In what will certainly send shock waves across the industry, Ford dropped a bomb at its annual dealership meetings in Las Vegas this week. InsideEVs was one of only a handful of news outlets invited to get an early look at the new Model E dealership rules, which included a presentation from Ford CEO Jim Farley.
In short, Ford is telling its dealer network they have to invest, evolve, improve, and offer new services if they want to be a Model E dealership and sell electric vehicles. Model E is a new division that was created when Ford split the company into three arms: Ford Blue Oval, Ford Pro, and Ford Model e. All of Ford's fully electric vehicles now fall under the Model e umbrella, while plug-in hybrids and regular hybrids are part of Ford Blue Oval.
Farley talked plenty about Tesla, and how the startup electric vehicle manufacturer has roughly a $2,000 price advantage over Ford. He said that Ford and its dealers need to, and have been, working to narrow that gap.
He explained how he believes that as Tesla scales up, it will be forced to change how it does business and its operations will begin to look more like traditional dealer networks. In fact, he's already seeing that in Tesla's operations in Norway.
With that, he also believes that Ford needs to change the way it sells electric vehicles, and the first major steps to that transformation are happening now.
Ford is giving its dealers until October 31st of this year – less than two months – to make a decision that will have huge implications for the future of the franchise. The company is offering its dealers three options:
- Become a Model E Certified Elite dealership
- Become a Model E Certified dealership
- Discontinue selling Model E vehicles effective January 1st, 2024
At a minimum, Model E Elite dealers will need to install two high-powered DC fast chargers and a level 2 charging station, as well as offer at least one DC fast charger available for the public to use. Ford estimates the all-in cost for dealers to become Model e certified elite to be between $1.0 and $1.2 million, with as much as 90% of the cost attributed to the cost to purchase and install the required charging infrastructure.
Model E Certified dealers are only required to install one DC fast charger, and it must be made available for public use. However, Model e dealers will have a hard cap on the number of EVs they are allowed to sell each year, and that number will be the same for all Model E shops, regardless of annual volume.
Ford told us that it hasn't decided exactly what that number will be, but it will be small and intended to only satisfy orders for the dealer's most loyal customers. Ford estimates the cost for dealers to become Model e certified will be about $500,000, again, with as much as 90% of the cost attributed to charging infrastructure.
We've been studying Tesla closely, especially with how their brand has scaled with units and operations in Norway and what we've noticed is that they have almost 1,200 employees now and they have very much dealer-like facilities and we think that's the direction they'll go as they scale their operations in the United States - Jim Farley, CEO, Ford Motor Company
And finally, dealers have the option of not becoming Model E Certified at all. If they choose that route, they give up the right to sell any fully electric Ford vehicles for three years. At some point in 2025, they will have the opportunity to tell Ford that they wish to become a Model e certified or Elite-certified dealership, and provided they complete the requirements, they will be allowed to start selling EVs in January 2027.
If they do choose to opt-out of becoming a Model E Certified dealer now, there will be no opportunity of becoming one until 2027.
This first stage of Model E evolution will be in effect from January 1st, 2024, through December 31st, 2026. The decision dealerships make now will be in effect through 2026 and dealers cannot change their Model e certification status until January 1st, 2027. All dealers will continue to be able to sell EVs until January 1st, 2024, when the new Model e rules begin.
Ford explains that its Model E dealership strategy will be built upon five pillars:
- Training: Dealers will need to undergo extensive EV training on an ongoing basis
- Charging: Model e dealers must have adequate level 2 and DC fast charging, with at least one DC fast charger available to the public
- Set Pricing: Transparent, non-negotiable pricing available online
- Excellent physical experience: Model e dealers must deliver an excellent ownership experience, including complimentary pickup and drop off for vehicle service visits
- Develop digital experience: Invest in building a digital ownership experience for the future
No-Haggle Pricing, But Not Direct Sales
When Ford announced the creation of Ford Model E, some speculated that one of the purposes may be to try to implement a hybrid version of a direct sales model in which customers would order their EVs directly from Ford but take delivery from a local dealer.
That won't be the case. The dealer franchise laws are very clear, and Ford cannot sell vehicles to consumers directly even if they wanted to. The only reason EV upstarts like Tesla, Rivian, and Lucid are able to (and even these companies are banned from selling vehicles in some states) is because they don't have an existing network of dealerships, as Ford does.
But Ford believes its dealer network is a strength, not a weakness, they just need to improve the sales process and customer experience with electric vehicles, and that's exactly what Model e aims to do.
The new rules for Model e dealerships require dealers to post set prices for the electric vehicles online at Ford's website. Customers can view the set pricing, complete the purchase online, and even schedule home delivery. But ultimately, it's the dealer's decision what the set pricing will be for the vehicles, and there will likely be price variation from dealer to dealer. Customers will be able to cross-shop different local dealers' prices online, and then choose the one with the lowest set price. The dealers must honor the set pricing for every purchase, and Ford will be checking the purchase orders to make sure that happens.
This new system gives the customer the option of doing everything online and completely eliminates the need to visit the dealership. Of course, if the customer prefers to visit the dealership, kick the tires and complete the purchase agreement in person, they are still welcome to do so. However, it will be for the same price they could have purchased it online from the Ford.com website, the dealers cannot change the price once it's set.
Charging Is Key
A huge (and most expensive) part of the Model E certification is the requirement for dealers to provide DC fast chargers with a minimum output of 120 kW. The chargers must be readily accessible on the property and available to the public. This requirement was born from the fact that Ford knows that a major pain point for consumers transitioning to EVs is the concern over fast charging availability, especially for those that live in apartments and cannot charge at home.
Dealers will be able to tell customers that whenever they need to charge, wherever they are, they can find a Ford dealership nearby where they can plug in. That's because Ford currently has 2,991 dealerships in the US and 96% of Americans live within 25 miles of a Ford dealership, and 85% live within 10 miles. So basically, you're just about always close to a Ford dealer, and if they all install DC fast chargers, the Blue Oval Charging Network will have pins on the map just about everywhere.
Ford has also established relationships with three charging station installation providers; ABM, EnTech Solutions, and AGI. These companies specialize in facilitating the installation of DC fast chargers, which can be quite complicated as well as expensive.
Depending on where the dealer is located, one of these companies will assist the dealer during the entire process, from filing the necessary permits to utility interconnection, to the actual installation of the stations and even making sure the dealer gets any available public funding available for EV charging infrastructure.
This is a very important component of the plan because installing high-powered DC fast chargers is a complicated process, one that most dealers will require assistance with. Ford also has programs in place to provide financing to its dealers for large capital improvements like this if the dealer needs financial assistance.
Bold New Start
We think Model E's new rules are a good start for the brand. Ford talked a good game at the meetings; everything was about building a better customer experience, offering the customer more options, evolving to meet a changing marketplace, everything we want to hear.
However, it will all come down to execution, as it always does. What will be the uptake from dealers? How competitive will the new no-haggle set prices be? The dealers are the ones setting the prices, so what if they all set prices above MSRP? How reliable will Ford's DC fast chargers be? Will Ford monitor the uptime of the units and force the dealers to quickly repair the chargers when they go offline?
There are still a lot of unknowns to this plan, but we give Ford credit for being the first existing OEM to attempt to improve its EV buying experience in such a significant way.