Ford - Direct Sales, NO Dealer Markups

Jim Farley has stated over and over that Ford needs to move toward direct sales to customers and no dealer markups for cars sold through dealerships.

It appears this is the direction Ford plans for its EV models, as dealer markups and aggressive dealership moves for more profit are hurting their relationship with customers as well as being a serious problem with sales.

Jim Farley stated, "We’ve got to go to non-negotiated price. We’ve got to go to 100% online.

https://arstechnica.com/cars/2022/0...-only-with-no-dealer-markups-says-ceo-farley/

This is their direction for Germany and the rest of Europe:
https://media.ford.com/content/fordmedia/feu/en/news/2023/05/15/Ultimate-Customer-Convenience.html

But, it's not just Europe - Ford in the USA will go this direction, too.

Other manufacturers are moving in that direction as well. Acura has models they only sell through a reservation system. Others are seeing the advantages that Tesla has clearly demonstrated.

This is going to be a big change for the auto industry here in America and across the world.

 

Expect to see more states (mostly red ones) make this practice illegal. car dealers are overwhelmingly republican.

https://qz.com/73541/why-its-illegal-for-tesla-to-sell-its-cars-in-texas

 

I hope Ford is going to be ready to back their sales with an efficient repair network. One of the attractions for me to an auto seller is an honest and knowledgeable repair service. And yes, such dealers are out there. It is my understanding that the repair business has replaced car sales in generating income for most dealers.

Ford might be taking on more responsibility than they know how to handle. Today you need repair facilities that can deal with the computers and other complexities involved with modern vehicles. The local “grease monkey” can’t do it any more. In fact they have not been able to do effective repairs for years.

 

I think its unlikely either way will be noticeably cheaper than the other. Processing warranties, financing and repairs are going to increase the cost whether its the dealership or the manufacturer.

I've bought two cars on ebay, one off craigslist, and one from a friend of a family member. I intend to continue via this method of car purchasing.

 

A friend ordered a new Bronco when they first announced them. Top of the line. When the dealer got it in, although my friend had paid full price for it before hand, the dealer wanted another $15k. He declined and finally got another one a year later. Turns out that the dealer wanted it for himself so he just jacked up the price. I hate car dealers.

 

supply and demand. The pendulum has swung back to too much supply. Simply look at the rebates and financing offered today.

 

Yes, with out a doubt, there are dealers who abuse the system. When vehicles were in short supply after Covid, my local dealer instituted outrageous “demand surcharges” over and above the MSRP. It was ridiculous. I hate the retail end of that firm, but the repair service is good, which is why I continue to go there.

 

I've heard reports that some dealerships are using tricks after sales in order to get customers to pay more.

Like, telling the customer that their delivery will be delayed, but if they pay more than their signed contract they can move to the front of the line. And, other such tricks.

 

Yes, skipping that major cut in value when the car rolls off the lot is a big deal. With a little care, one can find good used cars.

The work done at dealerships does need to be done. However, Jim Farley is in the best position to judge how best to do that.

 

I agree. The days of middlemen like me are numbered. The internet makes these things not only possible but easy. All of the manufacturers in our industry sell against dealers like me on their own web sites. Many of them even have Ebay and Amazon stores. Some demand adherence to minimum advertised prices while selling at lower prices themselves. People like me are obsolescent. I wouldn't want to be a car dealer.

 

As far as I know, and maybe I’m wrong, but cars are about the only thing consumers can negotiate the price on.

 

Consumers can negotiate prices on anything as long as they have a decision maker in the mix.

 

You sell used cars? That's a really tough business, as far as I can tell.

Are you are referring to the competition of dealerships selling the trade-in vehicles they get?

This is an areas where I think savvy buyers may be better off, but having a used car business requires serious business ability.

 

True, but there are a lot of businesses where there isn't enough margin to hire a decision maker to talk with individual customers who want to pay less!

I think that's what you ran into.

 

Absolutely.

This is certainly true for EVs. On another thread I listed a good number of states that allow no more than a small number of Tesla stores - between 1 and 4. Plus, South Carolina does not allow Tesla to have a service center. Now, we have Wyoming pass legislation making it illegal to sell EVs in that state (!?) This appears connected to the political force of dealerships.

I doubt those and other states will be more open to direct sales simply because now Ford wants to do it.

I wonder if Ford will use that sales model for EVs only - thus arguing that it is a different product or something.

 

I think I ran into incompetent customer service. Their loss.

 

Nope I have nothing to do with cars other than being a owner of them. I was talking about manufacturers going into competition with their dealers. Perhaps you have heard the commercials for "Renewal by Anderson." That is an example of it in the home improvement industry.

 

I wasn't aware of the "Renewal by Anderson" lawsuit or how they do business.

It absolutely is a major change to the business model for dealerships, with Ford retaining more control. Even if Ford doesn't sell direct, but requires that dealerships all sell for MSRP it would be a huge change.

I really don't know how Ford can do this in America. Yet, Farley keeps saying that this has to be the direction.

 

There is no lawsuit. It was just an example of a manufacturer replacing the dealers with themselves.

That would make Ford noncompetitive. I should know. I watch the Chinese taking market share from American manufacturers every day thanks to the minimum advertised prices our manufacturers like. I'm forced to sell more Chinese made products. I don't like it but business is business.

It may be as easy as failing to renew a contract. I don't know how dealer contracts work in the auto industry so take that as a wild guess. I don't know how the manufacturers would handle warranty repairs without dealers unless they did what third party warranty companies do. That would be a huge loss of control of a very important aspect of their business.

 

So..... Ford is following the Tesla model... I guess it's not bad policy to follow the the worlds most profitable automaker.

 

Actually that is not true. Since the pandemic computers used by cars and trucks and especially EV's vehicles are in short supply. What is hurting sales is the interest rates.

 

Good points here. However, Jim Farley says this direction is needed to KEEP Ford competitive.

Yes, Ford needs the service for warranty repairs, etc. And, I don't believe Ford can buy out dealerships. They are already hugely in debt.

 

That's what Jim Farley is saying. And, it's what is happening in some places in Europe.

I don't know how he plans to pull that off in the USA.

 

A dealer I had previously bought a car from did the same thing. I drove across the street, about 400 yards and purchase a different make from a different dealer. A demand for a Covid surcharge lost my business forever.