Ford outlines the electric vehicle investment structure for its dealers while chasing Tesla-like profits

Ford CEO Jim Farley poses next to a model of the all-new Ford F-150 Lightning electric pickup truck at the Ford Rouge Electric Vehicle Center in Dearborn, Michigan on April 26, 2022.

Rebecca Cook | Reuters

LAS VEGAS – Ford Motor is asking its nearly 3,000 dealers to invest up to $ 1 million in upgrades to sell all-electric vehicles, as the automaker attempts to reduce overhead costs and increase its dealers’ profits to better align Tesla, a leader in electric vehicles.

Ford offers its dealers the option to become “EV certified” under either program, with investments of $ 500,000 or $ 1.2 million. Top-tier dealers, which cost up to $ 900,000 upfront, will receive “elite” certification and receive more electric vehicles, executives said.

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

It’s an effort to elevate Ford dealerships as the company seeks to increase sales in its traditional and commercial businesses, as well as in electric vehicles. Tesla and other electric vehicle startups sell directly to consumers without franchising dealers.

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

Ford’s plans to sell electric vehicles have been a moot point since the company split its all-electric vehicle business earlier this year into a separate division known as Model e. Farley said the automaker and its dealers needed to reduce costs, increase profits, and deliver better, more consistent customer experiences.

Ford F-150 Lightning trucks manufactured at the Rouge Electric Vehicle Center in Dearborn Michigan.

Courtesy: Ford Motor Co.

Ford’s current range of fully electric vehicles includes the Ford F-150 Lightning pickup, Mustang Mach-E crossover and e-Transit van. The automaker is expected to release a litany of other electric vehicles globally with a plan to invest $ 50 billion in technologies by 2026.

Farley wants Ford dealers to reduce sales and distribution costs by $ 2,000 per vehicle to be competitive with the direct-to-consumer model.

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

Wall Street analysts have largely considered direct-to-consumer sales to be an advantage for maximizing profits. However, there have been growing difficulties for Tesla when it comes to repairing its vehicles.

Farley hopes to increase its cost competitiveness before Tesla can scale its domestic operations further, following the success of scale in Norway. Tesla did not immediately return a request for comment.

No purchase

Ford, unlike rival General Motors, is allowing dealers to forgo the sale of electric vehicles and continue to sell the company’s cars.

GM has offered acquisitions to its Buick and Cadillac dealers who don’t want to shell out to sell electric vehicles.

“There’s too much uncertainty. We don’t think it’s right to force them to take the EV trip or force them into an acquisition,” Marin Gjaja, chief customer officer of Ford Model e electric vehicle business. “We think it’s really superfluous because they have a healthy, strong and growing business … We want them to have the choice.”

GM did not immediately return a request for comment.

According to Gjaja, about 90% of the initial investment costs should go to installing electric vehicle chargers, including DC quick chargers that can cost $ 300,000 or more. Only a few dozen of the 2,991 Ford dealers currently have high-speed chargers, he said.

Aside from investments, retailers opting to sell electric vehicles will have to adhere to five standards to remain in compliance: clear, non-negotiable prices; load investments; employee training; and a better vehicle purchase and ownership experience for customers, both digitally and in person.

In the new framework, Ford and Farley are asking franchisees to specialize in electric vehicles, commercial vehicles or traditional internal combustion engines. Larger retailers can continue to sell all product lines, but the CEO asks smaller stores to specialize in what suits their markets.

“We want people to take on these standards that will be profitable to execute,” Farley said, refusing to have a target for certification of electric vehicle dealers. “It won’t be good for retailers or the company if people adopt these standards and don’t get a return on their investment.”

Tim Hovik, a retailer in Nevada who leads the Ford National Dealership Council representing the company’s franchise dealers, said the reception of the plans was well received.

“The dealer body is in full agreement with Jim’s assessment, we really want to be the most valuable franchise out there. We’re huge fans of that,” said Hovik. “It’s really about growth.”

Dealers who give up selling electric vehicles this year will have a second chance to do so in 2027, Gjaja said.

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