One year after Mark Fields succeeded Alan Mulally as the CEO of Ford, the company’s premium Lincoln division is finally showing some signs of life after years of decline and ironically, fuel economy regulations may be part of the reason why. Not so long ago, it was appearing increasingly likely that Ford was going to allow Lincoln to simply wither away and die.
When Mulally moved to Dearborn in 2006 to take over the automaker that put the masses on wheels, Ford was in dire straits. He quickly formulated a restructuring plan that included divesting all of the premium brands that the company had acquired including Volvo, Jaguar, Land Rover, and Aston Martin—refocusing only on Ford. Even Mercury and Lincoln were put on the chopping block, although only the former was discontinued in 2010.
Ford was the first U.S.-based automaker to introduce hybrid electric vehicles (HEVs) in the 2006 Escape Hybrid and has consistently been second to Toyota in U.S. HEV sales since then. In 2010, Ford added a hybrid option to the Lincoln MKZ sedan, and it has consistently been a popular setup in the midsize luxury sedan. Despite the popularity of the battery-assisted MKZ, Lincoln has yet to offer any plug-in powertrains in any models, but that may soon change.
2015 looks like it may be a turning point for plug-in hybrid electric vehicles (PHEVs) in premium vehicles. At the 2015 North American International Auto Show, the big three German premium brands—Audi, BMW and Mercedes-Benz—showed new production PHEV models, and all three have committed to adding plug-in options to all of their mainstream models in the coming years. According to Navigant Research’s Electric Vehicle Market Forecasts, luxury brands are expected to account for 50% of global light duty plug-in electric vehicle (PEV) sales by 2018.
Automakers are pursuing this strategy of creating premium PEVs for several reasons. Fuel economy and CO2 emissions standards are getting increasingly stringent and mainstream cars have already adopted the most affordable technologies for improving fuel efficiency. To add plug-in electrification would significantly increase the cost, pricing these vehicles out of the market. However, the heavier, more powerful luxury vehicles still have a lot of room to improve.
Adding PHEV powertrains with more powerful engines to a Mercedes-Benz S-Class, the new Cadillac CT6, or potentially the upcoming Lincoln Continental enables manufacturers to dramatically improve efficiency while maintaining—or even improving—performance. Most importantly, customers in the luxury segments are more willing to absorb the cost premium for the additional hardware, allowing manufacturers to maintain profitability.
The Upside to Lincoln
For Ford, making an investment to revive Lincoln provides an opportunity make a significant contribution to its corporate average fuel economy while preserving the affordability and profitability of Ford-branded cars, trucks, and SUVs. Since current Lincoln products are closely related to Ford-brand equivalents with similar fuel economy and comparatively low sales volumes, eliminating the premium models wouldn’t have a notable impact on the fleet average.
On the other hand, Lincoln is revamping its entire lineup with all-new products in the next five years, starting with the MKX crossover this year and the new Continental sedan in 2016. No powertrain details of the production Continental have been announced yet, but it would be surprising if Lincoln doesn’t follow the lead of the rival Cadillac CT6 with a PHEV sooner rather than later. Using Ford’s established PHEV technology, Lincoln could quickly become more competitive and provide a boost to its parent with better margins and mileage.
Tags: Clean Transportation, Electric Vehicles, Finance & Investing, Policy & Regulation, Transportation Efficiencies
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