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Ford has said it wants to change its dealership model, including building an e-commerce platform where customers can shop and buy EVs at non-negotiable prices in an effort to match the Tesla’s profit margin.
“I feel like when the second quarter last year earnings came out for Tesla and they showed a $15,000 premium, it completely changed my world,” CEO Jim Farley said at the Bernstein Strategic Decisions Conference on Wednesday. “It was an epiphany. It was like the angels were singing, like, ‘Oh my god, EVs are making more money than our ICE.'”
Farley’s comments in a lengthy interview came a day before the automaker announced it would spend $3.7 billion to hire 6,200 union workers to staff several assembly plants in Michigan, Ohio and Missouri in a bid sell 2 million EVs a year by 2026.
Farley said he expects widespread consolidation among dealers, suppliers and automakers as the industry begins building more EVs. His comments come at a critical time for car prices due to a supply chain crunch and opportunities for dealerships to take customers for new vehicles.
In the future, dealers will not have any inventory, he added. Instead, vehicles will be shipped directly to the customer, with remote pickup and delivery.
“Their business has changed a lot,” Farley said. “There will be many winners and losers, and I believe, consolidation.”
He did not give a timeframe for the transition to online sales or explain Ford’s plans for its dealer network.
Transitioning to an online-only sales model will entail many challenges, as automakers have limited control over their dealership networks. Car dealers are protected by state laws and spend millions of dollars annually on lobbyists to maintain their status.
Tesla operates retail stores but no dealerships, which is a major advantage in cutting middleman costs and maintaining profits.
Meanwhile, Ford is changing more in the way it sells cars. In a historic restructuring in March, Ford separated its EV business from its combustion unit. Revenues from the combustion business, called Ford Blue, will fund the growth of the EV unit, called Ford Model e.
Farley likened his vision for the automaker’s sales model to Target’s strategy to use its physical stores to compete with Amazon. “The target could have gone, but it didn’t,” he said. “They used their expertise as a physical retailer to their advantage, but they modernized the e-commerce piece.”
“This is exactly what we need to do on the retail side,” Farley said. “We need to go to a non-negotiable price. We need to be 100% online so inventory goes directly to the customer with 100% remote pickup and delivery.”
Farley said Ford is working with dealers to transition into the future.
“I believe on the retail side, we can do things after the warranty and remix the marketing spend to have a better experience,” he said. “I think our dealers can do it, but the standards will be brutal. They will be very different than they are now.”
Clarification: The original story said Ford was 100% online. That doesn’t mean Ford is getting rid of its personal dealerships, according to a spokeswoman.
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