Why would the price of Honda hybrid ($18.5k) is about the same as Ford Focus hatch ($18.3k) - 2012 prices?
2013 price of Focus is going up too!
Why would Ford hatch has to be more expensive than a Sedan?
Toyota made this mistake when they introduced Lexus sportscross in mid 2000. It became unpopular as new - Toyo eventually reduced the price but turned off interest. As used car, the sportscross are in demand!
Why? It’s generally about demand. The hatchbacks are seemingly in high demand for the Focus and they see that they can charge more, so they do. If demand starts to drop, I’m sure they’ll cut the price until any premium over the sedan is simply equal to the marginally higher production cost. Keep in mind, the hatch only has a $1000 premium over the sedan, simply because they don’t have a stripped down model of the hatch.
Now as to the price difference between the Insight and the Focus, I’d say you’re looking at a supply v. demand problem there, too. The Insight has been a sales flop for Honda, while Ford is pretty much building the Focus as fast as they can to keep up with demand…
Eraser1998:
We are talking about MSRP. So supply v. demand is not applicable here - supply v. demand doesn’t work since MSRP was set by the manufacturer. Market didn’t decide the price.
You yourself say that “don’t have a stripped down model of the hatch” making Focus hatch more expensive. Why don’;t they have stripped down version on hatch? Rich people buy a hatch?
With my comment of Lexus Sportscross, I think all these are the mentality of the manufacturer. I believe that the MSRP was set because they think that the market will bear the price they demand perhaps there is no alternative in the market. In effect Greediness. Lexus Sportscross failed and discontinued!
Chinese restaurant are or have been popular since the price is low. Walmart for that mater. Large volumes will demand the profit they are after and not by manipulating. When Netflix increased the price, customers left. Because, Ford is telling me that you buy an Insight not one of their hatch!
I recall at rental car places, they asked a lot more for Toyo Matrix claiming it is a SUV!
It just seems Extreme (flawed) capitalism! Giving incentive for people (eager) to sue the companies for trivial matters. Not a win-win. And all these are public companies. Am I correct that they are running the company on “people’s” money! It seems crazy to me.
“We are talking about MSRP. So supply v. demand is not applicable here - supply v. demand doesn’t work since MSRP was set by the manufacturer. Market didn’t decide the price.”
Yes it does. The manufacturer has better sales with the hatchback, and prices it accordingly. They also sell a sedan to attract the cost conscious crowd, too.
Hatchbakcs offer the SUV storage room without the SUV stigma some people fear. Couple that with near hybrid MPG for some, and you’ve got a car in high demand.
If you seen the post I made a few weeks ago, you seen where Mazda says they’re selling the new CX-5 almost as fast as they can build them. Sedan MPG(31mpg in AWD, 32 FWD auto, 35 fwd stick) in a crossover makes for a popular vehicle. It might help that it’s probably the only crossover in the class to offer stick shift, too.
The Honda Insight is unique in that it doesn’t deliver much of gas mileage and has the usual headaches/reservations associated with a hybrid. If I can have similar gas mileage and size without the hybrid system, then I prefer that.
You mention capitalism, so believe that the marker will adjust itself with people cross shopping and comparing price/value.
While I thank the replies, let me ask some specific questions:
jtsanders: Your comment on MSRP - I thought it was set as they start to release the cars. So MSRP was set on the basis of estimates, not on actual sales. So this is what I was referring to unless you have a link to show that MSRP was based on true sales. The other is that if hatches are in demand why not make more of it, instead of trying to squeeze the profit? Ford could still make a hatch that is basic and reduce the price. If they totally eliminate the sedan, poor selling, then there is cost saving on tooling - this is the basis that Ford came up with global design.
Galant: What reservations are there on hybrid? Is it the battery life and cost of replacement? gasoline cars have the same concerns due to price of gas. If there is a war (there is tension already) then the market or the (extreme) capitalism will increase the price of gas that you won’t appreciate having a gasoline car. In that sense prius is better since it can become “plug in” but Insight is not.
You say “marker will adjust itself with people cross shopping” - yes, I am considering Insight (in other words, Ford marketing is not smart enough to attract Honda customers). If the Focus hatch is attractively priced, then I would consider Focus. I saw a used 2010 Insight with 50k for $12.5k. If the battery is a concern, I need to get an insurance at the time of purchase.
Just thought of two significant points:
MSRP = Manufacturer’s Suggested Retail Price
It is based primarily on what it cost the manufacturer to assemble the vehicle and includes a little profit. Any deviation from that is determined by market forces, unless the manufacturer’s costs rose during the model year. Most of the time, deviations are discounts. But for especially popular modes in high demand, dealers can actually get more than MSRP.
So “Manufacturer’s Suggested Retail Price” is not supply vs demand.
It is Suggested Retail Price as they begin to ship their current model.
@scionf–“For a low price of $850” I think that the lowest price of a Model T was actually $250 back in the early 1920s. My dad bought a brand new 1939 Chevrolet for less than $700.
Ford made the Model T in black because black paint dried faster and he could push more cars out the factory loading dock.
I think the last car that rivaled the Model T in being marketed with limited options was the 1957 Studebaker Scotsman. It was available in only 3 colors and as a 2 door, 4 door and station wagon.
The reviews have not been nice on the insight. City gas mileage is not like the Prius. AC does not work at idle, claimed mileage is usually not achieved by drivers, inside not as roomy as Prius. That is part of the reason it is not selling well. The other part is that some by a Hybrid as a statement and a Prius does that more affirmatively.
Looking at the gas mileage on the insight, probably a Civic (or any similar small sedan) would be more cost effective in the long run. The part about wars and skyrocketing gas prices is unpredictable, but I doubt we ever see more than an inflation and fluctuation pattern.
Thanks for your comment Guys. I am just brainstorming to get to the bottom of issues - hope you understand. I appreciate your disciplined contribution.
@Triedaq: In the Wiki it says "The standard 4-seat open tourer of 1909 cost $850[33] (equivalent to $21,987 today)"
@Galant: I agree with all your comments on Insight. AC is prob not an issue to me as I am in North Cal. It might be cost effective to own a gasoline car but if gas is $8 or $15, it would be a big irritation (at least psychologically). In 2005 people were paying too much money for used Pruses! Around 1999 gas was $1.30. I would love it if I can brew my Diesel and have a decent car to use it with! Money spent on unpopular war, could have used to develop these technologies and to create jobs too. My 2 cents
1920s, the price had fallen to $260 according to Wiki - you were right Triedaq.
The msrp is set every year in response to market forces. If the model sold badly and it was perceived as overpriced, the msrp is sometimes lowered slightly. Sometimes they do it by lowering the cost of option packages or making more features standard for the same price. Or they introduce a special model with a more attractive price.
The Insight prices are low because it’s been a bit of a flop. How often do you see one? The press detested the way it drove, finding it slow and jerky, with poor integration between the electric motor and gasoline engine. There are plenty of on-line reviews, enough to get a good feel for how it was received. It’s gas mileage also does not look good when compared to the Toyota hybrids. Their drivetrains are much more sophisticated.
supply v. demand doesn’t work since MSRP was set by the manufacturer. Market didn’t decide the price.
Oh but they did! Car manufacturers are some of the most prolific users of surveys and focus groups to determine interest level in future cars. They have a general idea by the time they go to market what kind of demand they expect to see. Naturally, sometimes they err on either side of the equation. But by and large, they are pretty good at gauging demand. Sometimes, undersupply is a calculated approach (see below).
The other is that if hatches are in demand why not make more of it, instead of trying to squeeze the profit?
This is business 101. It costs money to make more of them. One upside of increased volume is the reduction in piece prices. However, many of these are determined well in advance and contracted at the estimated volumes so you have to renegotiate with your vendors who may not be all that willing to reduce their prices based on your updated volume. The downsides are many; increased labor costs, diversion from other lines, increased capital investment etc. Maximizing the production volume without adding any additional expense if the best option for them.
This happens in all kinds of businesses. Look at the electric company. Have you ever wondered why in the world they would push energy conservation? They make money when you use energy! The key is to maximize profits without having to build more infrastructure. If they can raise rates to encourage conservation and not have to build more expensive power plants that take decades to become profitable, it’s a win-win for them and they look good doing it!
There is another thing to consider. There is value in shortage. People are funny this way, when they want something, they will want it all the more if it is popular and in short supply. If you oversaturate the market, people lose interest because everyone has one…
Actually, MSRP is about supply v. demand. These companies do an extreme amount of market research prior to the vehicles going on sale to determine what the market will support. They do get it wrong now and then, but generally they’re pretty good. Some companies find that they need to offer rebates to attract buyers - but they’ve also found that often buyers demand a rebate regardless of MSRP, so they can price the rebate into the MSRP, all the while knowing the after rebate price is what their supply v. demand really projects.
Ford has likely determined that a stripped hatch model wouldn’t sell well, so why offer it? Hatch buyers have tended towards loaded models.
As for your comment on too many trim levels, that was actually a few years ago, IIRC, and they’ve cut them already. Personally I think they went too far towards Honda’s business model, since I can no longer buy the one or two features I might want from the SEL trim and apply them to a lower trim model - I have to buy all the useless junk they include with it.
@MarkM - it isn’t just once a year, even. Manufacturers have time and again changed MSRPs in the middle of model years.
The easier way for them is to simply change a rebate, but I’ve seen more and more adjustment of the MSRP itself lately
@TwinTurbo, @eraser1998 - if in High Demand, then it fetches above MSRP - MSRP is not dynamic as actual sale price (compare with buying and selling stocks). Certainly market forces, includes currency exchange rate, decides MSRP but claiming it as supply v. demand is a stretch - too generalization just because we are capitalistic.
jtsanders clearly provided the definition of MSRP - it is mostly based on the cost of production and the profit margin they are seeking, for common cars like Camry, Insight. Of course, if car maker makes only 100 of a model, then it is an extreme case and we are not talking about it. I went to grad biz school.
@TwinTurbo - electric company - they are highly regulated to the extent that they are almost a Gov entity. Electric companies agreed with regulators and the rebate they give a tax we pay as we pay our bills. I have a certification in this area.
My hands are sore to post any more …
The MSRP is only slightly related to costs. Ford sold the Focus for years at a per-unit loss to the company (not the dealer) in order to meet CAFE mpg requirements and offset the low mpgs of the VERY profitable big vehicles. In other words, they priced it (MSRP) to stimulate demand to meet larger corporate goals (maximizing profits while meeting fed. regulations).