Ford Admits Car Shopping Will Never Be The Same Again

Industry News / Comments

Times have changed. The Blue Oval must adapt.

If the global pandemic has taught automakers one thing aside from the critical importance of keeping significant semiconductor chip stockpiles, it's that consumer buying habits have changed forever. The traditional dealership business model no longer works, but that's not necessarily a negative. It's just different. Online sales will continue to grow and this means there's less emphasis on dealers and their large lots stocked with new vehicles.

Ford CEO Jim Farley, per Reuters, explained that it's better to adopt a build-to-order process where customers order the exact vehicle they want, i.e. trim, color, extra features, etc. instead of having to select from what dealers already have in stock. "We are really committed to going to an order-based system and keeping inventories at 50 to 60 days' supply," Farley said. "I know we are wasting money on incentives. I don't know where."

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Why would Ford continue building significant numbers of a certain vehicle and/or trim only to eventually discount it in order to finally sell it? It's better to let customers decide exactly what they want directly from the factory by ordering online.

In fact, the automaker has already begun utilizing digital sales platforms with Ford Express Buy for the Mustang Mach-E. There's also the Ford Blue Advantage online tool dedicated to used vehicles.

This doesn't mean dealerships are going to be shutting down left and right; they just might not need to own such massive amounts of real estate/lot space.

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2021 Ford F-150 Front-End View
2021 Ford F-150 Side View
2021 Ford F-150 Open Trunk Lid

Customers will always need dealers for essential communication and services, such as arranging test drives, delivery, and service visits. Placing online orders doesn't mean bypassing the franchised dealer, as is the case with Tesla and Rivian. Switching to an order-based system is a better way to do business.

Ford also managed to increase revenue by almost $5,000 per vehicle last quarter not by selling more vehicles as a whole, but by focusing on high-margin ones like the F-150. That's another important lesson Ford is sure to implement in future manufacturing decisions. Ford's shift away from incentivizing less popular vehicles towards building the specific ones people want is the business model we expect most automakers will eventually adapt as well.

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Front Angle View
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Source Credits: Reuters

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