Tuesday, July 19, 2005

Is Ford keeping Mustang GTs rare to inflate prices?

Several readers have commented on the rarity of the new Mustang GT and the pricing of same. The situation is being compared to the Thunderbird Fiasco, that had dealers charging hefty premiums over the MSRP. I'm not here to defend Ford, but it should come as no surprise to Mustang Fans that this is happening. There are several reasons;

Mustangs have traditionally been sold in a 33% GT and 66% V-6 mix. Just look at prodcution numbers for the last few years (where available) and this will be clear. Many Mustangs over the years have been sold to rental fleets is part of the reason. Another factor is the CAFE or Corporate Average Fuel Economy ratings, in an effort to comply with these regulations, V-6 models have outnumbered V-8 models for years.

Now with a completely new model Ford should have anticipated a higher demand for the GT model this year, but they underestimated demand and had to increase production by about 40%. from 140,000 to about 190,000 units. Still with the 33/66 mix of GT and V-6.

This will be the best year for Mustang sales since 2000, when 215,000 units were sold. And in 2000 how many of those 215,000 were V-8 models (Cobra and GT) Just about 60,000 units or 33%.

I have no doubt that dealers are not negotiating prices on Mustangs. It's been a while since a Ford dealer has had a car that they didn't have to discount. Besides full size trucks, Ford has been slipping. Now with new models coming in that may change. But look at the current discount frenzy and then ask yourself, "If I were a dealer, wouldn't I charge a premium or full price for any car I could?" Of course you would.

This type of price policy may carry over into 2006, that's highly likely. But that's because the car is hot, we all want it. I'm sure when the new SVT Shelby GT500 comes out, dealers will be bending customers over the barrel for every one of them. I don't think it will continue past 2006 and Mustang prices will have to normalize and be flexible.

I don't think it's right, that loyal customers should be charged premiums, but I can understand the motivation. Hell, when you have to give away a computer to sell a Focus and Home Depot discounts to sell trucks, it only makes sense not to deal on a car that sells itself.

Mustang GT production for 2005 will be near 60,000 and V-6 will be closer to 130,000. Will you be one of those lucky 60,000? Don't expect numbers to change much next year either.


Anonymous said...

same thing happened with the Dodge Magnums with the Hemi's . lots of SXT 3.5 's on the lots. and once an RT hit the lot it was sold.

Big Ford Fan said...

That's exactly what happens with any new hot car. But the question is, will Ford continue this into next model year.

TommyO said...

Who cares about Dodge Magnums, we are talking about a performance car, not a grocery getting station wagon for soccer moms. Besides, after the first several months, you could get that wagon for below sticker. The Mustang has had many models, including the '94 GT, the various Cobras, the Bullitt and even the Mach 1 that didn't have the premiums and scarcity that this long awaited GT has experienced. I know people that have purchased all of the cars mentioned and everyone was able to buy at sticker or below and find those vehicles ON THE DEALER'S LOT!
What is going to happen when they finally bring on the big gun Mustangs? Regardless of past figures, this is a car that is alive because of the automotive enthusiast and it should be available and priced accordingly for them or we will surely see the demise of this car. The people that buy the V-6 cars will not even flinch and they will turn to the next no frills psuedo sport/economy car(or Dodge Magnum) that they can find and never miss the Mustang. Us true Mustang guys (I have owned a '66 coupe, '69 sports roof GT; now own a '91 GT and an '02 GT conv't) will be the ones to miss these cars that we have loved for many years. Ford has touted this car as a GT wit a V-8, now it needs to supply the car the hype was built on.

Anonymous said...

economics 101 dictates that price is what the market dictates. Higher demand, higher price. If I were running a business, I'd do the same. If Ford really wanted to get my enthusiasm up, they'd offer the LX with the v8, cloth, no power locks, no bells&whistles. Chop off a couple of grand.

Anonymous said...

Anonymous, economics 101? Are you kidding me? It's the car business. Look what high price, high demand did to the T'Bird. The automotive field is too fickle to mess with a group that has been loyal to a particular model. If you ran an auto business based on your philosophy, you'd be out of business within 6 months. I am as loyal a Ford fan as you will find and had seriously thought of purchasing a third Mustang, an '05, to my collection. The fact that it isn't easily available and going for over sticker will definitely keep me away. Imagine if I feel that way, don't you think a considerable number of loyal Mustang enthusiasts will too? No car is imune from the public turning it's back regardless of how good it is. Can you say Camaro, Trans Am, Supra and as great as it was, the NSX. For one reason or another these autos suffered from lack of interest. There are a lot of cars to choose from, the dealers must not be penny wise and dollar foolish. The Fox body Mustang was very good to Ford and it's dealers, the short term extra cash flow may not be there down the road if they turn away the people that bought these cars when other Ford vehicles sat on lots waiting for buyers. That is economics 101 in reality. Don't kill your cash cow.

Anonymous said...

Those who really want a Mustang can wait til demand is lower, and they can probably get a really good deal on it. In the meantime, if demand's high, I'd make a buck on it. Sorry to hear that you'd give away your product. Who's going to be in business after a while, the guy who makes money, or the bleeding heart? A really good design will stand the test of time. The thunderbird never had a following and demographics similar to the Mustang.
Oh, a true Mustang enthusiast would wait til it's available at a more affordable price a year or two in. Thinking that you can pay list or below the first year it's out, you're crazy.


Anonymous said...

okay TommyO lets bring your 02 mustang and My Magnum to englishtown ( or anywhere else) and see what the grocery getter can do. I've had lots of fun dustin the last Gen mustang and Camaro's even with over 400lbs and an automatic the Magnum will blow your doors off.

Next high demand low supply , yes it makes unethical but profitable business sense Dave is right True Mustang fans will wait to get the right deal ( some have already caved and could not wait) this a more and more common as we see new "it" cars (H2, any AMG , C6, WRX Sti , Evo's ) Ford doesn't have to give them away and why should they. True Mustang Fans will bitch moan and piss , but they will wait. give it 2 years and there might be a mustang sitting next to my Magnum.

No one complains when Ferrrari's philosophy is to build one less then the market demands.


Big Ford Fan said...

Midnight Magnum and Tommy, keep the personal gripes to yourselves.

My heart agrees with Tommy on this, but my brain tells me that Dave is correct.

The Thunderbird did not have the fan base that the Mustang had.

Midnight points out several models from various producers that have also had high demand and premium pricing.

I'm sure Mustang prices will "normalize" but don't think the car will suffer from pricing.

The reality is we all want this car and some of us will pay the premiums and others will wait.

Anonymous said...

Dave and MM, You both don't get it, the car business is NOT like most other businesses. It is one of the only markets where the buying public expects to pay cost or less for a product because of the manufacturers and dealers. It is also one of the few types of retail that normally doesn't make it's main profits on sales, rather most dealers make their money on service and parts. Also, we are talking about dealer profits, not the manufacturers. The dealers are the ones raising the bar, Ford chose to hold the line pretty close to last year's sticker. Secondly, these same dealers that gouge, I repeat gouge, the loyal customers are running the risk of turning off long running fans. Ferrari can get away with the mark up, even Ford on the GT, they are exclusive world supercars and are going to hold their value or increase it over time. That isn't the case with the Mustang. When that happens do you think they are going to line up and buy, every 500 or Freestyle available? I don't think so. Where would Ford be able to wave their banner from, The GT? That car is not here for the long term. The Pontiac GTO is a car that is really great on paper, but probably won't make it for whatever reason, it just didn't do it. The Mustang has it all, but could easily be overlooked by many buyers for some of the choices like the rice rockets (WRX etc.) that are in the same price zone. Some one that is looking to buy a car should not wait 2 years. We waited 25 years ('79-'04)for the end of the FOX platform and kept the car alive, it is time for dealers to stop taking advantage of a new product, sell it for sticker, but not above. Today's news spoke of a drought in Spain that caused a rise in the price of olive oil from there, that is an example of supply and demand. MM, would you think it would be fair if the next time you brought your Magnum in for service that they raised the price 15% just because they were busy that week? Dave,would it be OK if you were to be charged double every time you went to the gas station because it was a busy time and the demand was high? The prices are set by the manufacturer and should not be increased for demand above sticker by the retailer. Arbitrary price inflation is bad business. The guy that keeps long time customers happy is the guy that will still be there in the end. The guy that takes advantage and abuses customers will probably make some fast cash, but is not guarenteed success. The dealer that makes a FAIR profit and offers good customer service will definitely do better. I was in the car business, my wife is in the car business and have bought my last eight Fords from the same dealer. I have seen life from both sides and can tell you that there is nothing cheaper than a fly by night car dealer with crappy business practices. In the New York area the Crabtree line of dealerships comes to mind among several others. Dave, you talk about being crazy for expecting to pay sticker or below the first year it is out, well how about the fact that we are now coming well into the second year with the '06 model with the same prospect, that is more than one year. Lastly, MM, I wouldn't waste my time going against your station wagon. These Mustang and Camaros that you "dusted" must have been too busy laughing at your grocery getter to take you seriously. Talk all you want, it is still not going to convince me that you have any type of performance vehicle, it is a 4,000lb. soccer mom mobile. Try pushing that through the next set of twisties you see or take it on a road course and you will see what I mean. Performance is more than 0-60. Of course, if that is all you have then maybe it is time you put a Mustang next to it, if you think the little woman will allow it.

TommyO said...

That last post was me. I hit the wrong login setting. Ps Dave, do you mind if I ask what you drive?

Anonymous said...

set up the cones Tom , I could drive a truck around them better then you. when was the last time you drove on any type of track?

The Magnum is not a sports car , it is a rwd v8 340 hp 390 lb ft tourqe monster. and even though it is a pig at over 4000 lbs it handles decently.

to bad I got rid of My Miata that would have huniliated you at the autocross or any twisty you want. that said what road course should I meet you at. BRP, hutch, sprain, palisdes, watkins glen ????

TommyO said...

You are a total geek! You couldn't drive anything, especially a truck, around me. As for your Miata, it's gone, get over it. And you are absolutely right, your Magnum is NOT a sports car. How you can say in the same sentence: "it is a rwd v8 340 hp 390 lb ft tourqe monster and even though it is a pig at over 4000 lbs it handles decently", makes me laugh. It may be quick in the quarter and feel tight to you, but you are crazy if you think that soccer mom mobile has a chance against either of my Mustangs or BMW in any serious contest. The fact is pal, you and your car are just not in the game. Enjoy endangering lives driving like an idiot in a station wagon with a big engine on busy, heavily travelled public roads. People like you have no idea about performance driving or vehicles, you are a danger behind the wheel and I woulnd't waste my time, or risk my life watching your erratic antics on the road. Grow up and face the fact that you bought the hype from the commercial, not a performance or sports car. Sorry pal, you lose.

Big Ford Fan said...

Real mature boys, if you want to fight, do it in private emails, not on my blog.

It's not fair to me to have this constant bickering. Have some respect please.

I don't work on this blog so you can see who's the best.

I have a few readers other than you two knuckleheads and I'm sure they aren't interested in the BS either.