4.3 Inflation and Real Interest Rates
Inflation is defined as a sustained increase in the general level of prices for goods and services as shown in table 6. It is measured as an annual percentage increase. During the crisis, USA and China saw a deflation as consumers were not spending to buy automobiles. Ford. In countries like India, the Inflation is high compared to the other markets of Ford and so the market pricing can be met only with the local production facilities. The real interest rates were dropped in the main markets of Ford as shown in table 7 but due to the risk involved in paying back the loans the consumers deferred their purchase of automobiles.
Table 6 – Inflation change in Ford’s main markets (Source – data.worldbank.org, …show more content…
The demand for Ford would, in the short term, be somewhat elastic, as the purchase of a new vehicle can often be delayed because of non-availability of funds. The demand for a specific model of Ford would likely be highly elastic, because there are so many substitutes from the competitors. The figure 7 and 8 shows how much the consumers spend on automobiles as part of their monthly disposable income.
Figure 7 – % consumer spend on automobiles (Source – Credit Suisse, 2015)
Figure 8 – Overall population spending as % of monthly disposable income (Source – Credit Suisse, …show more content…
Ford is now looking to push towards electric and greener vehicles. Ford has plans to invest $ 1.8 billion over the next five years to expand its research and development in the world’s largest auto market to bring new hybrids and electric vehicles to China. Shift to alternative technology to reduce fixed costs
5.3 Low cost Production & Vertical Integration
Ford has continued to reduce its manufacturing capacity after the recession caused a huge slowdown in vehicle sales. Ford transformed its Valencia plant one of the most advanced and productive automotive plants. Furthermore the cologne Germany plant will insource some operations currently being handled by suppliers to improve cost efficiency and begin a flexible two shift work pattern , allowing it to very efficiently match production with demand.
5.4 Interest Rates and currency
Inflation is defined as a sustained increase in the general level of prices for goods and services as shown in table 6. It is measured as an annual percentage increase. During the crisis, USA and China saw a deflation as consumers were not spending to buy automobiles. Ford. In countries like India, the Inflation is high compared to the other markets of Ford and so the market pricing can be met only with the local production facilities. The real interest rates were dropped in the main markets of Ford as shown in table 7 but due to the risk involved in paying back the loans the consumers deferred their purchase of automobiles.
Table 6 – Inflation change in Ford’s main markets (Source – data.worldbank.org, …show more content…
The demand for Ford would, in the short term, be somewhat elastic, as the purchase of a new vehicle can often be delayed because of non-availability of funds. The demand for a specific model of Ford would likely be highly elastic, because there are so many substitutes from the competitors. The figure 7 and 8 shows how much the consumers spend on automobiles as part of their monthly disposable income.
Figure 7 – % consumer spend on automobiles (Source – Credit Suisse, 2015)
Figure 8 – Overall population spending as % of monthly disposable income (Source – Credit Suisse, …show more content…
Ford is now looking to push towards electric and greener vehicles. Ford has plans to invest $ 1.8 billion over the next five years to expand its research and development in the world’s largest auto market to bring new hybrids and electric vehicles to China. Shift to alternative technology to reduce fixed costs
5.3 Low cost Production & Vertical Integration
Ford has continued to reduce its manufacturing capacity after the recession caused a huge slowdown in vehicle sales. Ford transformed its Valencia plant one of the most advanced and productive automotive plants. Furthermore the cologne Germany plant will insource some operations currently being handled by suppliers to improve cost efficiency and begin a flexible two shift work pattern , allowing it to very efficiently match production with demand.
5.4 Interest Rates and currency