Toyota Motor Corporation (ADR) (TM): Can Ford Motor Company (F)’s Fusion Reclaim the Sales Crown?

Because Ford can’t meet the high demand for Fusions, its dealerships aren’t forced to negotiate on price to move models off the showroom floor. That helps the Fusion sell at a premium of $1,176 above the industry average. Moreover, because the Camry’s demand has fallen, yet its supply remains high, the opposite pricing power takes effect – sending the Camry’s price down 2%, to sell at a $2,378 discount to the Fusion, according to Bloomberg.

By the laws of supply and demand, we can expect the Fusion’s price to drop slightly when its extra capacity comes online. But it won’t necessarily drop much, and the eventual price will be closer to its equilibrium between sales and price. Ford might not charge as much for each Fusion, but it’ll be able to sell more of them overall, maximizing the Fusion’s total profits.

“You might see prices come down a few hundred dollars, but I don’t think they face any significant risk of serious price degradation,” Alec Gutierrez, an analyst with Kelley Blue Book, told Bloomberg. “They’re going to hold their premium spot in the segment.”

Bottom line
This is a great development for investors and Ford alike. Ford’s F-Series has already been America’s best-selling vehicle for the last 31 years. If the Fusion can use its extra capacity to take the mid-size sedan sales crown in a few years, it will represent a huge win for Ford. As it stands now, the extra production capacity will allow the Fusion to keep gaining market share and profit.

As the Fusion’s resurgence demonstrates, Ford Motor Company (NYSE:F) continues to make improvements across its lineup. It’s also improving its balance sheet, and it remains a solid investment opportunity at today’s price.

The article Can Ford’s Fusion Reclaim the Sales Crown? originally appeared on Fool.com and is written by Daniel Miller.

Fool contributor Daniel Miller owns shares of Ford. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford.

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