by Jonathan Gitlin: Ford thinks its distribution model costs $2,000 more per car than Tesla’s…
Few Americans enjoyed the car-buying process even before supply chain chaos, and the chip shortage led dealerships to mark up inventory by thousands of dollars. But buying a Ford electric vehicle might be a lot less painful in the future, if Ford CEO Jim Farley gets his way. On Wednesday, Farley said that he wants the company’s EVs to be sold online-only, with no dealer markups or other price negotiations, according to the Detroit Free Press.
“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 pickup and delivery,” Farley said while speaking at a conference in New York.
One of Tesla’s most popular innovations was to eschew traditional dealerships remote and sell its products directly to customers. But traditional manufacturers like Ford are usually prohibited from selling their products directly to customers, a legacy of fears over vertical integration written into state laws during the early 20th century. As such, Ford’s franchised dealers will almost certainly still have a role to play.
“Then we have this opportunity to use our physical presence to outperform [competitors]. I think our dealers can do it. But the standards are going to be brutal. They’re going to be very different than they are today,” he said.
The move away from dealerships carrying extensive inventories of cars should save Ford money; the company says that its current distribution model adds around $2,000 in extra costs per car compared to Tesla. A third of that cost is tied up in inventory, and another third is spent on advertising.
“Our model is messed up. We spend $600 or $700 on the vehicle to promote it, and we spend nothing post-warranty on the customer experience. The problem is, on a parts business, which historically has been very profitable, we only get, maybe, only 10 or 20 percent of the customers come back to us,” he said.
He also doesn’t see the point in advertising a car that’s already sold out. “If you ever see Ford Motor Co. doing a Super Bowl ad on our electric vehicles, sell the stock,” he said.