Ford CEO Jim Farley recently talked with the media about Ford’s different approach toward electrification. They are going to simplify their body engineering. Also, use much powerful body parts, to give them an option to be updated if required.
According to Farley, there is an opportunity as they go digital, it could be software or digital display technology, or self-driving system. Instead of just swapping out internal-combustion engines for batteries and electric motors, Farley has said the company is completely rethinking how it develops its vehicles and how it keeps them fresh over time.
Ford typically redesigns its traditional vehicle models every five to seven years. If it can extend that time by relying on software updates to keep its vehicles fresh, rather than body redesigns, it could save fortunes. It’s part of how Ford expects to improve its operating margin to 10% by 2026. For its second quarter, the company posted a 9.3% adjusted operating margin. Those results were helped by tight new-vehicle inventories that have allowed Ford to boost its prices. Ford is at a disadvantage to companies like Tesla and EV startups that sell directly to consumers, without dealers acting as middlemen.
The company isn’t planning to eliminate its franchised dealers, which enjoy strong legal protections in many U.S. states that effectively forbid Ford from selling directly to its customers as Tesla does. But Farley said that Ford sees a path to reducing that cost disadvantage, which he estimates at around $2,000 per vehicle, by keeping dealers’ inventories very low and by shifting the way Ford markets its products.
One key to that effort: Ford plans to let customers order its EVs online rather than buying a vehicle from a dealer’s inventory. As Farley sees it, dealers will have only a few new vehicles on their lots, just enough to offer test drives to customers before they order. Customers will be able to order from the dealership or online “in their bunny slippers,” Farley said, with the dealer making the delivery and providing service after the sale.
Farley estimates that the low dealer inventories and online ordering will make up roughly $1,200 to $1,300 of that $2,000 per-vehicle cost disadvantage while ensuring that Ford’s dealers remain profitable. The plan will free dealers from having to carry costly inventories, allowing them — in theory, at least — to focus more on service and customer education. That could give Ford an edge that EV makers selling direct won’t be able to easily match.