It's no secret that the current market for new automobiles has rapidly descended into chaos amid the ongoing COVID-19 pandemic. Low inventory has spurred the creation of steep markups and these practices (among others) have spurred some companies to act with Ford confirming that it will enact new rules to address these issues on the EV side.
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The new rules have been in the works for months and will formally be rolled out in September, with Ford CEO Jim Farley confirming that these rules will create standards that are radically different than existing ones that are already in place. As expected these rules have ruffled the feathers of Ford's dealership network with some dealerships claiming that Ford's actions are potentially threatening the traditional franchise model that has been the default sales avenue for many decades.
Zero Inventory And Stronger Online Sales Define New Era
A key portion of Ford's plans center around two major goals with the company confirming that it not only wants dealerships to have zero inventory, but that all sales will be done online with the buildings themselves focusing more on service and repair. The idea of zero inventory is a jarring contradiction to what dealerships are known for with acres of glistening metal lined up perfectly in rows for all comers to see.
“I think our dealers can do it. But the standards are going to be brutal. They’re going to be very different than today,” Mr. Farley said at the time.
Farley's comments came during the Bernstein Investor Conference but while Farley and Ford are confident that their plan will go off without a hitch, dealerships are singing a very different tune. In interviews with the Wall Street Journal, multiple dealer reps expressed their concerns about Farley's recent statements and were quick to remind the publication that dealerships play a key role in the broader buying experience. A few of them went further in their remarks and confirmed that their attorneys will defend them in court pointing out that the franchise laws in many states are concrete, and Ford's actions might run afoul of those laws.
Ford Attempting To Smooth Things Over
Ford has noticed some of the pushback and has begun trying to work things out with its dealers with Farley himself holding four hours of group meetings with over 300 dealer owners to address the company's plans. These meetings were reported to have raised morale, but it also shows the figurative pickle Ford is in when it comes to pleasing customers, dealers, and investors.
The company is committed to following current franchise laws according to a statement by a Ford rep and it appears that we will not see anything come to the point of straight direct sales. Instead it appears that Ford is trying to create a no-haggle environment where prices are not negotiated and are instead set in maintaining a commitment with a customer.
While Ford is committed to rolling out its plan in September, asking the dealership arm to rapidly change formats after years of traditional franchise sales in a pre-pandemic era will not be an easy feat especially since it will require dealerships to revamp key aspects of the selling process while also pitching processes and redundancies that they might have taken for granted.
Carl Malek has been an automotive journalist for over 10 years. In addition to his specialization with Ford, he grew up in a General Motors household and is extensively familiar with their products too. Contact Carl on Twitter at @CarlMalek3, on Instagram and Facebook for automotive news to send news tips.
Image Credit: Ford Motor Company
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The laws protecting
The laws protecting dealerships keep the sales model for new vehicles in the 1950s. There's good reason that Tesla has become the most profitable automaker in the world, and it's not just bc they sell striclty EVs. Tesla's ability to sell directly to customers is significant as well. Dealers are really shooting themselves in the foot with their greedy markups. In spite of dealers' powerful lobby & money that has kept archaic laws in place much longer than is healthy for the industry, mfrs like Ford and some consumers aren't putting up with it any more, and things are slowly changing for the better (unless your in the car dealership business). But as the article outlined, the dealers are going to fight to hold on to their ancient ways, and it's going to take time for any changes. In the meantime, consumers & mfrs are stuck in the past while all other industries have realized it's the 2020s and there are better sales & distribution models than the 1950s auto industry sales model.
Why would I buy a car on line
Why would I buy a car on line knowing that I can’t return it if I don’t like it? Recently I rented a Tesla for 2 months. I didn’t like the car enough to want to purchase one. And, my 6’6” tall husband did not comfortably fit in the Model 3 I chose. Is Ford going to take back every vehicle I drive off the lot if I don’t like it after driving for a month or so? Maybe the wishful executives need to get off their soapbox and pretend for one day they are a dealership or average consumer. And while they are at it, reduce the sticker price on all vehicles, including trucks, by $15,000 to start, which may affect their salaries but oh well, and then maybe dealerships won’t have as many acres of vehicles hanging around.
The cost of cars won't drop
The cost of cars won't drop when the "greedy" dealerships get cut out. Tesla is raising prices even as their costs fall. Market demand determines what a car will sell for. Any profits the dealers made on cars now goes to the manufacturer.I have a Tesla, but I don't like the fact there's not a Ford or Honda dealer that I can just go to if I have a problem.