Ford Is Encouraging Dealers To Invest In Evs As It Seeks To Match Tesla’s Profits

Ford Motor Company is asking its nearly 3,000 dealers to invest up to $1 million in upgrades to sell all-electric vehicles, as the automaker seeks to reduce overhead costs and increase profits at its dealers in order to better compete with EV leader Tesla.

Ford is giving its dealers the option of becoming “EV-certified” through one of two programs, with investments ranging from $500,000 to $1.2 million. Executives stated that dealers in the higher tier, which has an upfront cost of $900,000, will receive “elite” certification and will be assigned more EVs.

Dealers have until October 31 to make a decision and until the end of the year to invest.

It’s an effort to raise the status of Ford dealers as the company seeks to increase sales across its traditional and commercial businesses, as well as EVs. Tesla and other electric vehicle startups sell to consumers directly, without the use of franchised dealers.

“We’re betting on the dealers. We’re not going to go direct. But we need to specialize,” CEO Jim Farley told reporters Tuesday after briefing dealers about the plans. “The main message I have for the dealers, which I’ve never said before, because I didn’t believe it was true, is that you could be the most valuable franchise in our industry.”

Since the company split off its all-electric vehicle business earlier this year into a separate division known as Model e, Ford’s plans to sell EVs have been a source of contention. According to Farley, the automaker and its dealers needed to cut costs, boost profits, and provide better, more consistent customer sales experiences.

The Ford F-150 Lightning pickup, Mustang Mach-E crossover, and e-Transit van are among the company’s current all-electric vehicles. The automaker plans to release a slew of other EVs around the world as part of a $50 billion investment in the technologies by 2026.

To compete with the direct-to-consumer model, Farley wants Ford’s retailers to cut selling and distribution costs by $2,000 per vehicle.

“We’ve been studying Tesla very carefully over the last several years,” Farley said.

Wall Street analysts have largely viewed direct-to-consumer sales as a benefit in terms of profit maximization. However, Tesla has experienced growing pains when it comes to vehicle servicing.

Farley hopes to increase Tesla’s cost competitiveness before it can scale its domestic business further, following the success of scale in Norway. A request for comment from Tesla was not immediately returned.

Unlike crosstown rival General Motors, Ford allows dealers to opt out of selling EVs while still selling the company’s cars.

GM has offered buyouts to Buick and Cadillac dealers who do not want to invest in selling EVs.

“There’s too much uncertainty. We don’t think it’s fair to force them to go on the EV journey or force them into a buyout,” Marin Gjaja, chief customer officer of Ford’s Model e electric vehicle business. “We think it’s really uncalled for because they have a healthy and strong, growing business. … We want them to have the choice.”

According to Gjaja, installation of EV chargers, including DC fast chargers that can cost $300,000 or more, will account for roughly 90 per cent of the initial investment costs. According to him, only a few dozen of Ford’s 2,991 dealers currently have the high-speed chargers.

Aside from the investments, dealers who choose to sell EVs must adhere to five standards in order to maintain their good standing: clear and non-negotiable pricing; charging investment; employee training; and improved vehicle purchasing and ownership experience for customers, both digitally and in-person.

Ford and Farley are asking franchised dealers to specialize in either EVs, commercial vehicles, or traditional internal combustion engines under the new framework. Larger dealers can continue to sell all product lines, but the CEO is requesting that smaller stores specialize in what best fits their markets.

“We want people to take on these standards that will be profitable in executing them,” Farley said, declining to forecast a target for EV dealer certification. “It will not be good for the dealers or for the company if people take on these standards and they don’t get return on their investments.”

The plans have been well received, according to Tim Hovik, a dealer in Nevada who heads the Ford national dealership council, which represents the company’s franchised retailers.

“The dealer body wholeheartedly agrees with Jim’s assessment, we very much want to be the most valuable franchise out there. We’re big fans of that,” said Hovik. “It’s really all about growth.”

Dealers who choose not to sell EVs this year will have a second chance in 2027, according to Gjaja.

(Adapted from CNBC.com)



Categories: Economy & Finance, Entrepreneurship, Strategy, Sustainability, Uncategorized

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