MKC Test-Drive: Is Lincoln Worth More Than Tesla?

| About: Ford Motor (F)
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Summary

How much is Lincoln worth inside Ford? A comparison on metrics vs. Tesla, which it outsold in the US through November by more than 6:1 on a unit basis.

Lincoln is up 15% in the US through November, showing accelerating growth with record November at 21% year-over-year increase.

Ford announced a new $5 billion investment in Lincoln. Tesla’s R&D this year is approximately $500 million.

Lincoln’s new SUV, the MKC, has been nominated for “2014 Truck Of The Year” by the US auto journalists.

I review the Lincoln MKC against its brand new peer group SUV competitors from Kia (Sorento) and Nissan (Murano). I declare Kia Sorento the winner.

The large auto conglomerates typically have a luxury brand or two that generates a disproportionate percentage of its profits. For example, Audi is estimated to contribute 40% of Volkswagen's profits, whereas VW's other luxury brands - Porsche, Bentley and Lamborghini among others - may add additional disproportionate percentages.

Some variant of this situation goes on inside the other automakers too: Infiniti inside Nissan (OTCPK:NSANY), Lexus inside Toyota (NYSE:TM), Cadillac inside General Motors (NYSE:GM), Rolls Royce inside BMW (BAMXY), Maserati inside Fiat Chrysler (NYSE:FCAU), Acura inside Honda (NYSE:HMC) and so forth.

But what about Ford and its Lincoln brand?

Ford (NYSE:F) recently reiterated its commitment to Lincoln, investing another $5 billion in new models to catch up with the other large global luxury car brands. The untrained eye might think that it's a futile effort, seeing as Lincoln has all but disappeared from US popular culture consciousness.

One might surmise that Americans these days associate Lincoln automobiles more with events at which assassins fire weapons at US Presidents - Kennedy in 1963, Ford in 1975 and Reagan in 1981 - than at car dealerships with respect to sales activity. So it was with some surprise that I absorbed Lincoln's actual sales statistics for the US market.

Lincoln is up 15% for the first eleven months of 2014. And with the November increase of 21% it had its best November since 2007. At 84,784 cars and 15% growth, it sure beats Tesla (NASDAQ:TSLA), which suffers from only 13,800 cars and a 15% unit decline in the same US market. That's a 30 percentage point growth spread in Lincoln's favor.

Actually, while we're on the subject - consider that Lincoln versus Tesla valuation comparison for a moment. Ford's market cap is $60 billion versus Tesla's fully-diluted market cap of $33 billion ($228 multiplied by 143 million fully-diluted shares). Lincoln sells many times more cars than Tesla and has a 15% positive growth rate in the US market compared to Tesla's 15% negative unit growth rate. Why shouldn't Lincoln, using Tesla math, be worth much more than Ford's entire $60 billion market cap?

Perhaps that's why Ford decided to inject new life into Lincoln with this new $5 billion investment program. If it spun Lincoln out, it could argue that it should be worth a lot more than Tesla, thereby generating huge value for Ford shareholders.

In comparison, Tesla looks to spend approximately $500 million on R&D in 2014 - significantly less than Lincoln. Maybe we shouldn't be surprised, but we still hear a lot more about Tesla's CEO Elon Musk on CNBC than we hear about Lincoln's President, Kumar Galhotra. I bet you, most readers of this article didn't even know his name.

Reviewing Lincoln's newest star vehicle

In the midst of all of this, Lincoln's new midsize SUV, the MKC, was just nominated as one of the three finalists for "Truck of the year" by the US auto journalists - an award which will be announced on January 12. I can't remember the last time a Lincoln was nominated for such a prestigious award.

As luck would have it, Lincoln sent me the MKC to test. Furthermore, in a pure coincidence, right around the same time, Nissan sent me the all-new Murano SUV. I also had a chance to test the all-new Kia Sorento SUV. In this three-way comparison, how does the Lincoln MKC measure up against two of its main and brand new competitors?

The Lincoln MKC looks almost like a perfect copy of the Audi Q5 - also a competitor. You can see it from the side, but it becomes especially stark when you study the rear liftgate with its integrated lights. The shape of this piece is so close to being identical with the Audi Q5 that it's comical.

Sitting inside these cars, the seat comfort is the best in the Nissan Murano, very closely followed by the Kia Sorento. The Lincoln MKC has a left dead pedal that's too close to the driver, causing you to push back the seat. Then, the Lincoln's steering wheel doesn't telescope enough, leading to the seatback having to be far too vertical. Only if you have shorter legs and very long arms would your seat comfort be competitive in the Lincoln.

The instrumentation is the best in the Kia, where everything is as clear as it could ever be. I had some minor Bluetooth problems in the Nissan, whereas in the Lincoln not everyone may be thrilled with the push-button transmission selector. The Nissan's navigation maps are terrible, not showing small roads/streets at least in the default mode, but the Lincoln had other annoyances. For example, it kept warning me about accidents and road closures that almost always appeared to be false positives. The adaptive cruise control also kept reacting to cars in lanes other than the one in which I was driving.

The back seat is by far the best in the Kia, with lots of space and comfort as well as adjustable seat backs and cushions. The Lincoln lacks enough head room, which is a terrible fault in an SUV. The Kia is also the only one where you have the option of a third row, making for a vastly better space overall.

How do they drive? The engines are all more than plenty powerful for all regular uses. The Ford is a 2.3 liter four cylinder, the Nissan is a 3.5 liter six and the Kia has a choice of two different four cylinders and one 3.3 liter six. I drove two of the Kia's variants. Generally the Kia engines felt the most refined, and the Lincoln the least.

Fuel economy did not differ dramatically between these cars, but still I got the best fuel economy in the Kia and Nissan with 29 MPG highway, and 26 MPG in the Lincoln. City MPG looked equal in the city for the Nissan and Lincoln at 17 MPG, whereas the Kia was a little better at around 20 MPG.

The overall drive feel is very soft in the Lincoln, much firmer in the Kia with the Nissan a little closer to the Lincoln. The Lincoln and Kia feel more "tight" in terms of placing the car, whereas the Nissan has a big and tall front-end where it's a little hard to see the corners. Overall the Kia has the best and crispest drive feel.

The prices of the mostly fully-loaded cars I drove were approximately $48,000 for the Lincoln, $40,000 for the Nissan (2WD only) and $43,000 and below for the two Kias (4 and 6 cylinder versions). They are not a perfect apples-to-apples comparison, but very close given their comprehensive equipment.

Overall, the winner in this comparison is without any doubt the Kia Sorento. With the minor exception of the Nissan's slightly cushier driver's seat, it won on all points. The instrumentation is superior, it's possible to get it with a third row, the rear seat comfort is the best, it yielded the best fuel economy and the drive feel was the best. This wasn't a close call given that it won on almost every point, and is priced favorably.

Between the Lincoln MKC and Nissan Murano, however, it was a closer call. As long as you can get comfortable with the Nissan's infotainment system and related settings, I give the edge to the Nissan. It's got a far better seating position and rear seat headroom than the Lincoln, and those are the winning differentiators here together with the price.

So the Lincoln MKC finishes third. That sounds really bad, but at some level it's not quite as bad as it sounds. I still found it to be a good car in some broader context. If you are not doing a lot of comparison testing, you will like it. It's better than almost anything that was on the road only a few short years ago.

These days, however, it's not enough to be better than other cars were a few years ago. Competition is improving at a faster and more impressive rate than ever. In this case, this shows the most in the Kia Sorento, which is the clear winner in this three-way comparison even though the other two SUVs from Lincoln and Nissan are also perfectly good cars in almost all aspects.

Lincoln's new best-selling car, the MKC, clearly isn't my choice for the "Truck of the year" award to be announced on January 12, but at least Lincoln's owner Ford can console itself that the MKC in November sold almost twice as many cars in the US as Tesla (2,152 vs 1,200). Maybe Lincoln can spin out the MKC nameplate for a $50 billion market cap, using Tesla math?

Disclosure: The author is short TSLA.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: At the time of submitting this article, the author was short TSLA. However, positions can change at any time. Lincoln and Nissan provided cars for review. Kia provided lodging and meals at a product launch event, in order to enable this first-hand drive report.

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