Car manufacturer The Ford Motor Company plans to change how it will sell electric vehicles. The changes have alarmed some dealers in the traditional franchise model.
Ford CEO Jim Farley suggested at the Bernstein Strategic Decisions Conference on June 1 that the company wants to move to a 100 percent online sales system for electric vehicles, according to TechCrunch and the Wall Street Journal.
Farley said at the conference that Ford dealers will have zero inventory going forward, TechCrunch reported. Instead, customers will order their vehicles directly from the manufacturer and have them available for remote pickup and delivery.
“Their business will change a lot,” Farley said, according to the outlet. “There will be a lot of winners and losers, and I believe, consolidation.”
“We’ve got to go to a non-negotiated price. We’ve got to go 100% online so that the inventory goes directly to the customer with 100% remote pickup and delivery,” Farley further stated at the conference, TechCrunch reported.
The Wall Street Journal reported that such changes had been alluded to by other Ford executives in recent months. The updated EV sales plan is set to be released in September, according to the outlet.
Farley spoke with around 300 dealers this week to discuss their concerns over the new electric vehicle sales model Farley talked about at the conference, according to Ford National Dealer Council chairman Tim Hovik, the Wall Street Journal reported.
“We are going to create a better experience for EV customers—shopping, buying and especially the ownership experience—with our dealers. It will require change, and we’ll do it together,” a Ford spokesman told the Wall Street Journal.
Thanks to massive lobbying efforts, car dealers enjoy protections in all 50 states that guarantee their role as a middleman between a car buyer and the manufacturer, preventing companies from directly selling vehicles to consumers.
Should states repeal protection for dealers?
“Virtually all states require auto manufacturers to sell new vehicles through local franchised dealers, protect dealers from competition in Relevant Market Areas (RMAs), and terminate franchises with existing dealers only after proving they have a ‘good cause’ to do so,” a 2015 policy brief from the Mercatus Center at George Mason University stated.
“These state laws harm consumers by insulating dealers from competition and forestalling experimentation with new business models for auto retailing in the twenty-first century,” the brief said.
Despite the existence of such laws, companies like Tesla have managed to circumvent dealership laws in many states by selling online to the customer and having their showrooms function strictly as galleries where customers can see the products but not buy them on-site.
Dealership owners speaking to the Wall Street Journal on the changes at Ford said that dealers have an important role in working with customers on their car purchases, such as offering them servicing, repair and education.
According to the dealership owners and their lawyers, the franchise protection laws in several states could make it difficult for Ford to regulate vehicle prices.
“They’re caught in between Wall Street and Main Street,” Rhett Ricart, the CEO of an Ohio Ford dealership chain told the Wall Street Journal. “His intentions are to motivate dealers to change, to survive.”
Missouri-based Jim Butler Auto Group president Brad Sowers said that the plans would reduce dealers’ importance by relegating them to the role of a delivery arm.
“When things are bad, they rely on us to make them decent. When things are great, then it’s easy to say ‘we don’t need them,’” Sowers told the Wall Street Journal.
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