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Ford And Hybrid Demand

Internet Article – Ford Strives to Meet Hybrid Demand

Abstract

This paper will explore points in a Washington Post article titled, "Ford Strives to Meet Hybrid Demand" and explain why changes occurred in its supply, demand, and price of hybrid vehicles. The supplier in this article, Ford Motor Company, has experienced a recent spike in the demand for hybrid vehicles, which will likely continue to increase. The spike has made it difficult for suppliers to meet the demand of its hybrid vehicles.

Summary

Hybrid vehicles are gas-electric vehicles. They provide gas mileage that is more efficient than that of conventional gas only powered vehicles. For the Ford Motor Company, an increase in its demand of hybrid vehicles seems to be a double-edged sword. It is profitable that there was an increase in demand; however, they have not been able to keep up with the demand. Ford introduced the first hybrid SUV, the Ford Escape, to auto showrooms in 2004. This was one of the few hybrid vehicles available to consumers. Upon introducing the Ford Escape and increased fuel prices, Ford experienced an unexpected increase in demand for its Escape, which rendered the company unable to keep up with the demand. Dealerships began selling out of this popular hybrid model as soon as it hit the showroom (Freeman, 2006). With gas prices constantly on the rise, consumer interest continued to rise. The demand for the hybrid vehicle became higher than the supply. With Ford Motors inability to keep up with demand, its sales for the vehicle fell from 2,526 in June of 2007 to 1,578 in July of 2007 (Freeman, 2006).

Changes in Supply, Demand, and Price

According to Ford, most of its sales for hybrid vehicles were in California (Freeman, 2007). According to AAA, California has some of the highest gas prices in the nation at $3.14 for regular grade gasoline. The only state with gas prices higher than California is Hawaii, at $3.46 for regular gasoline. In California, consumers are paying a couple of thousand dollars above the sticker price for the Ford Escape (Freeman, 2007). The supply of the Ford Escape was lower in many areas because most of the Ford Escapes that were being produced were being shipped to California (Freeman, 2007).

Increased gas prices created a shift in demand, resulting in increased interest in the more economical hybrid vehicles (Colander, 2006).

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