Ford (F) is serious about its transition into an electric vehicle company and now it is making sure its dealership network is on the same page.
Gone are the days where General Motors (GM) is its main competitor, as Ford CEO Jim Farley now considers Tesla (TSLA) its top rival.
Ford began by reorganizing is manufacturing operations. It separated internal combustion engine (ICE) cars or gasoline cars from battery electric vehicles (BEV). The purpose of this reorganization is to allow Ford Model e, the new entity of electric vehicles, to operate more like a startup, that is to say more agile and carrying out over-the-air updates as innovations are made.
But Ford knows its electric ambitions can only be as strong as its delivery network, and now it wants its dealers to pay to upgrade.
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Ford Wants Dealers Up to Snuff
Ford unveiled plans asking its almost 3,000 dealers to invest either $500,000 or $1.2 million to install upgrades needed to become "EV-certified."
Dealers who choose the higher tier will receive "elite " certification and will be allocated more EVs, but they will also be on the hook for $900,000 in costs upfront.
"We’re betting on the dealers. We’re not going to go direct. But we need to specialize,” CEO Jim Farley said, according to CNBC, after briefing dealers. "The main message I have for the dealers, which I’ve never said before, because I didn’t believe it was true, is that you could be the most valuable franchise in our industry.”
The money will go toward training, back-of-the-house charging infrastructure, e-commerce upgrades, remote delivery and pickup options, and upgrades towards the customers' digital experience.
But 90% of the money will go toward charging infrastructure.
Ford dealers will have until Oct. 31 to decide what they want to do and will have until the end of the year to start making investments.
Farley also said that he wants the dealers to reduce selling and distribution costs by $2,000 per vehicle in order to compete with the direct-to-consumer model that Tesla utilizes successfully.
Dealer Ultimatum
So dealers have until the end of the year to figure out whether they want to be in business with Ford going forward.
The first wave Model e dealer exclusivity will start on Jan. 1, 2024, and run through Dec. 31, 2026.
So, if a dealer decides that electric vehicles won't sell as much in their area over the next few years, they can skip the first window, but there will be a second window for Model e certification starting in 2027.
Dealers who want into that certification program will need to commit by 2025.
Ford is betting big on electric vehicles as the company looks to take Tesla's market lead.
The company plans to invest $11.4 billion to build two new EV production facilities in Stanton, Tenn., and Glendale, Ky., and another $525 million to train skilled technicians to service its new models.
Ford's plan is to get half of its sales from electric vehicles by 2030 and says that it will have the capacity to build more than 2 million electric vehicles per year by 2026. That would represent about a third of the company's global output.
