Ford Motor Company is reportedly planning to make its electric vehicles cheaper by as much as $2,000 by trying to convince dealers to reduce the costs of delivering EVs to customers.
Jim Farley, Ford’s chief executive officer, is in Las Vegas this week to talk to dealers about the plans, Reuters reports. The news agency notes that 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.
According to the report, the carmaker has told dealers that one key topic for the meetings will be a discussion of new agreements that would regulate how dealers sell the company’s increasing lineup of EVs. 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.
According to Farley, about a third of those savings—between $600 and $700—would come from what he called a “low inventory model,” where customers order a vehicle and Ford ships it to the customer. This would help Ford avoid stocking vehicles on dealer lots for weeks or months.
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. For example, installing a charger can cost as much as $500,000, so dealers want to know how quickly they will be required to deploy chargers.
Other dealers are worried that a shift by Ford to a Tesla-style build to order system could come with caps on the profit margins they can earn on a new vehicle sale. 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.
For example, General Motors offered buyouts to Cadillac dealers that did not want to make required investments for electrification, and recently announced it will do the same with Buick dealers. GM has already spent $274 million to reduce the number of US Cadillac dealers.
In July, Jim Farley said dealer margins were still very competitive, but noted that “they are going to shift.” The executive added that Ford intends to put more emphasis on selling products and services after the initial vehicle sale.