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"Prepare for a brutal future" Farley Tells Dealers


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9 hours ago, rperez817 said:

 

 

I agree with you jasonj80 and ice-capades. In an interview with Car and Driver, a Ford spokesman spun it as a way to better "manage battery recycling and materials", but as you pointed out I think there's much more than that. Ford Won't Let You Buy Your Leased EV When the Contract Ends (caranddriver.com)

 

 

 

What?  Batteries better last more than 3 years.  I could see recycling batteries and materials if these were 10-15 year old cars, but not 39 month returns.  I call BS on that one.  Ford’s betting the value at trade in will be greater than the residual and wants to capture that profit.

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WSJ reported that Jim Farley met with 300 Ford dealers to discuss the rules Ford is establishing for BEV sales, based on zero new car inventory at dealers and a 100% online sales approach. https://www.wsj.com/articles/fords-talk-of-new-ev-selling-rules-rattles-some-dealers-11656504003

 

This week, Mr. Farley held four hours of group meetings with a total of around 300 dealers to field questions and discuss their concerns about the future of EV sales, said Tim Hovik, chairman of the Ford National Dealer Council. The president and head of sales from Ford’s gas-engine division were also present.

Mr. Farley raised morale by emphasizing that dealers are key to Ford’s success, Mr. Hovik said, and answered questions about the comments he made at the Bernstein conference.

Mr. Farley’s statements about having zero inventory at dealers and sales being all online sounded to some observers like the direct-sales model employed by Tesla Inc. and other EV startups. Mr. Farley has said Tesla’s direct-sales model saves around $2,000 per car.

 

Some dealers get it, and understand the importance of a totally different approach when it comes to selling BEV. Quote below is from Rhett Ricart, a dealership owner in Ohio.

Some Ford dealers say Mr. Farley is mainly responding to changing demands from customers as the car-selling environment grows more competitive in the EV age.

“He’s preparing the class for a tough test. He’s not making the test,” Mr. Ricart said. “The test is provided by our customers and by the business environment.”

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5 hours ago, rperez817 said:

WSJ reported that Jim Farley met with 300 Ford dealers to discuss the rules Ford is establishing for BEV sales, based on zero new car inventory at dealers and a 100% online sales approach. https://www.wsj.com/articles/fords-talk-of-new-ev-selling-rules-rattles-some-dealers-11656504003

 

 

 

 

Some dealers get it, and understand the importance of a totally different approach when it comes to selling BEV. Quote below is from Rhett Ricart, a dealership owner in Ohio.

 

 

Yes, but it shouldn’t be only for BEV.  The way we buy goods has changed over the years, but the franchise laws and car buying experience hasn’t caught up.  Saving $2000 per vehicle is a huge cost savings.  Not getting that scale of savings by removing some lighting and chrome trim.  I’m all for it. 

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11 hours ago, slemke said:

Yes, but it shouldn’t be only for BEV.  The way we buy goods has changed over the years, but the franchise laws and car buying experience hasn’t caught up.  Saving $2000 per vehicle is a huge cost savings.  Not getting that scale of savings by removing some lighting and chrome trim.  I’m all for it. 


It will eventually apply to ICE as well.  It’s just an easier sell for BEVs due to limited volume and limited batteries and the unique things that dealers have to do.

 

My guess is Google is developing a new integrated ordering and tracking system for Model E that will later be adapted to ICE.

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  • 2 months later...

@ice-capades @Deanh Do you know of any dealership colleagues and friends who are attending the Ford North America Dealer Meeting in Las Vegas this week? Inside EV released an article today summarizing some points of the new business models for Ford dealerships Jim Farley intends to discuss at the meeting. Ford CEO Out To Convince Dealers To Offer Tesla-Like Selling Costs (insideevs.com)

 

Highlights.

  • Tesla's success at selling EVs without franchised dealers is putting pressure on legacy automakers to overhaul their retail networks, and Ford makes no exception.
  • In July, Farley told analysts that Ford needs to cut $2,000 a vehicle out of selling and distribution costs to be competitive with Tesla and other EV startups that sell directly to customers without franchised dealers.
  • The automaker did not comment on Farley's reported plans to talk to dealers about reducing selling and distribution costs but said "we are excited to meet next week with our North America dealers to grow and win together."
  • Some dealers talked to Reuters and said they expect Ford to outline minimum investments for charging stations and other equipment to support EV customers.
  • Should Ford aim to set fixed prices or fixed fees for delivering electric vehicles, dealers say state franchise laws could give them leverage to resist those efforts
  • Ford intends to put more emphasis on selling products and services after the initial vehicle sale.
Edited by rperez817
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23 minutes ago, rperez817 said:

@ice-capades @Deanh Do you know of any dealership colleagues and friends who are attending the Ford North America Dealer Meeting in Las Vegas this week? Inside EV released an article today summarizing some points of the new business models for Ford dealerships Jim Farley intends to discuss at the meeting. Ford CEO Out To Convince Dealers To Offer Tesla-Like Selling Costs (insideevs.com)

 

Highlights.

  • Tesla's success at selling EVs without franchised dealers is putting pressure on legacy automakers to overhaul their retail networks, and Ford makes no exception.
  • In July, Farley told analysts that Ford needs to cut $2,000 a vehicle out of selling and distribution costs to be competitive with Tesla and other EV startups that sell directly to customers without franchised dealers.
  • The automaker did not comment on Farley's reported plans to talk to dealers about reducing selling and distribution costs but said "we are excited to meet next week with our North America dealers to grow and win together."
  • Some dealers talked to Reuters and said they expect Ford to outline minimum investments for charging stations and other equipment to support EV customers.
  • Should Ford aim to set fixed prices or fixed fees for delivering electric vehicles, dealers say state franchise laws could give them leverage to resist those efforts
  • Ford intends to put more emphasis on selling products and services after the initial vehicle sale.

 

I haven't seen or heard any details about Farley's meeting in Las Vegas and who's actually attending. The media reports give the impression that all Ford Dealers are invited to attend but I wouldn't be surprised if this meeting is for selected, invited Dealers only. Usually, such as what used to be the annual new vehicle introduction meeting in Las Vegas, the meetings and presentations were set up on a schedule with Dealers from different regions attending on different days and a registration system set up in advance for those attending. For the annual "Intro" meetings, each group attended for meetings in presentations over a 1.5-2 day period with the whole process talking about a week.  It all depends on how the presentation is planned. If it's a simple presentation plus a question and answer session, Ford could theoretically host everyone in one session. However, I doubt that the case.

 

I just went through the FMC Dealer portal site and couldn't find any reference to the meetings. I'll try to send a note later to our GM/VP to find out if he and/or the Dealer Principal are headed to Vegas.  

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  • ice-capades changed the title to "Prepare for a brutal future" Farley Tells Dealers
31 minutes ago, 7Mary3 said:

I wonder if part of the reason for separating 'Ford Blue' from 'Ford E' has to do with dealer franchise agreements.  I have heard rumors that dealers have to choose one or the other.


That isn’t true that dealers have to choose and both are Ford Motor Company so the franchise agreement is the same.  I think they’re using the separate EV certification process to circumvent some of the existing rules and relying on dealers to cooperate voluntarily on the rest.

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https://www.autoblog.com/2022/09/14/ford-dealers-ev-sales-fixed-no-haggle-pricing/
 

 The Blue Oval issued a warning at its annual dealer conference, telling franchisees that they have until the end of October to decide whether to commit to fixed, no haggle pricing or be cut out of selling EVs.

Ford is far from the only auto brand watching its dealers make up their own pricing, but it’s been one of the quickest to act on the issue. Earlier this year, the automaker split its business operations, with one part of the company focusing solely on electric vehicles and powertrain development and the other continuing Ford’s gas vehicle development. If dealers want to sell EVs, they’ll have to opt into the rules for Ford Model E (the brand’s electric business arm) — one of which is a commitment to transparent, no-haggle pricing.

Once they’ve agreed to the terms and conditions, Ford dealers become Model E Certified. The automaker views this as an opportunity to push more of its network toward a model that Tesla and other startups adopted. Many younger buyers favor direct sales, as it limits the in-person time required to buy a car and makes the purchase process easier for many.

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33 minutes ago, GearheadGrrrl said:

This may not play well with the smaller dealers who have just made substantial investments to service electric cars and are now being told they need to make even more investments to keep the electric car franchise.


I don’t see any new investments required.

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1 hour ago, rmc523 said:

https://www.autoblog.com/2022/09/14/ford-dealers-ev-sales-fixed-no-haggle-pricing/
 

 The Blue Oval issued a warning at its annual dealer conference, telling franchisees that they have until the end of October to decide whether to commit to fixed, no haggle pricing or be cut out of selling EVs.

Ford is far from the only auto brand watching its dealers make up their own pricing, but it’s been one of the quickest to act on the issue. Earlier this year, the automaker split its business operations, with one part of the company focusing solely on electric vehicles and powertrain development and the other continuing Ford’s gas vehicle development. If dealers want to sell EVs, they’ll have to opt into the rules for Ford Model E (the brand’s electric business arm) — one of which is a commitment to transparent, no-haggle pricing.

Once they’ve agreed to the terms and conditions, Ford dealers become Model E Certified. The automaker views this as an opportunity to push more of its network toward a model that Tesla and other startups adopted. Many younger buyers favor direct sales, as it limits the in-person time required to buy a car and makes the purchase process easier for many.


And this is how they’re getting around the franchise laws - voluntary agreement.

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54 minutes ago, rperez817 said:

 

Maybe GearheadGrrl is referring to revamping operations associated with the commitment to transparent, no-haggle pricing. That's not without cost for a dealership that didn't have that kind of sales model in the past.


There is no cost for saying the price is MSRP.  If anything it’s a cost saving.

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20 hours ago, akirby said:


I don’t see any new investments required.

 

Ford Dealers have until the end of October to decide on committing to the Model E BEV vehicles. Minimum investment is $500,000 for the BEV certification or $1,200,000 for the Elite certification with additional charger requirements and allocation benefits. Most of the new investments will have to be paid by the end of December. Dealers not committing to the BEV program will have to wait until 2027 for the next opportunity to opt in.

 

When I have time, I'll have to look at more details regarding the statements regarding fixed, no haggle pricing for BEV's. For some reason, if I remember correctly, there was something about BEV selling prices that may give Dealers a way around the pricing policy.   

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3 hours ago, akirby said:

There is no cost for saying the price is MSRP.  If anything it’s a cost saving.

 

Over time, I agree it's a cost saving. But for a dealership that uses the "haggle, hassle, and wear down the customer" sales model, there will be costs (probably significant) initially to implement new policies, systems, training, and personnel supporting Farley's vision of transparent, no-haggle pricing for Ford BEV customers.

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1 hour ago, rperez817 said:

 

Over time, I agree it's a cost saving. But for a dealership that uses the "haggle, hassle, and wear down the customer" sales model, there will be costs (probably significant) initially to implement new policies, systems, training, and personnel supporting Farley's vision of transparent, no-haggle pricing for Ford BEV customers.


Here’s the cost.

 

Hey stop haggling and charge MSRP.

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27 minutes ago, GearheadGrrrl said:

I was thinking of a couple low volume rural dealers near me who already made a big investment to sell and service the Mach-E, F150 Lightning, and E-Transit. Asking them to spend and probably borrow another half million or million $$$ may be more investment then they and their bankers can make.


If they’re already certified to sell those then they probably don’t have to do anything else at this point.

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1 hour ago, akirby said:


Here’s the cost.

 

Hey stop haggling and charge MSRP.

 

Which is a substantial cost to old-fashioned Ford dealerships as mentioned earlier. Revamped operations management shifting away from the "haggle, hassle, and wear down the customer" model to the "Hey stop haggling and charge MSRP" model is going to be neither easy nor inexpensive for those dealerships. 

Edited by rperez817
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Behind the current thinking from Ford is Jim Farley’s belief that the switch to BEVs is going quicker than everyone expects. Now whether this is true or not or whether Ford is being swept up in its own self belief is something that only time will tell.
 

Ford still needs the profits of Ford blue to cover the costs of Model E until it becomes freestanding and profitable, that’s still years away so current statements to dealerships pushing upgrades to sell BEVs I think is a bit premature. Ford still needs to show its ability to deliver more than just handfuls of product. I think Farley is trying to move too fast with upgrading dealerships and it could backfire on him badly. Ford is more or less obliged to fix its supply problems first before trying to tie down dealers in long term agreements.

Edited by jpd80
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2 hours ago, jpd80 said:

Behind the current thinking from Ford is Jim Farley’s belief that the switch to BEVs is going quicker than everyone expects. Now whether this is true or not or whether Ford is being swept up in its own self belief is something that only time will tell.

 

It's difficult to assess the true market demand overall for EV's because supply is extremely constrained right now due to all the well known issues with the supply chain. The constraint on vehicle supply industry wide might very well be misleading the OEM leaders into believing that demand is higher than it will be when supply is plentiful (whenever that may be) and all the current players in the EV space are truly able to open the spigots with supply. 

 

That said, it's hard to blame Farley for moving in the direction he's chosen, given that all indicators are very favorable for demand for Ford's EV products. I'm curious to see how MME demand reacts to the significant price increases announced for the 2023 model. If demand remains high and inventory does not build (recall the goal of producing 250,000 MMEs in 2023) than that would presumably be a pretty strong indicator of demand, I would think. Time will tell.

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