.
MyFord Touch and SYNC systems are definitely positioning Ford well for its future bloodline of drivers, while increasing consumer satisfaction and loyalty. But what else should investors be happy about? Simple, these tech systems and premium options drive up the margins on each vehicle – which can be more difficult outside of luxury or full-size pickup segments.
Bottom line
Ford's positioning itself very well for the short and long term. It's selling vehicles at a phenomenal pace, and can hardly produce enough Fusions to keep up with demand. It's full-size pickup is having its best year since the recession began and doesn't look to be slowing down. Ford's plants are operating near maximum capacity; with these premium tech options selling well, Ford's second quarter is shaping up to be a great one. Last quarter its North America margins sat at a very healthy 11% and I wouldn't be surprised if Ford was able to squeeze out a bit more – which would be incredible.
