The nation decides... On the future of Falcon and 380

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Spring 2007 has seen a landmark shift in the Australian passenger car market occur. In short, two local manufacturers, Mitsubishi and Ford, have released two new imported passenger car ranges with specifications and pricing that could quite significantly undermine sales of their own locally manufactured cars.

These launches mark an important transition. The need to boost dealer throughput and increased market share for each company's global interests now outweighs any consideration for their local operations. It is also significant that neither company exports their large Australian passenger cars when their main rivals, Holden and Toyota, do.

Mitsubishi's and Ford's latest moves with the new Lancer and Mondeo passenger cars, expose what really happens behind closed doors to keep sales of the local product profitable. They mark a recognition that such practices cannot continue when the biggest market growth in coming years will be driven by individual choices, not cut-throat fleet deals.

It wasn't always like this. With the exception of the locally-produced four-cylinder Vectra sedan and wagon, Holden has always priced its imported, high-quality Vectra in such a way that it couldn't impact on the Commodore.

As countless user-choosers around Australia have found, a submission to their employers to drive a more compact and flexible Vectra hatch instead of a Calais even with the bonus of a saving in outlay would usually be knocked on the head at the last minute. Holden pricing could always be relied upon to deliver a fully-optioned Berlina or Calais for less than a Vectra, any Vectra.

For many years, Toyota has been sacrificing local Camrys below that of a Corolla import if it meant the difference between winning or losing a fleet sale. Ford and Mitsubishi have been forced to match the tactics to maintain local factory volumes of their locally-built ‘family' cars without the buffer of large export volumes.

These tactics have collectively wiped Australia's large passenger cars from the wish lists of retail buyers along with their more profitable margins. Why should a private buyer invest hard won after-tax savings in a car that has cost a corporate buyer $10,000 less for an instant depreciation hit of the same amount?

The proverbial has hit the fan now that most fleets and businesses have lost their ability to bully employees into cars that are too big and no longer suited to a more congested inner-city lifestyle.

Mitsubishi's pain with the 380 has been too obvious for Ford to ignore. When 380 sales dropped as low as 800 per month this year, private sales of the Adelaide-built front-driver barely cracked two figures. So few, it was joked Mitsubishi chief Rob McEniry could get to know the buyers on a first name basis.

With Falcon sales heading southward at the same rate, something had to change. Ford could no longer ignore the 2006 trend where sales of its retail-driven FPV range have risen at the same pace as its mainstream Falcon range has nose-dived. Booming HSV figures reflect the same trend.

The 2007 Ford Mondeo (more here) marks the first time in recent memory that a local manufacturer has positioned an imported alternative to its local full-size passenger car with equal or better sophistication and pedigree at a substantial saving.

Back in 1996, Ford's inferior US Taurus could never be a threat at local Fairmont prices, nor could the relatively small Mondeo sedan at $33,690 (the 1996 GLX auto equivalent to today's LX) ever be treated seriously against an EL Falcon at $32,278 (the 1996 Futura auto equivalent to today's Falcon XT). A business or fleet manager who vetoed either in favour of the Falcon was on very strong ground even before a fat local discount was negotiated. 

Today's vastly superior 2007 Mondeo LX starts at $3300 less than its 1996 equivalent with a bigger engine and state of the art auto, better economy, better cabin space, superior styling and quality and a long list of standard safety equipment.

The ground-breaking impact of Ford's latest $29,990 Mondeo pricing is that it now places the full-strength European-sourced model at $6000 under the starting price of a current Falcon.

In a similar fashion, Mitsubishi's new Lancer (more here) offers a superior but similar-sized package to the original 1985 Magna for just $3000 more than the $17,000 that a Magna cost in 1985. Under these terms, a fleet or business manager can no longer veto an employee choice even with a back-door cut-throat deal on the local product.

Why are Mitsubishi and Ford resorting to these tactics? Both Ford and Mitsubishi are now effectively inviting Australians to make a choice between Falcon and Mondeo or 380 or Lancer on merit, price and suitability.

By reducing their dependency on back-door fleet deals to keep their dealers afloat, both companies are forcing private buyers to choose between the Falcon or 380 and their imported stablemates on a level playing field. As import duty is cut further, there is little point keeping a local product alive if the only reason Australians will choose one is because of a fleet deal.

When the market is clearly showing that it considers cars like the Mondeo and even small car Lancer as worthy substitutes for the Toyota Camry/Aurion and Holden Commodore, Ford and Mitsubishi have now constructed the situation where individual Australian buyers are now directly responsible for whether the Falcon or 380 survives.

If you were asked to invest your superannuation funds in developing a new Falcon or 380 beyond 2010, would you?

Ford and Mitsubishi both now have viable passenger car alternatives in place with the correct relativity in pricing thus the prospects for the next Falcon or 380 are ultimately going to be determined by Australians in the showrooms, out in the open, exactly as it should be.

By shifting some local capacity to the Focus in 2010, Ford is already taking a bet each way on your response.

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