Ford CEO Farley challenges dealers to cut EV cost to customers by $2,000

[Administrator]

https://www.autoblog.com/2022/09/09/ford-jim-farley-dealers-las-vegas-customer-ev-cost-cuts/

Ford's Farley will challenge dealers to cut EV cost to customers by $2,000
It needs to happen to stay competitive with Tesla, but some dealers may balk

September 9, 2022. DETROIT — 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.

Full article:
https://www.autoblog.com/2022/09/09/ford-jim-farley-dealers-las-vegas-customer-ev-cost-cuts/

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[Blue highway]

waiting for the headline... Dealers challenge Ford to reduce costs by $2,000

 

[ShaggySS]

...this after Ford substantially raises the price of EV's...

 

[ARK]

...this after Ford substantially raises the price of EV's...

We don't know (I don't think yet anyway) what Ford did with the price it charges to dealers. Is that the invoice price? If the invoice price didn't raise by nearly as much as the MSRP, Ford helped themselves and helped the dealers by making the ADM basically an 'official' part of the price for the dealer to capture.

 

[ShaggySS]

We don't know (I don't think yet anyway) what Ford did with the price it charges to dealers. Is that the invoice price? If the invoice price didn't raise by nearly as much as the MSRP, Ford helped themselves and helped the dealers by making the ADM basically an 'official' part of the price for the dealer to capture.

I HATE HATE HATE sales games. If this is what they did shame on Ford. That is not how you beat Tesla.

 

[RickMachE]

We don't know (I don't think yet anyway) what Ford did with the price it charges to dealers. Is that the invoice price? If the invoice price didn't raise by nearly as much as the MSRP, Ford helped themselves and helped the dealers by making the ADM basically an 'official' part of the price for the dealer to capture.

I HATE HATE HATE sales games. If this is what they did shame on Ford. That is not how you beat Tesla.

Mach-E and Lightning MSRP = Invoice. But I'm sure there is something sinister afoot.

 

[Blue highway]

FWIW, from a top down view of the industry, I agree with Farley on this.

Distribution and sales is high cost low value. To compete with direct sellers, costs have to come out because too many people are getting paid for little or no value add between when the car leaves the factory and when the buyer drives it away.

One of things I think will happen is that over the next decade, there will be a lot less dealers. Probably half will go away as we transition to EV's.

From a service standpoint, dealers can be a plus, but I don't need 12 within a 30 minute drive as is the case now.

 

[Jimrpa]

There are a bunch of different “numbers” here, but generally speaking, as consumers, we only see the “MSRP” (sure, some may see the “dealer invoice” but even then, there’s all kinds of arcane stuff like “dealer holdback”, “sales incentives”, “financing” and so on, so I think it’s pretty tough to say how much a dealer actually paid for that 2023 blue Fiesta SE sitting there on the lot.) A factory order is a bit more straightforward, and perhaps that’s where Farley is going - stop jerking people around with “surprises” at delivery and just tell them at the time the order is placed “here’s how much it’s going to cost, walking out the door, when the vehicle’s delivered and no, we aren’t going to surprise you with the $10,000 mandatory undercoating at delivery”. Just my thought here.

 

[Jimrpa]

We don't know (I don't think yet anyway) what Ford did with the price it charges to dealers. Is that the invoice price? If the invoice price didn't raise by nearly as much as the MSRP, Ford helped themselves and helped the dealers by making the ADM basically an 'official' part of the price for the dealer to capture.

This is kind of what I think may have happened to help lessen the dealers pain as they move away from their old model to a “here’s the all in price” model.

 

[Jimrpa]

FWIW, from a top down view of the industry, I agree with Farley on this.

Distribution and sales is high cost low value. To compete with direct sellers, costs have to come out because too many people are getting paid for little or no value add between when the car leaves the factory and when the buyer drives it away.

One of things I think will happen is that over the next decade, there will be a lot less dealers. Probably half will go away as we transition to EV's.

From a service standpoint, dealers can be a plus, but I don't need 12 within a 30 minute drive as is the case now.

I do want a personal relationship with that dealer though so that, if I have a complex service issue, I can count on them.

 

[RickMachE]

I do want a personal relationship with that dealer though so that, if I have a complex service issue, I can count on them.

Couldn't agree more. I never want to have to deal with corporate directly if I don't have to.

 

[ARK]

Mach-E and Lightning MSRP = Invoice. But I'm sure there is something sinister afoot.

Do we know if that's continuing for 2023?

I'll just say as a general matter, if Ford is now pricing the Mach-E like the hit it is, and they are pricing it to make serious money because they can, I'd be surprised if they are expecting dealers to tighten their belts on Mach-E sales while Ford prints money with 2023 pricing.

 

[RickMachE]

Do we know if that's continuing for 2023?

I'll just say as a general matter, if Ford is now pricing the Mach-E like the hit it is, and they are pricing it to make serious money because they can, I'd be surprised if they are expecting dealers to tighten their belts on Mach-E sales while Ford prints money with 2023 pricing.

I believe they're printing money with the Lightnings. Lightning invoice = msrp. Profits dried up on Mach-E due to rising costs, so they raised prices to cover it. Dealers aren't going to make another dime on a 2023 over a 2022 or 2021 I believe. That's why the costs have to come down, because the profit in the vehicle isn't there for the dealers right now, or the salespeople.

 

[awp0]

Maybe he's firing his first shot toward selling direct. Something like: "Hey dealers, we need to save $2k on distribution. Help us solve the problem or we'll solve it by going direct to consumer".

 

[timbop]

...this after Ford substantially raises the price of EV's...

Perhaps you are aware that EV battery prices have increased for the first time in a decade, and in fact substantially so? Tesla has been raising prices every few months for a long time now, so it is not just Ford that is increasing prices to cover increasing battery costs. The cause is more demand than anticipated, and thus the raw materials are scarcer than needed - driving prices up. The law of supply and demand is sometimes inconvenient. The fact that we are also facing the steepest inflation in a long time should also be well known at this point.

We don't know (I don't think yet anyway) what Ford did with the price it charges to dealers. Is that the invoice price? If the invoice price didn't raise by nearly as much as the MSRP, Ford helped themselves and helped the dealers by making the ADM basically an 'official' part of the price for the dealer to capture.

Yes, Ford raised prices to consumers. But apparently less than necessary, which is why they are trying to pass on the $2000 pain to dealers - many of whom are also following the law of supply and demand to charge over MSRP.

Whether Ford is successful is unclear as we don't know how much leverage they really have. Those costs will have to come from somewhere, though.

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