You didn’t need to have a crystal ball to predict the reaction to the news that Ford is intending to raise its prices, just days after the Government unveiled its £2.3bn ‘aid package.’

ford badge The mainstream media’s view would be best summed up with the expression ‘spluttering indignation.’

And yes, Ford’s decision to increase the list price of the Focus by just over five per cent (and the rest of the range by a little less) seems badly timed to say the least.

But Ford’s move, which Vauxhall is already set to follow and which other hard-pressed manufacturers will undoubtedly emulate, also has a strong sense of inevitability behind it.

For over a decade the European car industry has effectively been trapped in a spiral, with excess production capacity and strong competition meaning that cars have been stuffed full of more and more equipment while their prices have stagnated in real terms.

Of course, this has been a brilliant time for consumers. The fact you can buy a decent family hatchback with eight airbags, air-con, advanced stability control, a high-strength impact structure and an engine capable of passing the most stringent emissions tests for less than £15,000 is one of the greatest triumphs of the modern world.

Ford production But it’s a business model that was only supported by selling huge volumes at tiny margins – against which the Government’s loan package is little more than a drop in the ocean.

Now those sales volumes are falling, and British sales operations are having to fight against the strength of the euro, price rises are inevitable. And, despite the negative PR, it’s a move best made at the bottom of the market rather than part way through a recovery. Despite the tabloid outrage, Ford’s decision is the logical one to make.

 

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