Ford Wants to Compete with Tesla by Telling Dealers to Lower Margins: Report

Photo: Jim Farley

Ford is looking to persuade its dealers to cut as much as $2,000 USD from the cost of delivering an electric vehicle (EVs) to better compete with Tesla, which has lower selling costs thanks to its direct-to-consumer model — reports Reuters.

Company CEO Jim Farley is headed to Las Vegas next week, where he will meet with Ford dealers. Farley has informed dealers of plans to bring up new agreements at the meeting that will dictate how dealers sell Ford EVs.

Ford hit a wall with dealers last year when they started marking up the company’s much-anticipated F-150 Lightning electric pickup by up to $30,000 USD. In response, the company warned them to stop demanding extra payments for EVs.

Farley told analysts back in July that Ford needs to cut $2,000 per vehicle from selling and distribution costs to compete with Tesla, which the veteran automaker hopes to overtake in EV market share. That’s exactly how much money Farley will ask dealers to take out of their margins next week.

The Ford CEO said in July that a third of those required savings could come from a “low inventory model,” Ford would start shipping some orders directly to customers instead of stocking them on dealer lots for weeks or months.

“We think that’s about — worth maybe $600, $700 in our system,” Farley told analysts. Tesla can also adjust prices rapidly on its website, and keep most of the gain from a price increase.

Ford didn’t reveal much about next week’s meeting, but did say, “we are excited to meet next week with our North America dealers to grow and win together.”

Some of Ford’s dealers have expressed concerns that a new build-to-order system like Tesla’s could limit their profit margins on new vehicle sales. Farley, however, doesn’t believe that will be the case.

“I see dealer margins still being very competitive, but they are going to shift,” the Ford CEO said in July. According to Farley, Ford wants to shift to putting more emphasis on selling products and services after the initial vehicle sale.