within 250 words minimum explain how Ford is using the concept of economies of s
ID: 327203 • Letter: W
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within 250 words minimum explain how Ford is using the concept of economies of scale to lower prices.
within 250 words minimum explain how Ford is using the concept of economies of scale to lower prices.
Wheels The Nuts and Bolts of Whatever Moves You JULY 22, 2010, 3:35 PM Is This the End of the Hybrid Price Premium? By JIM MOTAVALL The 2011 Lincoln MKZ Hybrid, due this fall, will be priced at $35,18o, the same as the V-6 gas-engine version of the car By pricing the coming hybrid version of the luxury MKZ (due in showrooms this fall) at $35,180, the same price as its gas counterpart, Lincoln may be starting a trend toward erasing the price premium for gas-electric drivetrains. Asked if the move announced on Thursday morning could anticipate a similar price equalization in other models, Chantel Lenard, the Ford group marketing manager, said, "What we're announcing is really focused on Lincoln, and it's a strategy for our premium brand. By pricing the two models the same, we hope to get new customers into the 2011 Lincoln MKZ." Ford also makes a hybrid version of the Fusion sedan on the same platform as the MKZ, and the company said that 80 percent of that Fusion Hybrid's customers are new to the Ford brand. But just 15 percent of Fusion sales are hybrids. Will the MKZ Hybrid, with the same price as the gas-engine MKZ, do better than that? Ms. Lenard declined to predict a percentage "Gas will continue to be the dominant engine for the MKZ," she said. "But we think that the hybrid will be pretty strong and more than a niche." The Ford Fusion Hybrid sells for $28,825, including destination and delivery charges, compared with a starting price of $20,420 (and $27,380 for a loaded V-6 model). But there are significant differences in standard features. According to Ms. Lenard, the two versions of the MKZ are packaged very similarly. "That way, the customer truly has a powertrain choice without cost as a factor," she said. That choice is about fuel efficiency versus power. With the 3.5-liter V-6 gas engine, the front wheel-drive MKZ produces 263 horsepower and 18 miles per gallon in the city and 27 on the highway. The hybrid version, with a 2.5-liter Atkinson-cycle 4-cylinder engine, will produce 191 horsepower with 41/36 m.p.g. Analysts and electric-vehicle experts say that Lincoln's pricing of the MKZ Hybrid signals the end of consumers paying a premium just for hybrid powertrains. "This is the start of a trend," said Chelsea Sexton, an industry electrification consultant. "As costs come down and consumers become more familiar with hybrid technology, it's beginning to cross over from a novelty to a commodity feature Ms. Sexton predicted that consumers would soon be able to "choose efficiency as easily as a luxury trim package."Explanation / Answer
Economies of scale means lowering down the cost of production by producing the larger quantity of goods.
Ford here, has started producing hybrid cars Lincoln MKZ Hybrid which is priced equally to the gas engine cars. Ford also makes a hybrid version of the fusion sedan on the same platform as the MKZ. The pricing of these will be same as gas engine cars. So, the customers will have better efficient cars on the same cost factors. So, as and when the customers of the hybrid cars will increase, its cost of production will come down. Even, other companies will start producing hybrid cars and the car will soon be considered a luxury with efficiency. So, as the production of hybrid cars will increase overall, by Ford and even by other manufacturers, the cost of producing hybrid cars will soon come down and thus Ford will gain economies of scale. Thus, Ford has priced the hybrid cars as equal to the gas engine cars and not higher than that, because the hybrid cars will soon take a great market share and resultantly bringing down its cost of production.
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