Ford Motor Co. last week wrote a new page in the ongoing debate over the future of the dealer franchise model.
CEO Jim Farley presented new sales standards that will require its U.S. dealers to invest hundreds of thousands of dollars in charging equipment and set nonnegotiable prices if they want to sell Ford's future electric vehicles. Dealers who choose to invest less would be restricted to taking customers' EV orders, receiving no EVs to display on their lots.
Ford increasingly has moved toward online reservations and orders with the launch of new models, electric and gasoline powertrains alike. Order banks reduce complexity and the need for incentives that arise from overproduction, Farley has said.
But he says the changes also are about achieving parity with EV manufacturers, such as Tesla and Rivian, that sell directly to consumers. Farley has said the tech-focused startups have a roughly $2,000 advantage over Ford.
The difference for legacy automakers like Ford, of course, is that direct-to-consumer EV automakers don't have franchised dealerships, so their sales processes aren't governed by state laws outlining relationships with retailers. Yet Tesla and Rivian also are precluded from selling directly to consumers in some states, which has led to years of legislative efforts by the EV makers to win exemptions to those prohibitions.
Some dealers have expressed concerns that automakers' evolving business models are encroaching on their own — and testing the limits of state franchise laws. Advances in technology — and a global pandemic — have made it easier to complete elements of a vehicle transaction online, and both dealers and automakers are moving in that direction. The expansion of online order banks and reservations raises new questions about who ultimately guides the customer experience. I wrote this year that dealers and automakers negotiated provisions in at least two states that require automakers to send customer reservations to new-vehicle retailers and prohibit them from interfering in price negotiations.
Farley last week said dealers could set the prices on its EVs — but they must be nonnegotiable. It's still very early, so it's not yet clear how dealers will respond to Ford's new standards, nor what their ultimate impact will be. Will other automakers follow suit? And is legislation addressing these issues on the way in more states?
Plenty of questions have yet to be answered.
