Ford Will Challenge Dealers To Match Tesla’s Lower Selling Costs

Ford Motor Co Chief Executive Jim Farley will go to Las Vegas next week to roll the dice on a strategy to convince dealers to cut as much as $2,000 from the cost of delivering an electric vehicle to a customer.

Ford has told dealers that one key topic for the meetings will be a discussion of new agreements that would govern how dealers sell Ford’s expanding lineup of electric vehicles.

Farley told analysts in July that Ford needs to cut $2,000 a vehicle out of selling and distribution costs to be competitive with Tesla Inc and other electric vehicle startups that sell directly to consumers without franchised dealers.

About a third of those savings could come from what Farley called a “low inventory model,” where customers order a vehicle and Ford ships it to the customer, rather than stocking vehicles on dealer lots for weeks or months.

“We think that’s about — worth maybe $600, $700 in our system,” Farley told analysts. Tesla can also adjust prices rapidly on its website, and keep most of the gain from a price increase.

Ford declined to comment other than to say “we are excited to meet next week with our North America dealers to grow and win together.”

Dealers said they expect Ford to outline minimum investments for charging stations and other equipment to support electric vehicle customers.

A key question will be how quickly dealers will be required to install chargers, which dealers said can cost as much as $500,000.

“The manufacturers so far have let us scale into it and I think Ford will hopefully do the same thing. You just can’t say, ‘Listen, we’re going to sell 2 million electric cars five years from now and we expect you to put in five superchargers,'” said Rhett Ricart, owner of Ricart Ford, a large dealership in Columbus, Ohio.

Tesla’s success at selling electric vehicles without franchised dealers is putting pressure on all established automakers to overhaul their retail networks.

A shift by Ford to a Tesla-style build to order system could come with caps on the profit margins dealers can earn on a new vehicle sale, some dealers said.

“I see dealer margins still being very competitive, but they are going to shift,” Farley said in July. Ford intends to put more emphasis on selling products and services after the initial vehicle sale, he said.

Dealers said state franchise laws could give dealers leverage to resist efforts by Ford to set fixed prices or fixed fees for delivering electric vehicles.

Rival General Motors Co last week said it would offer buyouts to U.S. Buick dealers who did not want to make required investments as the brand shifted to an all-electric lineup. GM has already spent $274 million to reduce the ranks of U.S. Cadillac dealers.

Josh Sloan, the general manager who oversees two Ford stores and one Lincoln store for Michigan’s LaFontaine Automotive Group, said his company is prepared to spend what it takes to shift to electric vehicles.

“I was surprised there weren’t higher standards from Ford sooner,” Sloan said. “We’re moving into this really fast. If you’re not all-in, you’re going to lose.”