Ford CEO says electric vehicles will be sold 100% online with nonnegotiable price

Ford CEO Jim Farley said Wednesday that consumers should plan to see dramatic changes as companies compete amid the shift to electric vehicles.

"We've got to go to nonnegotiated price. – We've got to go to 100% online. There's no inventory (at dealerships), it goes directly to the customer. And 100% remote pick up and delivery," he said in New York during Bernstein's 38th Annual Strategic Decisions Conference streamed live.

"Then we have this opportunity to use our physical presence to outperform" competitors, 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 they are today."

But that's not all. 

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He teased that the company sees potentially huge profits in building an electric vehicle for ride-hailing services Lyft and Uber.

"Shared mobility revenue will grow a lot," Farley said. "No one has ever built a product for them."

Meanwhile, the way car companies generate revenue may change, too – like renting cars for limited use and allowing customers to pay per mile or per day, Farley said. General Motors early in the pandemic folded its Maven service that took such an approach. 

Farley said he believes a Mustang Mach-E owner may want to use a Ford F-150 Lightning for the weekend.

Farley forecasted dramatic industry changes, including: 

• "We're going to see very large consolidation."
• "The Chinese will become more important ... China EV makers, if you look at a $25,000 build and material for an EV in China, it's probably the best in the world. And I think they're incredibly undervalued. They haven't shown any interest in exporting other than Norway." 
• "There's a shakeout coming. And I feel like that shakeout is going to favor many of the Chinese new players."
• "Old" automakers "absolutely will get consolidated. There will be some big winners, some people that transition, some won't. Many of the small players cannot afford to make this transition."

"With capital tightening, there are new constraints that will make the new player better. But some of them won't be able to afford to fulfill their ambitions. Because they can't raise capital."

The next three or four years will shape the automotive future. Startups will be "forced to solve tough problems like Tesla did" with limited access to money.

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Consumer savings ahead

The opportunity for profit within the next few years can't be overstated, he said. "I think this is the most exciting kind of land grab of revenue in our industry since the Model T. I really believe that."

At the same time, Farley said, "I believe our industry is definitely heading to a huge price war." 

The retail price war is already happening in China. Half of all electric vehicles in the world are sold there, and the most popular vehicle is an $8,000 van, he said. 

'Angels sung' over Tesla profit

When the second-quarter profit in 2021 came out from Tesla, "it totally changed my world. It was an epiphany. It was, like, the angels sung."

It was confirmation that electric vehicles can make big money, Farley said.

The electric vehicle maker established market dominance early, he noted. 

"The magic of Tesla," Farley said, "is because they were capital constrained, they didn't have the money. They did things that we are too lazy to do."

Ford estimates that its distribution model is about $2,000 per vehicle more than Tesla, including one-third being inventory sitting on dealer lots, one-third or $500 to $600 per vehicle on public advertising.

Farley didn't provide details of his order and delivery plan, but the concept appears to be similar to Tesla's. Tesla, which doesn't have a traditional dealer network, has a system for ordering a vehicle and completing other steps online, such as financing. Cars can be test driven from stores, and purchased vehicles generally are delivered to the customer.

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Selling without advertising

Sales and reservations of the Ford F-150 Lightning and the Mustang Mach-E SUV all happened without advertising campaigns, Farley noted.

Meanwhile, Ford is working now with its dealers to focus on specialized service in a changing market. Farley noted that Tesla has dealerships in Norway, unlike the U.S., because customers in Norway wanted more service rather than sales.

Farley is rethinking how everything is done and has been done, having seen that Mach-E ads needed to be pulled because they were sold out for two years, he said.

"Our model is messed up. We spend $600 or $700 on the vehicle to promote it and we spend nothing post-warranty on the customer experience. The problem is, on a parts business, which historically has been very profitable, we only get, maybe, only 10 or 20% of the customers come back to us."

It would be better to provide customer experiences such as complimentary vehicle detailing and software updates, he said. But the key is building loyalty among current customers "instead of doing Super Bowl ads."

"If you ever see Ford Motor Co. doing a Super Bowl ad on our electric vehicles, sell the stock."

Citing Target versus online retailer Amazon, Farley noted that customers want in-person customer assistance. The brick-and-mortar company expanded services and added an important digital component to remain competitive.

"Target could have gone away and didn't," he said.

Super Duty remains 

Farley emphasized that Ford plans to continue investing in gasoline-powered vehicles, noting that the Super Duty pickup trucks generate huge revenue for the company and battery technology isn't yet advanced enough to pivot.

"If you're a Super Duty customer towing 10,000 pounds in Montana or on the north slope of Alaska," he said, "an electric vehicle is an awful solution. The batteries are too heavy."

Still, Ford is spending $5 billion on battery electric vehicles in 2022, Ford chief financial officer John Lawler said in a taped message played at the conference. "The stakes are high, but so are our ambitions."

Contact Phoebe Wall Howard: 313-618-1034 or phoward@freepress.com.