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Ford Revises Dealer Requirements To Sell Electric Cars

Ford Revises Dealer Requirements To Sell Electric Cars

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It was quite a shock at the time. In September of 2022, Ford CEO Jim Farley delivered an ultimatum to its dealers — invest in the equipment and training needed to sell electric cars successfully or get shut out. No EVs for you! It was a bold move by Ford, one which may have partially been designed to wake its dealers up to the fact that the world of automobiles was changing and they had better change with it or get wiped out by the coming tidal wave of electric cars.

Farley committed one cardinal sin. He did not consult with the dealers. Instead, he just dropped a bomb on them and told them to get in line within 60 days or be excluded from selling electric cars. People don’t like being told what to do, especially when the cost of compliance was estimated to be between $500,000 and $1,000,000. A big chunk of that was a requirement that each dealership install two DC fast chargers that would be available to the general public. Such chargers are expensive, but that is just the beginning. Getting access to enough electricity to power them can mean installing new supply lines and transformers, which would cost a lot of money. Then there is the issue of demand charges utility companies assess to unlock all that electricity.

In addition to the requirement for charging equipment, Ford also demanded its dealers invest in new tools and training for its service departments so they would be ready to support the needs of the customers who bought electric cars from them. That equipment and training meant another big chunk of money the dealers had to come up with. The dealers balked and some sued Ford.

Then something strange happened on the way to the EV future. Suddenly, all everyone was talking about was how people really didn’t want to buy as many electric cars as expected and how the EV revolution might be over before it really got started. Today, Ford commercials are emphasizing that the company offers its customers a choice of conventional modes, hybrids, and electric cars. In September 2022, “hybrid” was a word almost never heard in connection with Ford Motor Company.

Ford Adjusts It Sales Program For Electric Cars

According to Business Insider, Ford has walked back its requirements for its dealers. Now, instead of DC fast chargers, Level 2 chargers will be required. Instead of several tiers of dealerships with different access to electric cars, now all Ford dealers will be welcome to sell EVs, according to a statement from Ford’s chief operating officer Marin Gjaja last week. Ford dealers will no longer be required to invest in certification to get EVs on their lot, which will open the sales of electric cars to the entire dealership network. Gjaja said the change in plans is designed to grow EV sales for the company.

The previous rigorous buy-in program was based on optimistic EV sales forecasts that dealers would make back their investments as the popularity of electric cars increased. But a lot has changed in the US EV market since the fall of 2022, and growth in the segment hasn’t played out as Ford initially expected, Gjaja said. EV sales have slowed in the past year. They are still on the rise but at a slower rate than the boom in growth that happened between 2020 and 2022. With wealthy early adopters largely sated, car companies are now trying to entice a new group of EV shoppers who are more frugal and practical, BI says.

Ford dealers were among the first to raise alarm bells about this slowdown when some stores started turning down Mustang Mach-E allocations last summer. Later, dealers started reporting issues with F-150 Lightning demand, which further eroded Ford’s relationship with its dealers. Even before the slowdown in EV sales, many Ford dealers were unhappy with the high price of entry for selling electric cars. Several dealer associations filed lawsuits related to the program, and in Illinois a board ruled in favor of the dealers’ claim that Ford’s EV certification program violated state laws. As of December of last year, a little more than half of Ford’s nearly 3,000 US dealers had opted out of the EV investment requirements, an early sign that the program had backfired.

Since then, Ford and other major automakers have gone back to the drawing board on their EV strategies. Ford says it will soon offer more hybrid models while General Motors is gearing up to add plug-in hybrid offerings across its lineup. Ford dealers will still need to make some investments to support EV sales on their lots, but they will no longer be held to the minimum $500,000 investment as was originally the case.

The EV Revolution Is Still Going Strong

electric cars
Credit: Bloomberg

So, what is going on here? Is the EV revolution still on track or has it gone off the rails? The answer to that question depends a lot on where you focus. Tesla is the face of the EV revolution and it has been seeing some disturbing sales figures in the past two quarters. There are reports of unsold Teslas being stored in large parking lots in the US, Australia, and Germany. The second quarter of 2024 ends in a few weeks and then we will have a better idea of whether Tesla sales are in full decline or whether the past two quarters were just an aberration.

As Zachary Shahan reported recently, sales of electric cars in the US are growing quite nicely for several manufacturers, especially Ford and Hyundai/Kia. In all, six of the top ten automobile brands in the US saw EV sales grow by 50 percent or more in the first quarter of this year. Worldwide, sales of electric cars were up 25 percent in April. One thing many people overlook is that the so-called S curve is not just one event. It is composed of several segments, each of which presupposes continuous innovation.

With all due respect to Elon Musk, Tesla has not introduced a new mass market car since the Model Y debuted in the US in March 2020. That is an eternity in the world of automobiles. By contrast, Hyundai/Kia have more than a dozen models of battery electric and plug-in hybrid powertrains for sale in the US, with more on the way. The Tesla model lineup is stale, and although Musk hinted this week that new models are coming, we have learned that promises from Musk often are two to five years away from being realized. In the meantime, Tesla has failed to innovate and is paying the price.

The Takeaway

It is painful to watch the US auto industry trying to navigate the transition to electric cars. There seems to be no plan. It is either full speed ahead or full stop. Right now, Ford and GM are backtracking hard while the market is actually growing quite nicely. One gets the impression these major companies are making it up as they go and getting their sums wrong in many instances.

Are US buyers actually clamoring for more hybrids based on 20-year-old technology? Is Toyota really going to be the tortoise that wins the race? The answers to these questions won’t be known for years. All we can be certain of is that the automobile business in 2030 will be very different from what it is today. It’s probably best to keep your seat belt buckled until the ride comes to a complete stop.


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