Michigan automobile stalwart Ford Motor Company (NYSE:F) and third-party car dealerships have locked horns over electric vehicles in recent months.
On the one hand, Ford’s chief executive officer Jim Farley sees an upside to ditching the middleman altogether, suggesting in a July earnings call that a direct-to-customer business model could save up to US$2,000 per vehicle.
On the other hand, franchise laws are on the side of the dealerships, who successfully stopped established automakers from conducting direct-to-customer sales in the 00’s following years of lobbying.
But even though Ford may be hamstrung by state laws, new guidance released today September 16 seeks to shift the burden to the dealerships should they wish to sell EVs down the line.
Under the newly announced arrangements, US-based Ford dealerships will have to cough up at least US$500,000 (some will need to spend upwards of US$1.2bn) to make themselves EV ready, primarily due to the costs associated with installing EV chargers.
No-haggle prices must also be agreed on, and some dealerships will be prohibited from carrying physical inventory.
According to a Wall Street Journal report, dealers selling EVs now must either opt into the guidelines or lose the right to sell EVs by 2024.
Tesla’s DTC advantage
While legacy automakers like Ford, Chrysler and General Motors’ major divisions are forced into engaging with third-party dealerships, Elon Musk’s market-leading EV maker Tesla (NASDAQ:TSLA) doesn’t have a dealer network at all, instead selling directly to customers.
But despite its reservations, Ford does see an advantage in the brick and mortar.
Speaking to The Detroit Bureau in July, Farley said: “Where we think we can really beat them (alluding to Tesla) is on post-purchase experience.
“For a lot of our customers, it’s about the in-person experience. Our dealers know how to do it.”
Steve Majoros, marketing director of GM’s Chevrolet division, also sees the benefit of physical dealerships.
“We intend to fully leverage our dealer partners in the sales, education and ownership experience of EVs,” Majoros told the Bureau. Adding: “87% of citizens in the US live within 10 miles of a Chevrolet dealership and that’s a pretty reassuring thing to know that if you want to talk to someone in person, if you want to go see that product, you have the ability to do so.
Regardless of the expense, dealerships will need to move with the times at some point: The current White House administration wants half of all new vehicles sold in 2030 to be zero-emissions models per executive order.
As part of its intensified focus on electric vehicles, Ford slashed around 8,000 workers in July, largely from the Ford Blue unit that focuses on internal combustion engine (ICE (NYSE:ICE)) operations.