Ford Drops A Bomb On Dealerships – Either You’re In Or You’re Out!

Yesterday we told our readers that Ford CEO Jim Farley was heading to Las Vegas to deliver a message at the annual Ford Dealer Convention. We thought he was going to be nice to the drug dealers, but instead he threw a bombshell at them. Here is the message Farley brought with him to Sin City:

When it comes to selling battery-electric Ford products that are part of the new Model E division, you’re either on the bus or off the bus and you only have 6 weeks to decide.

BOOM! Just like that, the EV revolution has taken a giant step forward and things will never be the same in the land of the Blue Oval. Ford recently restructured its business by separating its operations into three divisions, called Ford Blue Oval for its traditional vehicle sales, Ford Pro to meet the needs of commercial customers and Ford Model e to focus on battery electric vehicles. To clarify, all of Ford’s hybrid and plug-in hybrid models will be marketed through the Blue Oval side of the business. These distinctions will be important to keep in mind as you read more about Farley’s remarks yesterday.

Ford offers three choices to dealers

Farley told dealers they had until October 31 to choose one of three options:

  • Become a Model E Certified Elite Dealer
  • Become a Model E Certified Dealer
  • Stop selling Model e vehicles effective January 1, 2024

According Inside electric vehicles, whose correspondent Tom Moloughney was part of a very small press group at the event, Model e Certified Elite dealers will need to install two DC fast chargers and a Level 2 charging station. At least one of these fast chargers CC shall be available to members of the public. Ford estimates the cost of this will be between $1.0 million and $1.2 million, with up to 90% of that allocated to purchasing and installing the required charging infrastructure.

[Note: The US Department of Energy says the cost of installing a DC fast charger is around $50,000. According to Property Manager Insider, a DC fast charger installation costs between $28,000 and $140,000. If anyone thinks it will cost up to $1 million to add two DC fast chargers and a simple Level 2 charger to a Ford dealership, we have a bridge in Brooklyn that we would like to sell you.]

Model e certified dealers will only be required to install one DC fast charger and this must be available for public use. Here is the kick. Model e-certified dealers will be limited in the number of electric vehicles they are allowed to sell each year and this number will be the same for all Model e-certified dealers, regardless of their total annual sales volume.

Tom Moloughey reports that Ford hasn’t decided exactly what that cap will be, but it will be small and intended only to fill orders from the dealership’s most loyal customers. Ford estimates the cost for dealers to become a Model e Certified dealer will be around $500,000, with up to 90% of the cost attributed to charging infrastructure. [And again, if anyone thinks one fast charger costs nearly a half million dollars, we will sell you the Brooklyn Bridge and some ocean front land in Arizona. Cash only. No checks.]

The reason for fast chargers – which must have a capacity of 120 kW or more – is that many people who live in condos or apartment buildings do not have access to chargers. Over 90% of Americans live within 25 miles of a Ford dealership, so if all of those dealerships have at least one fast charger, potential customers will be reassured by that fact and can decide to buy a Ford electric car. That’s the theory, at least.

Pay now or pay later

This first stage of the Model e transformation will be in effect from January 1, 2024 through December 31, 2026. The decision made by dealers now will be in effect until 2026 and dealers cannot change their Model e certification status until January 1, 2027. All dealerships will be able to continue selling electric vehicles until January 1, 2024, when the new Model e rules come into effect.

Dealers who choose not to become Model e certified will waive the right to sell fully electric Ford vehicles for three years. At some point in 2025, they will have the option to tell Ford if they want to become a Model e Certified or Model e Certified Elite dealer and will be allowed to start selling electric vehicles in January 2027 – provided they meet all the conditions of the certification deal with.

Five pillars of Ford’s EV strategy

Ford explains that its Model E dealership strategy will be based on five pillars:

  • Training: dealers will be required to complete extensive EV training on an ongoing basis
  • Charging: Model e dealers must have adequate level 2 and DC fast charging, with at least one publicly available DC fast charger
  • Fixed pricing: transparent and non-negotiable pricing available online
  • Excellent in-person experience: Model e dealerships must provide an excellent ownership experience, including free pickup and drop-off for vehicle service visits
  • Growing the digital experience: Investing in building a digital property experience for the future

Pricing without haggling, but no direct sales

Older readers might remember an experiment GM tried in the 90s with its new Saturn division. Its main characteristic was not to haggle over prices. Everyone got the same deal. Some people actually enjoy arm wrestling with a vendor like they’re buying an oriental rug at a bazaar, and they’re free to take to the streets and play those macho games. But if you wanted a Saturn, it would cost you the same whether you lived in Albuquerque or Altoona, whether you were male or female, young or old, rich or poor. The price was the price and a lot of people were pretty happy with it.

Ford is now adopting a no-haggle version of the model for the battery-electric cars it will sell through its Model e division. Dealer franchise laws prevent Ford from selling these vehicles directly to consumers, but Ford sees its dealer network as a strength, not a weakness. It just needs to improve the sales process and the customer experience with electric vehicles.

Model e-certified dealers will be required to post fixed prices for electric vehicles online on Ford’s website. Customers can view set prices, make the purchase online, and even schedule home delivery. But ultimately it’s up to the dealer to decide what price to set for the vehicles and there will likely be price variations from dealer to dealer.

Customers will be able to cross-shop prices online from different local retailers and choose the one with the lowest set price. Dealerships must meet the set price for each purchase, and Ford will check purchase orders to make sure that happens, Moloughney says.

Customers can do it all online or visit a dealership if they choose. But once there, the dealer will be locked into the price they posted online. No fun business is allowed.

A shout out to Tesla

Farley told dealerships he was seeing a convergence between traditional sales models and the online model that Tesla pioneered. “We have studied Tesla closely, particularly with how their brand has evolved with units and operations in Norway and what we have noticed is that they now have almost 1,200 employees and they have dealership type facilities and we believe that is the direction they will go as they expand their operations in the United States.

He’s not wrong. Recently, Tesla added larger showrooms that look a lot like a traditional dealership, starting with its new $2.5 million facility in Austin, Texas. Ford may have spotted a new trend and is ready to embrace it.

Takeaway meals

Moloughney says the mood among dealers at the convention was upbeat, but the devil is always in the details. Time will tell how well Ford’s new sales strategy works in practice. It will also be interesting to see how other major manufacturers doing business in the United States react to Ford’s new initiative. General Motors has offered cash to its Cadillac and Buick dealers who don’t want to be part of the electric vehicle revolution. Ford is taking a different approach.

The internet has irrevocably changed the way everything is sold, which is why malls all over America have so many vacant storefronts. Everything from laundry detergent to dog food is sold online today and delivered right to your doorstep.

We can expect some dealerships to be unhappy with the changes and there might be a lawsuit or two about it, but it’s really very hard to turn the winds of change away. New ways of doing business are coming to the automotive world and Ford seems to have a credible strategy to capitalize on them.

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