Ford isn’t backing down from the fight with Tesla as the EV race heats up. According to a new report, Ford CEO Jim Farley will meet with dealers next week in a bid to lower the price of its electric vehicles to compete with Tesla.
One of Tesla’s most significant advantages is its ability to effectively sell direct to consumers (DTC) through its online site, thereby skipping dealers altogether. As a result, Tesla was able to cut dealer-related costs and streamline deliveries.
Ironically, when Tesla first started selling EVs, many saw its DTC approach as a vulnerability with less exposure to buyers, but the opposite happened. Now one of its biggest advantages.
Elon Musk frequently cites Tesla’s manufacturing capabilities. On Tesla’s Q2 earnings call, Elon explained:
With regard to manufacturing and technology, about 5 or 6 years ago, we said we wanted to be the best manufacturer in the world and that was a bit counterintuitive, for some people, actually, in my opinion, would be our strongest competitive advantage.
We’re super pro-manufacturing here at Tesla. And in general, we want to encourage other companies to be super pro-manufacturing. And in general, I think it’s a very important thing to do. We need to make stuff and make it efficient and that’s manufacturing.
The key term here is “make it efficient,” as many start-ups and long-time automakers recognize that it’s not easy to make profitable electric vehicles.
We’re super pro-manufacturing here at Tesla. And in general, we want to encourage other companies to be super pro-manufacturing. And in general, I think it’s a very important thing to do. We need to make stuff and make it efficient and that’s manufacturing. (opens in a new tab)
Ford seems to be catching up as the automaker took second in EV sales in the US this past month. That said, after an exchange of shots back and forth between Elon Musk and Jim Farley, CEO of Ford (Farley said, “Take it, Elon Musk” after taking an early lead in the EV pickup truck market with the F-150 Lightning), the automaker might actually took a page from the Tesla playbook.
Ford asks dealers for lower priced EVs
Don’t worry – Ford doesn’t drop its models from dealerships to target online shoppers. That said, Jim Farley recently told dealers a new deal would be discussed in their upcoming meeting next week to promote sales of his electric vehicles.
In particular, Farley focuses on cost. In July, Ford’s CEO said the automaker needed to cut costs by about $2,000 to stay competitive with Tesla and other EV makers.
Ford has already implemented several measures, such as selling low-inventory models directly to consumers. While this would help cut costs by around $600 or $700, according to Farley, it’s still not enough to compete with Tesla, which can update prices instantly.
Dealers expect Ford to implement new policies to encourage growth in its EV line, such as requiring the installation of chargers.
Josh Sloan, GM of two Ford dealers and one Lincoln dealer in Michigan, claims:
We are moving into this very quickly. If you don’t all, you will lose.
Is Ford all in? So far, that seems to be the case. Ford made the right moves this time, and they paid off.
Working with dealers was a smart move on Ford’s part. For one thing, dealers should be incentivized by the massive growth in EV demand. If they want to stay competitive with Tesla and other EV startups, I think they need to be more flexible.
As Elon said, it’s all about efficiency. And if dealers want to compete in this new EV era, they need to cut costs somewhere.
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