Traditionally, people who want to buy a car should contact a dealership. But Ford wants to restructure that process.
According to Ford's CEO Jim Farley, the company wants to sell all of its electric vehicles (EVs) online, and at a non-negotiable price to match Tesla’s profit margins.
He envisions that in the future, dealers won’t hold any inventory.
Instead, the vehicles will ship directly to the customer, with remote pickup and delivery.
"It's exactly what we have to do on the retail side," added Farley in a conference. "We’ve got to go to a non-negotiated price. We've got to go 100% online so that the inventory goes directly to the customer with 100% remote pickup and delivery."
Farly's comments about selling cars online came at a time for car prices due to the supply chain crunch and instances of dealerships gouging customers for new vehicles.
"I feel like when that second quarter last year profit came out for Tesla and they showed like a $15,000 premium, it totally changed my world," said CEO Jim Farley at the Bernstein’s 38th Annual Strategic Decisions Conference. "It was an epiphany. It was like the angels sung, it was like, 'Oh my god, we can make more money on EVs than our ICE.'"
Farley said he expects consolidation among dealers, suppliers and automakers as the industry begins building more EVs.
This is because transitioning to an online-only sales model would entail numerous challenges, because automakers have limited control over their dealership networks.
Car dealers are protected by state laws and spend millions of dollars annually on lobbyists to maintain their status.
"I believe on the retail side, we can do things post-warranty and remix the marketing spend to have a better experience," Farley said. "I think our dealers can do it, but the standards are going to be brutal. They're going to be very different than today."
"Their business will change a lot," Farley said. "There will be a lot of winners and losers, and I believe, consolidation."
What Ford is doing here, is trying to copy Tesla's business model.
The company with Elon Musk as its leader, operates retail stores but has no dealerships.
This is a key advantage in cutting the middleman, and cutting cost, and retaining profits.
Ford is just like other car companies in the way it sell cars. By changing the strategy to be more like Tesla's, Farley likened his vision for the automaker's sales model to Target’s strategy of leveraging its physical stores to compete with Amazon.
"Target could have gone away, but they didn't," he said. "They used their expertise as a physical retailer to their advantage, but they modernized the e-commerce piece."
Not only that Ford is eyeing on Tesla, trying to beat the car maker in its own game, but the company is also ensuring that it can remain relevant when competing with others fossil-fuel guzzlers that also sell EVs, like BMW, Nissan and Kia.
The move from Ford follows its previous strategy, which spun off its electric cars into their own sub-brand.
With the move, Ford is trying to break free from state laws it's required to follow.
Unlike Tesla, traditional car makers, including Ford, are usually prohibited from selling their products directly to customers, a legacy of fears over vertical integration written into state laws during the early 20th century.
For this reason, Ford is required to franchised its dealerships.
"Then we have this opportunity to use our physical presence to outperform [competitors]. I think our dealers can do it. But the standards are going to be brutal. They're going to be very different than they are today," he said.
Ford is also among the biggest spenders for advertising, spending billions of dollars a year on advertising alone.
But interestingly, Ford is not spending any money to market its Mustang Mach-E and the F-150 Lightning.
When it comes to EVs, "I’m not convinced we need public advertising," Farley said. "If you ever see Ford Motor Co. doing a Super Bowl ad on our electric vehicles, sell the stock."
This comments were delivered a day before the automaker announced that it would spend $3.7 billion to hire 6,200 union workers to staff several assembly plants in Michigan, Ohio and Missouri in a bid to sell 2 million EVs a year by 2026.