Ford’s Attempts To Shake Up The Dealer Model Could Kill Its EVs (Analysis article on Ford's New ICE/EV Dealership model)

[North7]

Interesting article and analysis on Ford's new ICE / EV sales model and potential dealership impacts.

Ford’s Attempts To Shake Up The Dealer Model Could Kill Its EVs

We all know the dealership system is broken. New car listings are replete with markups, and buyers that can even find a reasonably-priced car are still subject to scams and fraud. So when a manufacturer tries to rein in its dealers with new rules, the result is generally an improvement — but Ford, with its new EV initiatives, may have gone a step too far.

Ford announced last week that it would bifurcate the Blue Oval, with Ford Blue handling ICE vehicles and Ford Model E working on EVs. With that split comes a wealth of new rules for dealers, regarding the ways in which they can and can’t sell electron-fueled Fords. Automotive News has the details, emphasis mine:

The automaker plans to create the blueprint in tandem with dealers and won’t finalize details until after they provide input over the next few months. But executives have outlined some of what they want to include: a commitment to carrying no inventory, selling at nonnegotiable prices and operating with scaled-down facilities.​

Making the move to a more digital method of car buying is unequivocally good — nearly 30% of 2020 automotive sales were done online, so it’s clearly something consumers want. But, whether due to impatience or urgent necessity or simply a lack of care for the fine details of a vehicle, average car buyers also want to buy cars that are currently in inventory. The current car market is heavy on orders, since nothing’s sitting out on dealer lots, but back in 2015 only five percent of new cars were custom ordered.

When dealers sell ICE vehicles side-by-side with EVs, but will only sell electric vehicles to buyers who place a factory order, there’s a natural incentive for people to pick the gas burner. They can see the car in person, feel the interior, actually drive it — and the dealer has an incentive to get a car off its lot so something new can take its place.

Changing the way dealers work is an admirable goal for Ford to pursue. But by placing limits on the way EVs can be sold, without doing the same to ICE vehicles, the company could be kneecapping its most forward-looking models. To buyers on the EV fence, that alone could push them over to the ICE side — markups or no markups.

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[Jdc]

The author makes an interesting point but I don't think he really provided enough evidence for it. He mentions dealerships with zero inventory, but that doesn't mean there can't be drivable mannequins. Most people hate dealerships, especially the younger crowd. https://www.nytimes.com/2021/06/17/business/buying-a-car-online-carvana.html
Buying cars online will be the norm soon enough.

 

[The Pope]

Not in the Auto Industry, but in the Ag, Construction, Forestry and Residential Lawn Care Industry (think....Tractors, Combines, Bulldozers, Logging Equipment, Lawnmowers and several other things), I know of one company that retains ownership of the vehicle up until it's sold by the dealer. This company has & can shift inventory form one dealers lot to another. Granted the dealer can request certain vehicles and the manufacture does it's best to provide those vehicles, but the bottom line is.... the manufacture sets the max price and retains ownership of the vehicles up until the dealer sales them.

This "might" be an option for @Ford Motor Company .............

 

[drew707]

ICE vehicles are getting the same treatment this isn’t going to be exclusive to EV, though EV will be the ground floor for the model. Ford already sells ICE vehicles direct to consumer in certain markets

 

[‘21OBX]

I was told this about 8 months ago by a dealer that the current situation of low inventory and higher order numbers is looking like the new normal going forward. This particular dealer said for them not having to pay to have as many vehicles on the lot was actually helping them with costs. They claim to make more per vehicle since they pay less having the vehicle ordered and sold before it even gets to them. They claimed they would have one or max two vehicles of any model on hand to feel as test drive. But they had no plans of the rows and rows of cars they once had. While it sure doesn’t look impressive to drive by a mostly empty lot he said they have lost very little sales numbers wise. The problem with this is the current state of ford(and manufacturing in general) imo is they haven’t been able to supply vehicles in a timely, consistent fashion.

 

[flip]

There was a Webex the other day that I'm not going to provide specifics about because I don't know what is and isn't proprietary. Basically, dealers are not going to be removed from the EV transactions. That said, there are no details or framework that was discussed since that will be hashed out with the dealer body as this develops.

IMO, again, no proof or this but I think someone inside Ford that was involved or somewhat involved with these discussions leaked the plans to the media before Ford approached dealer council. In order to get in front of a story, Farley was forced to go public and, IMO, didn't do a good job of delivery. Dealers immediately took this as Ford's way of starting to cut dealers out of the process, with the exception of being parts and service facilities. The dealer body has long suspected Ford will try to do direct sales but couldn't because of banking and other state and franchise laws.

Ford is going to try and do EV, everyone knows this. I honestly don't think it's a viable model at this time due to the lack of infrastructure, available minerals needed for millions of batteries and a list of other things. If you're in a "green" state or metro area, yes, some of the needed elements are there or are getting there. In the rest of America, not so much. Who's going to be hot on an EV after they find out their home needs $20K in electrical service upgrades to handle a 50A charging station? My municipal utility already said it's going to be a nightmare and our hard infrastructure isn't set up for all these additional loads. They said it would take millions and years to upgrade our local grid. Who's going to fund this?

Dealers aren't going to be real hot on EV if Ford says they have to build a new $5M facility. I'd guess less than 30% of dealers would be willing to do that based on all these different factors. The ROI on this would be 30 years and there's too many factors to consider. I'm cool with a training and equipment requirement, little to no new EV inventory, placing orders, one price sale and reasonable facility updates (chargers).

EV for Ford on a large scale isn't going to work without the dealers and they know this. They want what Tesla doesn't have and that's a large scale service network. Ford is trying mobile service but it's been a complete flop so far.

We will see how this plays out. I don't like Ford dictating prices because I'm a capitalist but also believe there are a lot of dealers that try to take advantage of customers which reflects poorly on the brand and dealers that don't do business like that. I know many people on here hate dealers and I've started to reply to a few comments or threads over the last couple of years but deleted them because I'm not going to convince anyone not all of us are crooks. Do I think some dealers are crooks? Yes. Should Ford put programs in place to deter bad behavior? Yes.

My family made a significant investment over 100 years ago when my g-grandfather got his Ford franchise. We have grown to having 135+ employees and are an invested heavily in our community. While we aren't one of those high volume dealers Ford loves, we found a niche and believe relationships are the key our success. What I'm getting at is all of the people that are cheering the potential demise of the dealer model I think your frustration has merit but you need to look at the impact it could or would have on the people it would directly hurt. Could they find jobs? Probably. Are dealers going to stick around just to do warranty work Ford pays almost poverty wages to do? Nope. Whether you believe it or not, dealer profit margins are razor thin, anyone that says otherwise is a f'ing liar. It takes ALL departments to keep dealers going and those that are weak in fixed-ops, the only place to make money is sales. If sales dramatically changes, the whole business model implodes.

There is a middle ground that allows dealers to be a part of the process while being able to make a reasonable profit for providing a service on behalf of Ford. Anyone that believes Ford is going to cut vehicle prices if dealers aren't involved, is delusional. 3% on a $50K vehicle is $1,500. Is that really going to make a huge difference in anyone's buying decision? What happens when your closest dealer is now 75 miles away because your local dealer couldn't make it anymore? Lots of things to consider, the biggest is potential loss of jobs, tax revenue, community investments and benefit of local dealer to help with vehicle needs or repair work. If you think the aftermarket is going to fill that void, I got a bridge and a gold mine I'd like to talk to you about.

 

[Kos]

I think the author is stuck in a dated mindset. There was a lot of talk about how Tesla would never succeed without a dealer network and now they control the entire purchase cycle.

I believe this model could work for both EVs and ICE vehicles. Dealer's simply keep a few test vehicles on the lot. You come in, say I want that one. They draw up the order and Ford fulfills it. As long as they can keep the fulfillment cycle under 30 days (a somewhat arbitrary # on my part) people will wait for a new vehicle optioned the way they want it. As someone who has worked in both manufacturing and logistics, I believe a 30 day cycle is possible once we get through the supply chain issues the country is currently facing.

 

[DREWR13]

While I understand the past year or so has been wild as far as MSRP pricing. Its funny to me how many people forgot about dealers selling New F-150's for $15,000 BELOW MSRP in 2019...

 

[petengineer]

There was a Webex the other day that I'm not going to provide specifics about because I don't know what is and isn't proprietary. Basically, dealers are not going to be removed from the EV transactions. That said, there are no details or framework that was discussed since that will be hashed out with the dealer body as this develops.

IMO, again, no proof or this but I think someone inside Ford that was involved or somewhat involved with these discussions leaked the plans to the media before Ford approached dealer council. In order to get in front of a story, Farley was forced to go public and, IMO, didn't do a good job of delivery. Dealers immediately took this as Ford's way of starting to cut dealers out of the process, with the exception of being parts and service facilities. The dealer body has long suspected Ford will try to do direct sales but couldn't because of banking and other state and franchise laws.

Ford is going to try and do EV, everyone knows this. I honestly don't think it's a viable model at this time due to the lack of infrastructure, available minerals needed for millions of batteries and a list of other things. If you're in a "green" state or metro area, yes, some of the needed elements are there or are getting there. In the rest of America, not so much. Who's going to be hot on an EV after they find out their home needs $20K in electrical service upgrades to handle a 50A charging station? My municipal utility already said it's going to be a nightmare and our hard infrastructure isn't set up for all these additional loads. They said it would take millions and years to upgrade our local grid. Who's going to fund this?

Dealers aren't going to be real hot on EV if Ford says they have to build a new $5M facility. I'd guess less than 30% of dealers would be willing to do that based on all these different factors. The ROI on this would be 30 years and there's too many factors to consider. I'm cool with a training and equipment requirement, little to no new EV inventory, placing orders, one price sale and reasonable facility updates (chargers).

EV for Ford on a large scale isn't going to work without the dealers and they know this. They want what Tesla doesn't have and that's a large scale service network. Ford is trying mobile service but it's been a complete flop so far.

We will see how this plays out. I don't like Ford dictating prices because I'm a capitalist but also believe there are a lot of dealers that try to take advantage of customers which reflects poorly on the brand and dealers that don't do business like that. I know many people on here hate dealers and I've started to reply to a few comments or threads over the last couple of years but deleted them because I'm not going to convince anyone not all of us are crooks. Do I think some dealers are crooks? Yes. Should Ford put programs in place to deter bad behavior? Yes.

My family made a significant investment over 100 years ago when my g-grandfather got his Ford franchise. We have grown to having 135+ employees and are an invested heavily in our community. While we aren't one of those high volume dealers Ford loves, we found a niche and believe relationships are the key our success. What I'm getting at is all of the people that are cheering the potential demise of the dealer model I think your frustration has merit but you need to look at the impact it could or would have on the people it would directly hurt. Could they find jobs? Probably. Are dealers going to stick around just to do warranty work Ford pays almost poverty wages to do? Nope. Whether you believe it or not, dealer profit margins are razor thin, anyone that says otherwise is a f'ing liar. It takes ALL departments to keep dealers going and those that are weak in fixed-ops, the only place to make money is sales. If sales dramatically changes, the whole business model implodes.

There is a middle ground that allows dealers to be a part of the process while being able to make a reasonable profit for providing a service on behalf of Ford. Anyone that believes Ford is going to cut vehicle prices if dealers aren't involved, is delusional. 3% on a $50K vehicle is $1,500. Is that really going to make a huge difference in anyone's buying decision? What happens when your closest dealer is now 75 miles away because your local dealer couldn't make it anymore? Lots of things to consider, the biggest is potential loss of jobs, tax revenue, community investments and benefit of local dealer to help with vehicle needs or repair work. If you think the aftermarket is going to fill that void, I got a bridge and a gold mine I'd like to talk to you about.

As with all businesses, you adapt to the new environment or you die. In many states dealers have successfully lobbied for laws that have given them the advantage for years. And while there are many "good" dealers, now in the days of social media, it only takes a few bad apples to ruin the batch.

New car dealers will have to adapt as many other industries have. Some dealers will make it and some won't. Kodak, Blockbuster, family farms, big shopping mall retailers, print media are just a few examples where the company/industry went under or serious contraction and consolidation has had to take place to stay profitable.

 

[JohnG]

Dealers are the worst part of car buying. The stupid games they play ruin the car buying experience. There are plenty of good ones, but because there are so many bad ones the net value is lost. How many documented cases of dealers essentially stealing bronco orders does it take before we can agree the process that allows that to happen should be terminated?

The idea that everything would cost more with out dealers there to take the hit for us and sell under msrp is a joke. Market forces will still dictate incentives and discounts from the manufacturer.

Leave the sleazy car sales tactics to the exclusive realm of used car dealers, and people wi flock to buy new cars. The process can be that painful.

Direct to consumer, all the way.

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