Ford Motor Company (NYSE:F) is building more SUVs, where does that put fuel economy narrative?
Ford Motor Company (NYSE:F) is planning to launch four new SUV models in the coming years. The automaker’s VP of Marketing and Sales, Mark LaNeve, revealed the plan at the 2016 Chicago Auto Show. Ford’s SUV plans appear to contradict the popular narrative about fuel economy. Many automakers are working to meet certain regulatory requirements on fuel economy, but it seems the appeal of low fuel prices is strong enough to ignore. When the prices of fuel drop, drivers tend to drift towards utility-type vehicles and that could well be the reason behind Ford’s four SUV models plan.
For is not the only one talking about expanding its portfolio of large cars. Fiat Chrysler Automobiles NV (NYSE:FCAU) recently announced that it was planning to end production of certain small cars, Dodge Dart and Chrysler 200 so that it could concentrate in the production of larger vehicles.
Why appetite for SUVs?
It’s all in the fuel prices. While there are regulatory and environmental requirements to comply with in terms of vehicle fuel consumption, sometimes it just makes sense to face the reality. The prevailing condition of low fuel prices is favorable for SUVs. Consumers have much to spare on their income and they are willing to spend the saving on larger cars, which explains the strong demand for SUVs and Ford Motor Company (NYSE:F) is not willing to miss the opportunity.
For Ford, SUV has different meanings
However, it is important to note that SUV can have different means when you are talking about Ford Motor Company (NYSE:F). SUV has become sort of a generic name at Ford and it doesn’t necessarily mean the traditional fuel guzzlers of the past decades. It is likely that Ford’s new SUV models could feature hybrid or electric engine capabilities to ensure that they don’t consume as much fuel as legacy SUVs.
The appetite for SUVs appears so irresistible that Tesla Motors Inc (NASDAQ:TSLA) is also in it with Model X. Perhaps Model 3 crossover could expand its line up in the segment.
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