Ford Motor (F) has decided to raise prices by an average of 2.7% of its vehicles sold in the U.K. for the fourth time of the year. The decision was backed by the continuous depreciation in the value of pound with respect to euro (30% compared to 2007) as the automaker sources most of its component parts, other than smaller capacity engines and Transit vans, from Europe.
The hike, which will take effect beginning this month, will raise prices between £250 ($412) and £500 ($82) for popular models such as the Ka, Fiesta, Focus, C-MAX, Kuga and Mondeo and to £600 ($990) for S-MAX and Galaxy.
In October, Ford showed its best monthly performance in more than a decade by posting a staggering 12.8% rise in sales in its 19 European markets. With this, the automaker also outperformed the 6.8% gain in sales for the overall industry.
The sales gain was backed by several incentive programs by the European governments to trade old vehicles for newer cars backed the sales gain. The Scrappage programs across several European countries are similar to the U.S. Government’s “Cash for Clunkers” program – which ran between July and August – through which the automaker clocked tremendous response.
However, the challenge begins next year as the scrappage program is set to expire after an extension and VAT sales tax rate returns to 17.5% from 15%. At that time, the absorption of cost due to a weakening pound by raising prices would no doubt put Ford into a dilemma.
Read the full analyst report on “F”
Zacks Investment Research
