With the exit of the former CEO, Allan Mulally, Ford Motors (F, Financial) seems to have pledged to revive its fading Lincoln brand over the next five years and the present CEO Mark Fields has committed $2.5 billion for achieving this task. The company has researched and found out that the Chinese population regards Lincoln brand as a more prestigious brand than Volkswagen (VLKAY, Financial) Audi and on par with Toyota’s (TM, Financial) Lexus brand. Hence, the management wants to take adequate measures to launch this brand in the world’s largest luxury car market. Let’s dive in and find out why China is a favorable destination for the Lincoln brand and what the plans of Ford are for the quick revival in Lincoln sales targeting the buyers of the luxury car segment.
China’s luxury segment growing phenomenally
The luxury car market is expected to stay in the boom phase for several years in China. Ford’s own estimates state that globally the luxury car sales will grow by a third to 10.7 million by 2020, and China would be driving most of the change. The company believes that very soon the U.S. and China will contribute to nearly half of its overall sales in a fiscal year. Hence, this expansion plan in China is a golden opportunity to build its market share ahead of rivals like General Motors (GM, Financial), Toyota and Volkswagen.
Also to be noted is that the luxury cars have a significant contribution to a company’s overall profits, as noticed in the previous year when the luxury vehicle sales comprised over 30% of the overall profits earned by the auto industry. The top brass of the auto maker have kept this point at the back of the mind and to strengthen the bottom line growth is targeting the tripling of Lincoln sales by 2020. Until 2013, the company has sold only 100,000 units globally, and it aims to achieve unit sales of 300,000 units by 2020 – with China being a major contributor is terms of units sales in the country.
Marketing the Lincoln brand
Though the mainstream products such as the Ford Fusion, Escape and Edge are doing really well in China, they lack the technical edge to compete with luxury market standard bearers like the Mercedes Benz and the BMW-5 series. Additionally, the company is not going to manufacture the Lincolns domestically in China, but would be importing them from North America. This could create a spike in the costs compared to General Motors’ strategy to locally manufacture the Cadillac in China.
Ford is well informed on the drawbacks vis-à -vis its immediate rivals and hence is trying out a new strategy according to which it opened three dealerships in China in early November – with the three dealerships opened in Tier I cities of Shanghai, Beijing and Hangzhou. The dealerships have been developed after studying the luxury hotels and high-end retailers in the country. Ford expects that by adding a luxury experience to the buying process it can persuade buyers to spend on its product portfolio. Ford expects to close at least eight dealerships by the end of the year, and have an independent network of 60 dealers in 50 Chinese cities by end of 2016.
Also to match the mainland tastes, Lincoln has officially declared the launch of a new line of vehicles ranging from the mid-sized sedan, MKZ, to a smaller utility vehicle, the MKC. According to Reuters, the brand is essentially planning for a new vehicle launch almost every year for the next few years, after which it would replace the entire line-up once again on a brand-new mechanical platform and with the investment of an additional $5 billion.
CEO of Ford China, John Lawler, stated, “We believe Lincoln's highly competitive products, coupled with its innovative and personalized ownership experience, will provide our customers with a totally differentiated offering on today's competitive luxury auto market in China.”
Moving further ahead
China’s luxury segment is already overcrowded with several German players and thus Lincoln is focusing on personalized dealership experience to market its product range. In China, the brand is channelling a different vibe for its entry into a market where Lincoln has not yet been officially launched. While competition in the luxury car sector continues to intensify in China, Lincoln sees potential in China’s “emerging youthful luxury buyer.” With Ford expressing its thoughts on Lincoln’s success in China being the key to its reinvention as a globally relevant luxury brand, its best to stay tuned and find out how the brand is able to position itself in China in the long run.
