Ford Model e: Ford Will Run Their EV Business Separately, Opening a Path for Direct-to-Consumer Sales
Finally, the world knows why Ford has yet to name an electric vehicle the ‘Model e.’ On March 2, Ford announced the formation of a distinct unit for electric vehicle operations. The decision paves the way for the automaker to accelerate EV development while opening new avenues for direct-to-consumer sales. Ford says they are driven by the need to compete and win against both new EV competitors and established automakers.
3/3/22 Update: Ford CEO and President Jim Farley explained the move and how it affects dealers.
“This is only about creating incredible products that improve over time. To create a better customer experience than yesterday. And ultimately, to win as a company. The reality is, our legacy organization has been holding us back. We had to change.”
Ford wants a certain number of dealers to opt in to a new Model e sales model. Model e dealers would not hold inventory. Instead, they will facilitate the delivery of online orders, much as Tesla does for their customers. Electric vehicles will be sold at non-negotiable prices. That’s just one step away from direct-to-consumer sales.
“Our message to dealers is, we’re betting on you. Get ready to specialize,” Farley said.
The Ford+ Plan in 2022
Ford’s announcement outlines the establishment of two new operational divisions that will remain under the corporate umbrella of Ford Motor Company. Ford Model e will take on the future of electric vehicle development and sales. Ford Blue will become Ford’s combustion-powered division, encompassing everything from the F-150 to the Bronco.
The two new divisions within Ford will continue to collaborate and propel the greater Ford enterprise forward, according to the press release detailing the plans. Ford Model e and Ford Blue will join Ford Pro as the corporation continues to branch out its business model. In 2021, Ford Pro was launched as a one-stop shop for commercial and government customers.
Ford Model e: Ford’s New Electric Vehicle Business
The creation of Ford Model e was driven by the success of the popular Ford Mustang Mach-e and the overflowing support for the upcoming F-150 Lightning. Interestingly, Ford cited the success of their dedicated EV division in China as another source of inspiration for the launch of Ford Model e.
Ford President and CEO Jim Farley will take on yet another role as President of Model e. Farley has long been an outspoken proponent of Ford’s ambitious electrification plans.
“Ford Model e will be Ford’s center of innovation and growth, a team of the world’s best software, electrical and automotive talent turned loose to create truly incredible electric vehicles and digital experiences for new generations of Ford customers,” Farley said.
Ford hopes that Model e will attract and retain the best engineers and software developers to Ford. As autonomous driving and wireless over-the-air updates become the norm, Ford wants to be a leader in the reimagined automotive industry that’s currently in the making. A lot more computers, and a lot less oil. They’re pushing full steam ahead with ground-up development of electric vehicles. EV platform design, battery research and development, electric motors and inverters and charging infrastructure will all fall under the umbrella of Ford Model e. There are also plans to advance recycling infrastructure in both cost-cutting and environmentally responsible ways.
Direct-to-Consumer Sales Coming Soon
Ford not-so-subtly shared one of their larger ambitions for their new electric vehicle division: foregoing the dealership model. We’ve seen Ford’s corporate leadership speak out against outrageous dealer markups as the F-150 Lightning nears delivery. Ford’s announcement highlights the changes to their EV sales model:
“Ford Model e also will lead on creating an exciting new shopping, buying and ownership experience for its future electric vehicle customers that includes simple, intuitive e-commerce platforms, transparent pricing and personalized customer support from Ford ambassadors.”
Yeah, transparent pricing would be welcome. It’s great and almost shocking to see a legacy automaker making such a large pivot away from the status quo. Could the direct-to-consumer model win over new customers to the Ford brand?
Ford Blue: Combustion Lives On
CEO Jim Farley calls the Ford+ plan the company’s biggest opportunity for growth and value creation since Henry Ford scaled production of the Model T. Ford Blue will work to optimize Ford’s combustion-powered models and profitability through strengthened consumer relationships, quality improvements and greater operational efficiency.
“Ford Blue’s mission is to deliver a more profitable and vibrant ICE business, strengthen our successful and iconic vehicle families and earn greater loyalty by delivering incredible service and experiences. It’s about harnessing a century of hardware mastery to help build the future. This team will be hellbent on delivering leading quality, attacking waste in every corner of the business, maximizing cash flow and optimizing our industrial footprint.”
Ford Model e: Why Is It a Big Deal?
Ford CEO Jim Farley has long said that Tesla needs to be taken seriously. Tesla, Rivian, Lucid and newcomer Fisker are all having success with direct-to-consumer sales. However, these automakers and any others who go this route face a maze of state laws that present roadblocks for direct-to-consumer sales. The dealership lobby is strong in much of the United States. So much so that a recent West Virginia bill was introduced that would ban most over-the-air updates in the state, all so that dealerships can continue to rake in service center revenue.
Other automakers are in the weeds with the dealership model, too. Kia’s much-lauded EV6 electric crossover is facing opposition from Kia dealerships. They’re simply not adapting to the coming rush of electric vehicles. Jalopnik reported that EV6 buyers are reaching out to them with stories of dealers who are making buying an EV6 a lot harder than it should be.
Nationwide, 17 states currently have a ban on direct-to-consumer sales. Eleven more states have carved out specific exceptions for Tesla (and in some cases, other automakers that sell only EVs). That’s why Tesla technically can’t sell directly to consumers in states like Texas and Washington. It’s an antiquated system in need of change.
Ford recognizes the tides of change approaching automotive sales. Automotive News reported that efforts to permit direct-to-consumer sales have been introduced in 10 states. Several of the bills already failed. More are surely to come as electric vehicle market share surpasses 5% of new auto sales in America.
This is long overdue. Consumers are fed up with dealer markups, deceptive sales tactics and stressful experiences at the dealership. But this isn’t the end for dealerships. There will be a need for dealers for decades to come, even if sales shift away from their franchises.
Electric vehicles are coming, like it or not. Ford is aiming for annual production of more than 2 million EVs by 2026. They expect EVs to represent half of global volume by 2030. Automakers say that half a trillion dollars will go to electric vehicle development this decade. However, EVs currently can’t be serviced at the neighborhood repair shop, or in one’s home garage. Certified technicians certified in electric vehicle repair are quickly going to be in high demand at service centers everywhere. Dealership service centers aren’t going away. In fact, dealership service centers will likely see business grow as more consumers opt for electric vehicles.
Ford’s new Model e and Ford Blue divisions present a massive opportunity for new revenue streams and efficiency within Ford’s R&D and sales operations. Will other legacy automakers follow suit? Truthfully, they are very likely making plans as we speak. CarEdge will keep you up to date with consumer-focused automotive news. More change is surely to come.