Ford Fiesta Invading C-Segment

MONTEREY, CA – The Ford Fiesta is playing with the big boys, relatively speaking.

Buyers of the Blue Oval’s B-segment car are trading in larger vehicles, says Jim Farley, group vice president-global marketing.

“Customers really see Fiesta not as a B-car, but as a C-car,” Farley says.

This perception could signal increased small-car interest by American consumers as political unrest in the Middle East contributes to oil supply instability and price volatility at U.S. gasoline pumps.

Today’s average per-gallon price of regular grade gas is $3.29, a $0.60 jolt from year-ago of which 21.7%, or $0.13, accumulated in the last week, according to the American Automobile Assn.

Ford is seeing an influx of Fiesta buyers who arrived at dealer lots in Toyota Corollas and Honda Civics, competitors of the Ford Focus C-car, Farley tells Ward’s here during a media event.

“One of the things we did to make that happen was we started to find a lease point that was more competitive with Toyota and Honda,” he says, adding Ford discovered a threshold. When lease prices fell below $200, showroom traffic increased.

“That started in December and it really helped us position the car,” he says, noting California consumers – particularly in L.A. and San Francisco – are warming to the Fiesta.

Fiesta 5-door’s sticker approaches “low end of the C-segment.”

The Fiesta competes in the Lower Small market, according to the Ward’s segmentation. Ford’s share of the segment jumped to 19% in December, more than three percentage points higher than prior-month.

The trend continued in January as Ford claimed 18.4% of the segment, edging Hyundai – which competes with the Accent – for second place. The achievement is noteworthy considering Ford was unrepresented in the Lower Small sub-segment until it began recording Fiesta sales in June 2010.

Nissan dominates with the Versa, which is an anomaly. A C-segment car according to its dimensions, Ward’s classifies the Versa as Lower Small because of its $10,740 starting price.

Nissan’s share of the Lower Small market was 37.4% last month, while the sub-segment accounted for 15.4% of the total Small Car segment, according to Ward’s.

The Fiesta’s rollout also appears to be contributing to a surge of interest in hatchbacks. The 5-door Fiesta “is really the core of what is popular now,” Farley says, adding the once-shunned body style is among the features luring C-segment buyers.

“We’re now selling 5-door (SE trim levels) in volume now,” he says. “The price is more in the low end of the C-segment.”

The Fiesta SE hatchback starts at $15,295, accounting for a $500 cash-back promotion.

Ford anticipated Fiesta’s sedan version would dominate the model mix, but soon after production launch demand was 50:50. And as of this week, the hatchback take-rate among Fiesta buyers was 55%, Ford says.

Journalists and other industry watchers told Ford this trend was predictable and a “no-brainer,” Farley adds. “But the research didn’t tell us that.”

The unexpected sales mix was among a few hiccups associated with the Fiesta launch. Early shipments were disrupted after a hurricane damaged rail lines leading from the auto maker’s assembly plant in Cuautitlan, Mexico.

And the build-out of the Focus, which is all-new for the ’12 model year, crimped Fiesta sales in the last 60 days. “There was a lot of (price) overlap with the two cars,” Farley tells Ward’s.

The Focus SE sedan now is selling for $15,995, including $2,000 cash back.

“With the fuel price escalating and all the new competitive (C-segment) activity, (such as) the (Hyundai) Elantra, the C-segment is actually growing much faster than most people expected. We made a good bet by building a lot of extra ‘old’ Focus (models).”

Despite additional competition from the all-new Chevrolet Cruze, the current-generation Focus held its own. Combined sales for January and the final two months of 2010 were flat year over year, according to Ward’s data.

More C-segment activity is expected in spring when the next-generation Focus hits showrooms along with a redesigned Honda Civic.

The new Focus, which will be available as a sedan or hatch, arrives with a higher sticker than its predecessor. The ’12 SE starts at $17,995.

If pump price volatility continues, might the sticker gap spark another surge in Fiesta sales? “It could,” Farley says, adding he expects the B-car to have a solid February when Ford reports monthly sales March 1.

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