wade through (F) wants to put the odds on his side in the battle for leadership in the electric vehicle market.
The Dearborn, Michigan-based automaker was looking for anything that could give it an edge over its main competitors. He also wanted to get rid of everything that was holding him back against Tesla (TSLA) rival No. 1, according to CEO Jim Farley.
Ford started by reorganizing its manufacturing operations. It separates internal combustion engine (ICE) or gasoline cars from battery electric vehicles (BEVs). The goal of this reorganization is to enable the Ford Model e, a new entity of electric vehicles, to operate more like a startup, i.e. more agile and perform over-the-air updates as innovations are made.
Ford Wants To Review Its Distribution Network
The company has also decided to launch an electric version of its most legendary model in hopes of wooing consumers with a name that speaks to them or brings back memories. This is how the Ford Mustang Mach-E crossover became one of the first electric models to be marketed by the group. Ford then released the F-150 Lightning pickup/truck, an electric version of the iconic F-150, the best-selling vehicle in the United States for decades.
The automaker wants to use other weapons to allow it to play on the same terms as Tesla. Indeed, Farley wants to convince the company’s dealers to reduce the cost of shipping electric vehicles to consumers, Reuters reports.
The chief executive officer will make this request during a meeting next week in Las Vegas with dealers. The request will come as part of a new agreement on how dealers sell electric vehicles manufactured by Ford, Reuters said citing unnamed sources.
Ford did not immediately respond to a request for comment.
“We worked closely with our dealers to create a retail model that was better than what any traditional OEM would offer [original equipment manufacturer] and better than startups now scrambling to develop a sales and service network to support customers in an effort to maintain and grow share,” Farley told analysts during a second-quarter earnings call.
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Pressed by analysts, he later pointed out that “we have to get this $2,000 from our distribution costs to be competitive” with Tesla, Rivian (RIVN) and Chinese EV makers. He points out that what all these competitors have in common is that they sell directly to consumers without going through dealers.
A third of the $2,000 savings could come from implementing a new distribution system that Farley calls the “low inventory model.” “The customer orders a vehicle, then we send the vehicle to the customer. That’s what I mean by a low inventory model. We have to go there,” he explained.
“We think it’s about — maybe $600, $700 worth in our system. Another one is all sales, SG&A [selling, general and administrative expenses], and advertising costs. We have three levels of marketing. We think it’s $600 per vehicle,” added the CEO.
“We’re going to simplify it. And we’re just going to shift the e-commerce platform that we don’t have today — all of our electronics customers have a very predictable experience, whether they’re in a dealership or in their bunny slippers, and they’re going to have a seamless buying process. very simple, transparent, very easy. And we will invest.”
Fundamentally, Ford has not ruled out a Tesla-like system, with a website where consumers can order their vehicles directly from the manufacturer and where they can adjust prices when necessary and enjoy the benefits of price increases.
One of Tesla’s advantages over its competitors is the fact that intruders aren’t bound by a franchise agreement, even if this means it doesn’t exist in certain states. Thus, the system allows Tesla to deliver vehicles to customers as soon as they are ready and to avoid additional dealer-related costs.
Ford isn’t the only legacy automaker looking to review its distribution network. General machine (GM) recently offered a purchase to a US Buick dealer who didn’t want to make the investment required when the brand would go electric.