Ford CEO Farley challenges dealers to cut EV cost to customers by $2,000

[TechTutor]

Are you in a zev state? Ford seems to be prioritizing zev state reservation holders.

But now I'm wondering if that owner really didn't know he was going to make $8K off my delivery. Guess I'm going to call this week and see if he was just lying or really doesn't know. I never understood compulsive liars.

I hate to be a cynic, but I think that owner knew darn well he was making money. They always cry poverty, but we all know the owners are not living in the slums of your city/village/town.

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[GDN]

The real question on my mind is how can a dealership employee (or owner) not have read the playbook? It sounds like it's possible, just didn't seem plausible to me.

When I spoke to the owner a few weeks back he was visibly pissed off at Ford and part of his agitation was that he wasn't making any money on my sale. At the time I just chalked it up to normal "we can't eat" shenanigans to which I normally respond with, "damn, I never know how you all keep your lights on since you only ever lose money every sale..." but this time I just played it as a, "well, I feel like an asshole referring three people to you..."

But now I'm wondering if that owner really didn't know he was going to make $8K off my delivery. Guess I'm going to call this week and see if he was just lying or really doesn't know. I never understood compulsive liars. I used to date one and it was bizarre to say the least.

You're being played once again. That dealer knew certainly what he was making, but they have no shame, he was still going to milk you for every penny he could. Quit letting them win.

I know some small dealers may be having a little bit harder time currently if they don't have the inventory to sell, but go find a few medium to big dealers. I can assure you they are living bigger than you would ever hope to live.

 

[greenne]

Because customers are now comparing Ford purchase experience with Tesla and Rivian. They didn’t have those options in the past. Once it is evident dealers at the point of sale bring more stress than value to the table, it is only a matter of time before state laws catch up. So it makes sense dealer function match the value and the need sooner rather than later. They could work with Ford now or become irrelevant later. I would not be surprised if Ford is sweetening the deal for dealers in ways we don’t hear about by promising to extract more money from owners after the sale and giving the dealers a cut. Dying to see the code to see if there is a timer with ”Critical xxxx warning, service soon“ message in there.

If Ford intends to move(or stay) with primarily ordered vehicle sales then the current function of dealers makes no sense. Current dealer model only works if dealers have stock to sell-- a person can walk in off the street and buy a vehicle.

Whether we will ever get back to that sales model(dealer stock), I don't know. If Ford wants(or needs) to sell vehicles primarily "order to spec" they need to change the dealer-corporate relationship and probably the way they compensate dealers.

 

[cvalue13]

The Lightning Dealer Playbook got published on this forum briefly about 9 months ago. It has a since been removed.

The article that talks about Ford weird Lightning dealer 10% commission available:
https://www.carsdirect.com/deals-articles/2022-ford-lightning-invoice-pricing-is-totally-weird

Pasting in full here for posterity (links get busted/articles deleted):

“Ford F-150 Lightning invoice pricing will be unlike any vehicle on the market, based on our analysis of a letter sent to dealers. Even though factory invoice pricing is often relatively simple, the highly anticipated electric truck will feature what the brand calls a blended invoice structure based on an incredibly complex calculation.

Normally, buying a car for below invoice would be a good deal. With the 2022 Ford Lightning, the invoice price may end up being unknowable for not only buyers but also for the salespeople tasked with selling it. Although we assumed that Ford would take a page from the Mustang Mach-E, this actually won't be the case.

Ford says the so-called blended invoice structure "combines the elements of a traditional invoice and the e-invoice." The "e-invoice" debuted a year ago with the Mach-E, based on an allowance for each delivery and rewarding dealers compliant with the brand's advertising rules and that remain certified to sell its EVs.

Even though the Mach-E and F-150 Lightning are both EVs, their invoice prices will be calculated differently. With the Lightning, the company will weigh a whopping combination of 8 different factors. Here's a quick breakdown of how F-150 Lightning invoice prices will be calculated when the truck goes on sale next year.

• 1% of MSRP paid to dealers as a delivery allowance for every delivery
• 1% of MSRP for adhering to advertising rules like not listing Lightnings under MSRP
• 1.5% of MSRP as "floorplan assistance" (i.e. financing dealer inventory)
• 0.5% of MSRP for "Tier 2 Pass-Through" for certain marketing costs
• 0.5% of MSRP for "Tier 3 Co-Op," which refers to subsidized advertising
• 0.9% of MSRP for "FCP," which rewards sales achievement targets
• 3.1% of MSRP for compliance with Ford's EV certification requirements
• 1.5% of MSRP for an unspecified "Customer Onboarding Payment"

If you were to look up F-150 invoice pricing, it may not be hard to figure out based on resources available online. With the F-150 Lightning, things won't be quite so simple. Having said that, the blended invoice structure does appear to show us that Ford is creating a new system that rewards dealers for getting things right.

The biggest components that impact a dealer's cost on the F-150 Lightning center on complying with Ford's standards and customer-focused activities. However, the fact that dealers can sell the Lightning for whatever price they like could beg the question: will buying a Lightning really be all that different?

For now, that appears to remain an open question.”

 

[ExCivilian]

I think that owner knew darn well he was making money.

You're being played once again. That dealer knew certainly what he was making, but they have no shame, he was still going to milk you for every penny he could. Quit letting them win.

Perhaps. The only thing I can say with certainty in this specific incident is he was either truly angry or lying about being angry but he wasn't charging me over ADM so didn't wring any extra pennies out of me over it.

That's why I included that bit about dating an ex who was a compulsive liar. They lie even when there is no benefit! It's bizarre. In any case, this particular owner started banging on his keyboard and told me he was being threatened by Ford with fines if he started writing sales contracts for vehicles he doesn't have in inventory and then by the end of the conversation was swearing at a Ford under his breath and handed me a signed sales contract.

So that's a weird dog and pony show just to give me what I'm asking for but, like I said, it wouldn't be the first time. It just seemed weird to hear about someone who literally didn't read the playbook because I've dealt with this guy in other contexts over the years and he's definitely an owner I can see who wouldn't have read any "playbook"

 

[jazzmanmonty]

What percentage of the vehicle cost is the raw material going into the battery?

You can't look at how raw material costs directly effect the price of a car. Manufacturers outsource everything to tier companies. They buy individual parts from them and then assemble at Ford plants. So they put in an order for say 50,000 batteries and negotiate the price from there. So it's not like Ford buys X tons of sand to produce their glass. They order all their components, put together a total cost for parts, then factor in all the other parts of the equation to determine their final cost per unit and MSRP.

 

[F-150 Prius]

You can't look at how raw material costs directly effect the price of a car. Manufacturers outsource everything to tier companies. They buy individual parts from them and then assemble at Ford plants. So they put in an order for say 50,000 batteries and negotiate the price from there. So it's not like Ford buys X tons of sand to produce their glass. They order all their components, put together a total cost for parts, then factor in all the other parts of the equation to determine their final cost per unit and MSRP.

Ford has said they're copying Tesla's homework.

Tesla has increased its price not due to supply-side economics, but due to their slow down in production and the overwhelming demand with inelastic pricing (a lack of competing products and a consumer will to pay any price.)

If raw material costs directly effect the price, then yes, that's what can be examined, and that's what the auto industry is using to rationalize oversized price hikes. The terms of the supplier contracts apparently allow the suppliers to vary prices during the contract.

As we've seen with oil and gas prices … they go up a little and retail prices go up a lot, immediately … then they go down a lot and retail prices stay up, then slowly increment down.
The auto industry has found a way to generate higher profits while building fewer cars, selling at higher average prices, with smaller inventory … they're liking it and they're in no hurry to return to the bad old days of months of inventory and the customer having choice.

 

[ExCivilian]

What percentage of the vehicle cost is the raw material going into the battery?

The most current estimate I've seen from analysis is that it currently costs about $200/kwh from "lithium" stage to installed cell. That's up from what I think was $138/kwh before the market spikes.

 

[DrZoidberg]

Because I initiated the order in my Lightning, I spec’d it online and clicked an “order button.” All the dealer did was, call to confirm what I had already confirmed when I clicked order, not provide any tangible updates during the process, sit with me for 2 hours to sign paperwork, “inspected”/washed my truck, and that was it. And then they get to walk away with $9k for what I would say is a total of 3 hours of work?

Then don’t pay a markup and the dealer won’t make as much

 

[SteelTerp87]

Then don’t pay a markup and the dealer won’t make as much

I didnt pay a markup. My MSRP was $94,000 so they made $9,400

 

[DrZoidberg]

where do they make 10% ? I thought everyone said msrp is equivalent to invoice

 

[Pioneer74]

where do they make 10% ? I thought everyone said msrp is equivalent to invoice

It is. Look at the numbers in post #34. That is how the dealers are compensated.

 

[Rob G]

I don’t think they need to cut 2000 dollars. They need to stop charging between 10 and 40 thousand over MSRP for their EV offerings.

 

[Rob G]

My dealer said they made 600 bucks plus incentives on my MSRP deal. I have no reason to not believe them. They don’t gouge dealer orders but will mark up inventory cars.

 

[GarageMahal]

My dealer said they made 600 bucks plus invectives on my MSRP deal. I have no reason to not believe them. They don’t gouge dealer orders but will mark up inventory cars.

Plus incentive is a very big number for the Lightning.

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