Ford CEO Jim Farley to meet dealers next week and bid for lower prices of electric vehicles. Farley talks about Ford defeating Tesla and heating up the EV race in the industry. One of the most advantageous aspects of Tesla is that they sell directly to consumers. The dealership costs are skipped and reduce the overall electric vehicle price.
Looks like Ford is finally agreeing that they should change how the dealership systems work. In the past year as the company was launching F-150 Lightning, it has implemented various regulations. Where dealers were not allowed to sell the vehicle early on, and resale of the vehicle is not allowed for customers. However, such changes may or may not have impacted the sales. Competing in the aspect of price has become essential as production and sales are increasing.
Ironically, when Tesla first began selling EVs, many saw its DTC approach as a vulnerability with less exposure to buyers, yet the opposite turned out to be true. It’s now one of its greatest advantages. After years of going back and forth with US dealerships and government officials over selling cars directly to buyers, Tesla is proving the DTC model not only works, but it’s also more efficient.
Dealerships earn their profit from vehicle sales, which trickles down as costs to the consumer. Furthermore, it’s costly to store inventory on the lot, which can add expenses to both the dealer and automaker, which affects the buyer. Tesla’s business model is not the focus of legacy automakers and EV startups as they look to mirror the EV leader’s success.
Elon Musk often talks about how Tesla can cut costs and pass that on to buyers. On Tesla’s Q2 earnings call, Elon stated, “We need to make stuff and make it efficiently.” The key term here is “make it efficiently,” as many startups and legacy automakers are realizing it’s not easy to make a profitable electric vehicle. Although Musk is referring to manufacturing here, Tesla applies the same to its selling process with minimum marketing and distribution costs.
Ford seems to be catching on as the automaker took second in EV sales in the US this past month. That said, after trading shots back and forth between Elon Musk and Jim Farley, Ford’s CEO (Farley said, “Take that, Elon Musk” after taking an early lead in the EV pickup truck market with the F-150 Lightning), the automaker may actually be taking a page out of the Tesla playbook.