Ford Gives Dealers Six Weeks To Decide If They Want To Continue Selling EVs

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Pasting InsideEV article below


Ford Gives Dealers Six Weeks To
Decide If They Want To Continue
Selling EVs


Dealers are either all in on electrification or they're going to be left out.

Tom Moloughney

In what will certainly send shock waves across the industry, Ford dropped a bomb at its annual dealership meetings in Las Vegas this week. InsideEVs was one of only a handful of news outlets invited to get an early look at the new Model E dealership rules, which included a presentation from Ford CEO Jim Farley.

In short, Ford is telling its dealer network they have to invest, evolve, improve, and offer new services if they want to be a Model Edealership and sell electric vehicles. Model E is a new division that was created when Ford split the company into three arms: Ford Blue Oval, Ford Pro, and Ford Model e. All of Ford's fully electric vehicles now fall under the Model e umbrella, while plug-in hybrids and regular hybrids are part of Ford Blue Oval.

Farley talked plenty about Tesla, and how the startup electric vehicle manufacturer has roughly a $2,000 price advantage over Ford.

He saidthat Ford and its dealers need to, and have been, working to narrow that gap.
He explained how he believes that as Tesla scales up, it will be forced to change how it does business and its operations will begin to look more like traditional dealer networks. In fact, he's already seeing that in Tesla's operations in Norway.

With that, he also believes that Ford needs to change the way it sells electric vehicles, and the first major steps to that transformation are happening now.

Three Options

Ford is giving its dealers until October 31st of this year – less than two months – to make a decision that will have huge implications for the future of the franchise. The company is offering its dealers three options:

• Become a Model E Certified Elite dealership

• Become a Model E Certified dealership

• Discontinue selling Model E vehicles effective January 1st, 2024

At a minimum, Model E Elite dealers will need to install two high- powered DC fast chargers and a level 2 charging station, as well as offer at least one DC fast charger available for the public to use. Ford estimates the all-in cost for dealers to become Model e certified elite to be between $1.0 and $1.2 million, with as much as 90% of the cost attributed to the cost to purchase and install the required charging infrastructure.

Model E Certified dealers are only required to install one DC fastcharger, and it must be made available for public use. However, Model e dealers will have a hard cap on the number of EVs they are allowed to sell each year, and that number will be the same for all Model E shops, regardless of annual volume.
Ford told us that it hasn't decided exactly what that number will be, but it will be small and intended to only satisfy orders for the dealer's most loyal customers. Ford estimates the cost for dealers to become Model e certified will be about $500,000, again, with as much as 90% of the cost attributed to charging infrastructure.

We've been studying Tesla closely, especially with how their brand has scaled with units and operations in Norway and what we've noticed is that they have almost 1,200 employees now and they have very much dealer-like facilities and we think that's the direction they'll go as they scale their operations in the United States - Jim Farley, CEO, Ford Motor Company​

And finally, dealers have the option of not becoming Model E Certified at all. If they choose that route, they give up the right to sell any fully electric Ford vehicles for three years. At some point in 2025, they will have the opportunity to tell Ford that they wish to become a Model e certified or Elite-certified dealership, and provided they complete the requirements, they will be allowed to start selling EVs in January 2027.

If they do choose to opt-out of becoming a Model E Certified dealer now, there will be no opportunity of becoming one until 2027.
This first stage of Model E evolution will be in effect from January 1st, 2024, through December 31st, 2026. The decision dealerships make now will be in effect through 2026 and dealers cannot change theirModel e certification status until January 1st, 2027. All dealers will continue to be able to sell EVs until January 1st, 2024, when the new Model e rules begin.


Five Pillars

Ford explains that its Model E dealership strategy will be built upon five pillars:

• Training: Dealers will need to undergo extensive EV training on an ongoing basis

• Charging: Model e dealers must have adequate level 2 and DC fast charging, with at least one DC fast charger available to the public

• Set Pricing: Transparent, non-negotiable pricing available online

• Excellent physical experience: Model e dealers must deliver an excellent ownership experience, including complimentary pickup and drop off for vehicle service visits

• Develop digital experience: Invest in building a digital ownership experience for the future

No-Haggle Pricing, But Not Direct Sales

When Ford announced the creation of Ford Model E, some speculated that one of the purposes may be to try to implement a hybrid version of a direct sales model in which customers would order their EVs directly from Ford but take delivery from a local dealer.

That won't be the case. The dealer franchise laws are very clear, and Ford cannot sell vehicles to consumers directly even if they wanted to. The only reason EV upstarts like Tesla, Rivian, and Lucid are able to (and even these companies are banned from selling vehicles in some states) is because they don't have an existing network of dealerships, as Ford does.

But Ford believes its dealer network is a strength, not a weakness, they just need to improve the sales process and customer experience with electric vehicles, and that's exactly what Model e aims to do.

The new rules for Model e dealerships require dealers to post set prices for the electric vehicles online at Ford's website. Customers can view the set pricing, complete the purchase online, and even schedule home delivery. But ultimately, it's the dealer's decision what the set pricing will be for the vehicles, and there will likely be price variation from dealer to dealer. Customers will be able to cross-shop different local dealers' prices online, and then choose the one with the lowest set price. The dealers must honor the set pricing for every purchase, and Ford will be checking the purchase orders to make sure that happens.

This new system gives the customer the option of doing everything online and completely eliminates the need to visit the dealership. Of course, if the customer prefers to visit the dealership, kick the tires and complete the purchase agreement in person, they are still welcome to do so. However, it will be for the same price they could have purchased it online from the Ford.com website, the dealers cannot change the price once it's set.

Charging Is Key

A huge (and most expensive) part of the Model E certification is the requirement for dealers to provide DC fast chargers with a minimum output of 120 kW. The chargers must be readily accessible on the property and available to the public. This requirement was born from the fact that Ford knows that a major pain point for consumers transitioning to EVs is the concern over fast charging availability, especially for those that live in apartments and cannot charge at home.
Dealers will be able to tell customers that whenever they need to charge, wherever they are, they can find a Ford dealership nearby where they can plug in. That's because Ford currently has 2,991 dealerships in the US and 96% of Americans live within 25 miles of a Ford dealership, and 85% live within 10 miles. So basically, you're just about always close to a Ford dealer, and if they all install DC fast chargers, the Blue Oval Charging Network will have pins on the map just about everywhere.
The service providers that will assist Ford's dealers with EV charging infrastructure
Ford has also established relationships with three charging station installation providers; ABB, Entech, and AGI. These companies specialize in facilitating the installation of DC fast chargers, which can be quite complicated as well as expensive.

Depending on where the dealer is located, one of these companies will assist the dealer during the entire process, from filing the necessary permits to utility interconnection, to the actual installation of thestations and even making sure the dealer gets any available public funding available for EV charging infrastructure.

This is a very important component of the plan because installing high- powered DC fast chargers is a complicated process, one that most dealers will require assistance with. Ford also has programs in place to provide financing to its dealers for large capital improvements like this if the dealer needs financial assistance.

Bold New Start

We think Model E's new rules are a good start for the brand. Ford talked a good game at the meetings; everything was about building a better customer experience, offering the customer more options, evolving to meet a changing marketplace, everything we want to hear.

However, it will all come down to execution, as it always does. What will be the uptake from dealers? How competitive will the new no-haggle set prices be? The dealers are the ones setting the prices, so what if they all set prices above MSRP? How reliable will Ford's DC fast chargers be? Will Ford monitor the uptime of the units and force the dealers to quickly repair the chargers when they go offline?
There are still a lot of unknowns to this plan, but we give Ford credit for being the first existing OEM to attempt to improve its EV buying experience in such a significant way.
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Sirfun

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This is a no brainer. The dealer network and OEM's are business partners. Ford is spending Billions to get on the EV train. They are merely telling the dealers what their part of the bargain is, to join them in the EV business. If they don't want to ride that train, then get the F off!!
Of course, they have to put in charging at their own expense. That's how the partnerships work. Dealerships pay through the nose to maintain that relationship. That's also why Ford and all the OEM's never thought Tesla would survive. Tesla has to pay for EVERYTHING, and do all the work for infrastructure themselves. But they also reap the rewards, now that the initial growing pains are subsiding.
On their set pricing side, that's the price they set as the Max. price, and when you show interest they'll say that's just our starting price, come on down, and we'll talk. From there, they may, or may not be willing to negotiate down. You won't know until you talk to them.
 
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cvalue13

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On their set pricing side, that's the price they set as the Max. price, and when you show interest they'll say that's just our starting price, come on down, and we'll talk. From there, they may, or may not be willing to negotiate down. You won't know until you talk to them.
its a good question, but as I see it (error as it may be) the issue isn’t vehicle pricing, but instead everything else

for vehicle pricing, I think the intent here is that Ford has its vehicle builder online, the customer picks its dealer, then that builder spits out that dealers non-negotiable price - the customer completes the order online, and the price of the truck is written in stone. (With the Lightning, the process is already 90% this, except dealers can change price “on the hood” still.)

where the “problem” with pricing and dealer b.s. can remain, despite the vehicle price being non-negotiable, is at the level of F&I, third-party finance kickbacks, extended warranties, dealer add-ons, and - perhaps worse of all - trade in tomf*ckery.

in that case folks should still do what they should do now: show up with either cash or theird party financing pre-secured, say “no” to every offered add-on, and sell any “trade in” on open market (unless the tax advantage outweighs).

in all, I think Ford’s proposals above have been very much informed by Ford’s experience with the past 6 months of Lightning deliveries and dealer shenanigans. Dealers (a few) have been intentionally omitting ADMs on their Ford online order pages to keep out of Ford’s eye, then once the order is placed demanding an ADM from the customer. Dealers (several) have peppered eBay, their own sales websites, etc., with Lightnings appearing to be listed at MSRP - again, to keep out of Ford’s eye -to then only verbally over the phone never by email etc tell callers the ADM markup price.

Seeing these “gotcha” loopholes in action, I think Ford intends to try and close them for the price of the truck, but trade-ins, financing, etc., I assume will continue to the the Wild West.
 

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That's a very high price quoted for DC Fast chargers. It can't possible be true, unless Ford is buying them at "regular price" and then re-selling them to dealers for an exorbitant price...
 


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cvalue13

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That's a very high price quoted for DC Fast chargers. It can't possible be true, unless Ford is buying them at "regular price" and then re-selling them to dealers for an exorbitant price...
Yeah, for those reasons I took the quote to be inclusive of associated infra, etc., Ford would impose on dealers. Eg, needing dedicated spaces, reachable after-hours, service upgrades, etc.,

BTW the article doesn’t tie in the new, significant, tax rebates becoming “live” for corporate charging infrastructure installations in 2023, which can materially offset the dealer costs for chargers installations.

ford’s timing to push dealers to instal this charger infrastructure surely is in part based on capitalizing on the timing of these new tax credits. Ford couldn’t get them, but each dealer location can.
 

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It will require discipline from the dealers to keep a minimum price so they don't cut each others throat.

Or it will be Ford who will stroke the dealers to keep to RRP.. recommended retail price.


- Ford can decide who sells its vehicles, it has a legal right for its brand to be positioned in the market place.
- It can set dealers minimum purchase level

It can't force them into a price point. They will be treading a thin line; price fixing is illegal.

The legal wrangling will survive longer than the dealer network. Ford has to wind it down somehow.,

I feel for these poor dealers, they go about their life just like all of us. A lifetime of building falling around them.

They are walking towards a cliff edge. Some will drop out immediately, some in 2 years.
From there it will be counting down to the last one standing. Like Blockbuster Video.
 
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cvalue13

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I feel for these poor dealers, they go about their life just like all of us. A lifetime of building falling around them.
aside from the general background that dealers are making more now than ever in recent history:

In the lightning, for the first time anyone knows of, Ford has built in a 10% dealer profit so long as dealers follow certain rules.

that is, the lightning’s invoice and MSRP (which are ~identical) have almost nothing to do with an assured 10% profit to the dealers.

And about all the dealer has to do is receive and prep the vehicle, with it not sitting on the lot longer than a day before the customer - who ordered it entirely online - picks it up.

I’m not so sure that savvy dealers adjusting to the times aren’t instead loving every minute of it
 

charliemagpie

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In the lightning, for the first time anyone knows of, Ford has built in a 10% dealer profit so long as dealers follow certain rules.
I can't talk on this, I have no idea how dealership margins work ,or stockturns etc etc.

As you say, Ford has determined a net 10%, which should pay all bills and return at least 20% profit on investment to the operator. I don't need to understand the numbers. The answer is close enough right there. All Good.

The thing we miss is competition. Here we have a business who surcharges 10% extra Vrs competitors who don't.

My first car was a Ford XB, I owned a Maverick for ages. I love Ford, I think the Lightning looks great, they have done an amazing legacy job on it.

But Ford is not good enough to sustain its goodwill to get away with a 10% surcharge for any reasonable length of time.

Whichever way I look at it, the cliff edge is coming , its that very 10% that will push dealers over it.

They are literally farked.

BTW, Sandy Munroe even once said , in order to survive, Dealers should get into the rental business.
 


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cvalue13

cvalue13

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The thing we miss is competition. Here we have a business who surcharges 10% extra Vrs competitors who don't.
I guess I’m not agile enough to follow this through. better minds than me.

to me, there’s net profit, and there’s net profit. If Ford is keeping invoice and MSRP identical, but instead saying “look, we’ll give you 10% of net profit to behave as a customer interface, shipping, and service location” - it’s not as though “competitors” aren’t also paying for someone to do customer interface, shipping, service, etc.

that dealers are making a profit does not seem to in-and-of-itself indicate that there is a “surcharge” not otherwise still existing in competitors.

the question only seems to be is 10% a better, worse, or equal “surcharge”

Separate but relatedly: I’d be interested in knowledgeable Tesla folks weighing in on the references to Norway, Tesla there moving toward dealer models, or some such, referenced in the story
 

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Tesla has more than a $2,000 lead on Ford. I wonder, given the general attitude and behavior of legacy auto dealers, how many will decide to become e dealers. Since Ford must follow the dealership model they need a certain number of them to agree or else. The dealers might decide to take a wait and see approach (I.e., wait until 2027), in which case Ford could be gone and so are they. Time will tell.
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