Ford’s CEO Says Tesla Needs To Be Taken Seriously As The Dominant Player In The EV Market
Long gone are the days when Tesla and Elon Musk were at the butt of many legacy auto jokes. The silly notion of an electric car proved to be an idea that isn’t so silly after all. It’s ruthless and cutting edge. And legacy automakers still aren’t prepared for it. Recently, Ford CEO Jim Farley held an internal meeting with some 20,000 Ford employees, and a good portion of that meeting was about Ford’s competition, primarily Tesla.
The Detroit Free Press was able to get a copy of the video of the meeting, and according to it, Farley said that Ford needs to take Tesla seriously as the dominant player in the EV market. He compared Ford with Tesla while also using charts and graphs.
The article noted that Farley mentioned Volkswagen and Rivian as well. Farley’s main focus, however, was on Tesla. The article noted that Farley’s tone was rather serious while discussing Tesla and that he emphasized that Tesla was operating from a position or place of strength, using charts, graphs, and specific comparisons.
“If Ford was a trillion-dollar company, our stock would be worth about $250 a share. Think about the value creation of Tesla right now. And they have resources, smart people, the Model 3 is now the bestselling vehicle in Europe. Not electric. Flat out. It was the bestselling vehicle in the UK. Most months, it’s the bestselling vehicle in California. Not just electric, but overall. If we’re going to succeed, we can’t ignore this competition anymore,” Farley said.
“Look at Tesla, why are they doing what they’re doing and what can we learn from them. First, they have a direct model … There’s no one in between. They make it so easy. Three or four clicks configuring the vehicle with not a lot of complexity to delivering it to the customer. Simple, non-negotiated pricing. A large reservation system as well as remote service.
“Second, Tesla maximizes use of electrons in the vehicle. No one does it better than they do. Their customers pay less for a better battery. …
“Third, the product itself is highly differentiated from the rest of the ICE field and complexity is tiny, compared to OEMs.”
That isn’t all. The article noted that Farley pulled out a chart and said that Ford’s competitors are “unbelievable in this space,” and added that this is something Ford hasn’t ever seen before. Farley also mentioned that even though Ford’s investment in the EV startup Rivian is expected to pay off, Rivian is also a formidable competitor to Ford. He also spoke about Volkswagen and noted that it was the second-largest producer of EVs in the world — behind Tesla. (It’s actually third, but who’s counting? Or, well, it’s second if you count plugin hybrids.)
Will Ford Do Away With The Dealer Model?
The dealer model is pretty toxic to the auto industry. Before Tesla and its direct sales method came along, the only way you could buy a car was through a dealership or directly from the car owner. With regards to the latter, I know folks who got scammed from buying used cars off of Craigslist, but the former is highly toxic.
When Farley brought up the “direct model,” he was referring to how Tesla sells its vehicles. And his willingness to learn from Tesla indicates that he is considering changing how Ford’s vehicles are sold. He even admitted that there isn’t a lot of complexity, whereas how Tesla is selling and delivering vehicles to its customers is super simple. He noted that it has simple, clear pricing and that there is no negotiating. Farley is certainly aware of how many dealers scam their customers with markups and hidden fees. The question I have is what is he going to do about it? Will he follow Tesla’s lead and phase out dealerships?