Factors effecting Hybrid Car sales in the United States

- A case of Ford Fusion

Mohammad Shafiq Obeidat Wilmington University

DBA

Executive Summary

The Ford Fusion Hybrid is a gasoline-electric hybrid powered version of the mid-size Ford Fusion sedan developed by the Ford Motor Company, and launched to the U.S. market in 2009.

2009 2010 2011 -

5,000

10,000

15,000

20,000

25,000

15,554

20,816

11,286

Ford Fusion Sales

The graph shows number of cars Ford has sold the in the US since it’s launch:

With so many excellent midsize hybrids on the market, the competition is tough. This study aims to provide some insight into the driving factors for Hybrid car sales.

Problem Statement

As shown in the table, the top ten hybrid cars (based on the market share) with their sales share in 2009, 2010 and 2011.

The data shows that Ford Fusion rose from 5.4% of market in 2009 to 7.6% in 2010 but then fell 4.2% losing its sales to other competitors.

2009 2010 2011Toyota Prius 48.1% 51.4% 50.8%Hyundai Sonata 0.0% 0.0% 7.3%Honda Insight 7.1% 7.6% 5.8%Lexus CT 200h 0.0% 0.0% 5.4%Honda CR-Z 0.0% 1.9% 4.2%Ford Fusion 5.4% 7.6% 4.2%Lexus RX400h 5.0% 5.5% 4.0%Ford Escape 5.1% 4.1% 3.8%Toyota Camry 7.9% 5.3% 3.4%Ford Lincoln MKZ 0.0% 0.4% 2.1%

Market Share (Top ten Hybrid cars)

This study aims to find factors affecting the sales of hybrid cars in the US and to make recommendations to the Ford management.

Statistical Evidence

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Number of Hybrid Cars Sales in United States

Year

Num

ber

of

Hybri

d c

ars

sold

Statistical Evidence

1999

2001

2003

2005

2007

2009

2011

0200,000400,000

Number of Hybrid Cars Sales in United States

YearNum

ber

of

Hybri

d

cars

sold

The graph shows the total number of Hybrid car of all makes and models sold per annum in the United States of America from 1999 to 2011

An exponential rise can be seen in the sales from 1999 to 2007. The sales started souring after 2007 and haven’t seen a growth up until 2011.

Since the US market for hybrid cars is getting bigger with over a quarter of a million cars sold per annum , there is a need to understand the economic factors that lead the hybrid car sales to rise of fall, to be able to predict and demand and target the market.

Statistical Evidence

The correlations table below shows that there is a strong correlations between ‘Total Hybrid cars sales in the Us’ and ‘Per Capita GDP of US’ (Sig. 2-tailed = 0.000 < 0.05) . The correlation of the sales is also very strong with ‘Total GDP of US’ (Sig. <0.05) but not with ‘Growth Rate Percent’ (Sig. > 0.05).

This implies that an increase in the sales of hybrid cars in the US is accompanied by an increase in the ‘Per capita’ and ‘Total’ GDP of the country. Correlations

TotalHybridCars

Sales

PerCapitaGDPU

S$

GrowthratePerce

nt

GDPatcurrentpri

cesUS$

TotalHybridCarsSales

Pearson Correlation 1 .964** -.527 .953**

Sig. (2-tailed) .000 .064 .000

N 13 13 13 13

PerCapitaGDPUS$

Pearson Correlation .964** 1 -.507 .998**

Sig. (2-tailed) .000 .077 .000

N 13 13 13 13

GrowthratePercent

Pearson Correlation -.527 -.507 1 -.519

Sig. (2-tailed) .064 .077 .069

N 13 13 13 13

GDPatcurrentpricesUS$

Pearson Correlation .953** .998** -.519 1

Sig. (2-tailed) .000 .000 .069

N 13 13 13 13

**. Correlation is significant at the 0.01 level (2-tailed).

Statistical Evidence

Now, we conduct a regression analysis to check the relationship between these variables, and get to an equation to be able to predict the hybrid car sales.

In this model, ‘Total are the independenHybrid Car Sales’ is the dependent or outcome variable; and ‘Total GDP’, ‘Per Capita GDP’ and ‘Growth Rate’ t variables.

Model Summary

Model R R Square Adjusted R

Square

Std. Error of the

Estimate

1 .976a .953 .938 33265.747

a. Predictors: (Constant), GrowthratePercent, PerCapitaGDPUS$,

GDPatcurrentpricesUS$

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1

Regression 204219271762.

953

3 68073090587.6

51

61.515 .000b

Residual 9959489255.97

0

9 1106609917.33

0

Total 214178761018.

923

12

a. Dependent Variable: TotalHybridCarsSales

b. Predictors: (Constant), GrowthratePercent, PerCapitaGDPUS$, GDPatcurrentpricesUS$

Looking at R and R Square values in the Model Summary table, shows that over 93% of variance can be explained by this model which is very strong.

The ANOVA table shows the analysis of variance. Looking at the Sig. value (0.000), the regression model is statistically significant.

Statistical Evidence

The Coefficients table actually gives us the relationship we are looking for.Looking at the Sig. column, both ‘Growth rate’ and ‘Total GDP’ have a value of >0.05 which indicates that they do not significantly help predict the sales of hybrid cars in the US. However, ‘Per Capita GDP’ has a value <0.05 indicating a statistically significant relationship in predicting the car sales.

The regression analysis shows that an increase in $87.81 in annual per capita income leads to the sale of one more car in the United States.

Coefficientsa

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

1

(Constant) -1382832.399 277155.973 -4.989 .001

GDPatcurrentpricesUS$ -1.682E-007 .000 -2.451 -2.087 .067

PerCapitaGDPUS$ 87.807 30.423 3.361 2.886 .018

GrowthratePercent -6328.172 5645.736 -.096 -1.121 .291

a. Dependent Variable: TotalHybridCarsSales

Management Recommendation

The study showed that the economic macro factor that the sales of hybrid cars in the US depend on is the average annual income of a person in the country.

This is a helpful insight for the management in order to work towards promoting Ford Fusion Hybrid sales. The overall demand can be predicted using per capita income and Ford should look into calculating and achieving a target sales of Fusion hybrid to maintain and grow its market share in the country.