Ford herds retailing into EV future

During deliberations over the evolution of Ford Motor Co.'s franchise dealership model, its retailers secured a big win: choice.

The automaker wants its dealers to invest heavily in battery-electric vehicles and redefine how they sell those products as it seeks an edge over Tesla and other newcomers that sell directly from factory to consumer. After months of meetings with its dealer council, including breakout discussions with rural dealers, the two sides struck a compromise that Ford laid out to dealers who gathered in Las Vegas last week.

Getting the right to sell Ford EVs beyond next year won't be cheap — a seven-figure investment in many cases. But it will be optional.

Anyone not ready to fully commit to electrification can gain the ability to sell a couple of EVs a month by spending less money upfront, an alternative devised by the dealer council that the company agreed to adopt. Those who aren't ready to invest at all can continue to sell internal combustion vehicles for the foreseeable future.

Even as it calls for change, Ford hopes to continue making money and winning over customers with new gasoline-powered offerings such as the seventh-generation Mustang revealed last week in Detroit. Ford showed that it's still willing to flex its internal combustion muscles with the surprise announcement of a new Mustang performance series called Dark Horse.

"With everybody else I look at, it's a trade-off," Tim Hovik, chairman of Ford's National Dealer Council, told reporters in Las Vegas. "If you're going to build more of one, you'll build less of the other. To my knowledge, we're the only company that's come out in a position to grow our ICE engines as well as our BEVs at the same time."

Ford is positioning EVs as one of three subsets of its products that dealers can sell, along with combustion vehicles that fall under the Ford Blue division and commercial vehicles branded as Ford Pro. CEO Jim Farley created Ford Pro last year and separated the company into Ford Blue and Model e — for EVs — in March.

He says the stakes couldn't be higher.

"The main message to the dealers, which I've never said before because I never believed it was true, is that you could be the most valuable franchise in the industry," said Farley, who oversees the Model e division himself. "We're growing all three businesses and managing them uniquely."

Ford dealers have until Oct. 31 to choose one of two EV certification tiers that require different levels of investment in fast chargers and staff training. Those who opt out of both will be limited to selling internal combustion vehicles and hybrids.

EV dealers must sell the products at nonnegotiable prices, and those who choose the lower-priced certification tier won't be allowed to carry them in inventory, instead having customers order exactly what they want for later delivery.

Dealers who choose the highest tier — Model e Certified Elite — will be asked to invest $900,000 initially. Most of that will go toward installing two DC fast chargers, at least one of which must be public-facing. They likely will have to invest $300,000 more, and add a third fast charger, by 2026, bringing the total cost to $1.2 million. Certified Elite dealers will carry limited stock and have demo models, Ford said, but will be able to sell an unlimited amount of EVs.

The lower tier — Model e Certified — will require a $500,000 investment that will mostly go toward installing one public-facing fast charger. Those dealers will be allowed to sell no more than 25 EVs per year, according to two people who attended the meeting. They also will not carry inventory or have demo vehicles available, Ford said.

Ford originally did not envision a lower tier that could sell EVs, even in a limited capacity, executives said. But they added the option following discussions with dealers.
"We've had a significant amount of input," Hovik said.
Executives said the costs for each tier could change based on potential federal or local incentives to install EV chargers. It's partnering with three consulting companies to help dealers install the equipment.

Those who attended the meeting said Ford promised that allocation of EVs won't be heavily skewed to states with zero-emissions regulations but rather will be spread more evenly across the country.

Ford rolled out the new standards to dealers in Las Vegas in what some who attended described as an occasionally combative meeting. The concerns stemmed mostly from small-market dealers worried about the size of the investment, even as executives attempted to reassure them they could remain successful selling only gasoline vehicles.
Each certification will be effective from Jan. 1, 2024, until the end of 2026. Ford said dealers who opt out of becoming EV-certified for now will have another opportunity to buy in starting in 2027. It does not expect to force any dealers to do so at that time, either.

"We don't want to rush dealers into being a Model e dealer before their market or they are ready to," Farley said.

Ford said each of its 3,000 U.S. dealers theoretically could choose to become Certified Elite. Farley declined to say how many he wants to opt in.

"We want people to take on these standards that can be profitable in executing them," he said. "It will not be good for the dealers or the company if people take on these standards and they don't get a return on their investment. We're not so excited or dogmatic that we want a certain number of people to take it that we'd look past the financial viability of it. That'd be a really bad move for us."

Sam Pack, CEO of Sam Pack Auto Group in Texas, said he plans to have each of his four Ford dealerships become Certified Elite.

"The message I heard was one of optimism," Pack said. "Yes, there's a lot of questions that have not been answered. But we'll work through those. This is a learning journey."

Marty Duncan, owner of Jerry Duncan Ford in St. Harriman, Tenn., said if he opts in, it will be at the lower-priced tier.

"I'm not sure yet," he said. "I'll look at being certified in the first round, but I'll definitely do it in the second round."

The duality of Ford's ICE and EV approach was on display last week, when the automaker took dealers to the Las Vegas Motor Speedway so they could race in Mustang Mach-E GTs and F-150 Lightnings and ride shotgun with professional drivers who jumped Bronco Raptors over a dirt hill on a closed course.

Across the country in Detroit, Ford hosted an outdoor party down the street from the auto show for more than 1,000 Mustang enthusiasts as it revealed the 2024 pony car. Ford is sticking with gasoline engines for the Mustang, including a manual V-8, even as rivals plan to electrify their sports cars.

"People have asked me, will this be your last internal combustion Mustang? The answer is: We'll see," Executive Chair Bill Ford told reporters following the reveal. "The customers will let us know when that day will come. Personally, that day will come with a tear in my eye."

Farley said Dark Horse — the first new Mustang performance series in 21 years — is the type of offering Ford plans to introduce as it focuses its combustion products on "families" of vehicles with strong enthusiast appeal.

"People are leaving the segment, like Dodge, so we have a chance to really present something new about Mustang, and we want to do that at the start; we don't want to roll it out over time," Farley said. "We're going to keep investing, keep our ICE products really exciting."