Ford’s Mustang Has a Problem: The New Mustang

(Bloomberg) -- There is no great reason not to buy a Ford Mustang. It's a unicorn of a car: neither massive nor tiny, showy nor ugly, expensive nor cheap. These days, it even gets good mileage.

For 52 years, the pony car has just been getting better, which puts Ford in a bit of a pickle. With a new and improved Mustang just months away, buyers for the incumbent model have vanished. U.S. sales have plummeted 30 percent, to just 50,800, through July of this year. In June, it was outsold by the Dodge Challenger, something that has happened only one other time in the past five years. Sales of the Challenger, meanwhile, have climbed slightly in 2017. 

Ford said no one was available to discuss the sales slide, though spokesman Dan Jones noted in an e-mail that the company has been teasing the 2018 iteration since January and that Mustang buyers tend to wait for the launch of the newest model.

The internet has made it easier for consumers to obsess over beloved goods and made product cadence increasingly difficult for a wide range of companies. Deceiving or surprising customers has become all but impossible. 

“The Holy Grail is to do away with releases completely,” said Mohanbir Sawhney, professor of marketing at Northwestern University's Kellogg School of Management. Companies such as Tesla have smoothed sales volatility by constantly updating their products remotely, he explained. “I've driven a Tesla for three years, and I don't think of it as an old car,” Sawhney said. “Every week, they give me something new.”

Apple, meanwhile, keeps its outgoing iPhones on the market when it releases a new one. Olivier Toubia, a marketing professor at the Columbia Business School, said this is a tidy way to separate customers by price sensitivity. “The old phone becomes an entry point for a segment of customers,” he explained. Meanwhile, those who are willing to pay more upgrade to the new one.

Assembling a vehicle, however, is more complicated than snapping together a smartphone. Carmakers retool massive assembly lines to make a new car and can't continue stamping out the dated version. To mitigate the pain before a big release, car companies can either scale back production to match demand or roll out special editions to tempt a small number of loyalists into paying more for what is essentially the same car.

Ford has done both. In 2016, it started selling the Mustang Shelby GT350, a track-focused version with a souped-up engine and bigger brakes. In October, Ford idled its Michigan Mustang plant for a week, sending some 3,702 workers home.

To be fair, the Mustang pain isn't confined to Ford. Buyers seem to be cooling on cheap sports cars in general. Sales in the segment this year through July were down 12 percent. Plenty of people still want these machines, but nobody needs them.

Mustang sales will likely swell again when the new model arrives in the fall. But the recent lull shows that drivers are getting restless. In the auto industry, vehicles are usually given a full overhaul and redesign every six to 10 years. In the years between, a car or truck receives minor tweaks called refreshes.

The Mustang received its last major overhaul for its 50th anniversary in 2015. Ford's designers, by all accounts, knocked it out of the park—creating a vehicle with lines both atavistic and futuristic. The machines zipped out of dealerships. Yet just two years later, customers are already kind of over it.

To bring back some buzz, the company did much more than a simple refresh for next year's release. The 2018 Mustang comes with new LED lights and blinkers, a spate of new safety technology, two new transmissions—including a six-speed manual and a 10-speed automatic—and an optional V8 that will have more power than the current one. There are also some all-new colors. Opting for the Mustang in “Orange Fury,” the vehicular equivalent of a Creamsicle, is perhaps the easiest way to let the neighbors know you are driving the freshest pony on the range.

Updating and relaunching a vehicle, however, gets expensive. If Ford is forced to keep tweaking its pony car so often, it will become a much less efficient economic machine.

To contact the author of this story: Kyle Stock in New York at kstock6@bloomberg.net.

To contact the editor responsible for this story: Josh Petri at jpetri4@bloomberg.net.