What To Expect From Ford’s Luxury Brand Lincoln In 2016

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Ford Motor  (NYSE:F) unveiled the 2017 version of its luxury vehicle Lincoln Continental at the North America International Auto Show in Detroit earlier this month. The vehicle is a four-door luxury sedan that will be manufactured in the U.S. and sold in the U.S. and China. It is expected to replace the outgoing MKS Sedan in the Lincoln lineup. With it the Lincoln will have two sedans, three crossovers and one SUV in its lineup. Apart from the crossover MKT, all other models in the lineup have either been refreshed or are soon to be refreshed, giving the company a strong core portfolio for its luxury brand.

Lincoln’s Importanceus luxury vehicle sales

Luxury vehicle sales form around 10% of the overall sales of the U.S. car market.  However, owing to their higher than average transaction prices and higher margins, they contribute about two-fifth of the industry’s revenue and nearly half its profits. Therefore, it is important for each company to have a strong luxury brand. Moreover, it is important for each company to know exactly how to negotiate the luxury car market. Broadly speaking the same trends are affecting the luxury car market as the overall car market: demand for sedans is on the decline, while crossovers and SUVs continue to grow at a remarkable pace. Sales of the compact luxury SUV segment grew by 60% in 2015, while that of the small luxury SUV segment grew by 38%. [1] In contrast, entry level luxury sedans grew by just 8%, while midsize luxury sedans fell by 15% respectively on a year-over-year basis. [2]

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Changing Image

Lincoln is planning to introduce new models to its product portfolio over the coming years. This is important as the brand’s image in the U.S. is not very strong. It generally lags behind Lexus, BMW, Mercedes-Benz and Audi in the luxury market in the U.S. However, according to Ford’s own surveys, Chinese customers rank Lincoln as a more prestigious brand than Volkswagen’s Audi and on par with Toyota’s Lexus. Spurred on by this, the company opened three new dealerships for the brand in late 2014 in China. [3] The dealerships were developed through careful study of luxury hotels and high-end retailers in the country. The company thought that by bringing a luxury experience to the purchasing process it could persuade buyers to spend on its products. In addition, the company introduced new technology to its dealership lots. The lots were equipped with a number-plate recognition-system that alerts all employees at the dealership to the name and information of the person arriving. The employees can then quickly guide these customers to their appointments.

In its first full year in China, the brand sold 11,630 units. [4] In the U.S., it sold around 109,000 new units, a close to 8% year-on-year increase. Ford is targeting 300,000 unit sales for the brand by the year 2020, so by its own targets the brand is 40% there. [5] Over the next five years, it will have to grow its sales by 150% to reach that target. As part of those targets, the brand plans to begin selling a new MKZ sedan and the 2017 Lincoln Continental in China later this year. The brand is quite confident of its prospects in China, as evidenced by the fact that it has opened 33 dealerships in the country, eight more than initially planned, including 10 of its biggest retailers globally. [5]

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Notes:
  1. U.S. Luxury Car Sales Figures 2015, GoodCarBadCar, January 2016 []
  2. Ref: 1 []
  3. Lincoln Opens First Stores in China and Unveils “The Lincoln Way”, lincoln motor company media center, November 2014 []
  4. Lincoln tallies 11,630 sales in China debut; Ford Motor rises 3%, Automotive News, January 2016 []
  5. Ref: 3 [] []