According to the Detroit Free Press, Jim Farley, the current Ford CEO, said that he wants to sell its EVs online rather than through its dealerships.
Apparently, he was upset at the markups added by many of its dealers on its ever-so-popular electric F-150 Lightning that offended many customers. For example, one of the dealers right here in the greater Boston area reportedly added $10,000 to its price, and then had to back down from such a practice.
That also brings another issue: pricing. Jim Farley also said he did not like price negotiations at the dealerships. What a revelation! I am sure there are people who like to haggle, but I am also positive many people do not.
“We’ve got to go to non-negotiated price. We’ve got to go to 100 percent online. There’s no inventory (at dealerships), it goes directly to the customer. And 100 percent remote pickup and delivery,” Farley said.
Well, I wish him good luck.
Farley is right in his desire to move online, but he needs to think hard how to make the transition. Just telling the dealers no probably will not do.
Dealerships have over the years grew to be an indispensable part of traditional auto makers. Let us imagine a scenario where all Ford dealers close their doors all in one day. Will Ford survive? No. Ford needs its dealers to sell its massive inventory of cars – most of them gasoline cars.
So Farley could say no more EVs for dealers. It may work, but it has risks. The dealers may threaten to carry less of its inventory, or something else that may jeopardize Ford’s bottom-line. The outcome of the this fight will depends on the power dynamics between Ford and its dealers.
Farley also said the current dealer distribution model adds around $2000 to its cost, a third of which goes to advertising, and another third of which to inventory.
Now the question is how to do away with this extra cost. The fight against the dealers is on. Time will tell if the traditional auto makers such as Ford can catch up with Tesla in its efficient distribution.