A few weeks back, we first heard about legacy automaker Ford’s (F) plans to fundamentally change their dealership model in a way that may well make it unrecognizable to others. But with Ford increasingly trailing behind its competitors—not long ago we found that Ford was number seven in sales, behind Chinese company BYD (BYDDF)–it may need something big to shake it up and return it to prominence.
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So what does Ford have in mind? Well, based on the original reports we got back in October from Ford Authority, Ford dealers are struggling under rising inventory levels. So it is clear that Ford needs to get people back into dealerships ready to buy. However, Ford does not necessarily want customers to be able to buy a car at the dealership, so instead, it is looking to a sales model like Tesla (TSLA) uses, in which car buyers order their car online for delivery.
Such a move is groundbreaking, to say the least, but whether for good or for ill is unclear. After all, a one-size-fits-all sales plan means that customers will never be able to see how a vehicle fits them. Is there enough head room? Leg room? Are the controls laid out in a pleasing fashion? These factors are all removed from the customer’s control in such a case. Test drives are all but gone. And what of the concept of used vehicles, if there is “no inventory on lots,” as the Ford Authority report noted?
Dealership Switches are Not New
There are a lot of unanswered questions connected to this plan, and Ford will likely not reveal any of the answers until 2025, when the changes are projected to hit. Ford has already shaken things up before; remember 2023, when a different Ford Authority report noted that Ford broke off into Ford Blue for traditional, gas-powered cars and Model e for electric vehicles.
Before then, in 2022, an Edmunds report noted that Ford dealers would be expected to pay more for the right to sell electric vehicles to begin with. And not long after that, Ford Authority detailed Ford’s Flex Buy loan option that gave customers the ability to spread their payments out over longer terms when unexpected issues rose up certainly helped things from there.
But perhaps the biggest sign of what Ford has in mind came from a QAD blog post from 2023, in which detailed how Ford dealerships in Europe would be moving to an “agency model,” in which dealerships are little more than facilitators for customers to buy their product direct from the manufacturer. Ford pitches this as “one set market rate,” with “no guessing, no more haggling, no more shopping from dealer to dealer. Just log in, browse, build and purchase.”
And that sounds reasonable, except for one thing: what happens to your used car when the dealership no longer carries inventory? Suddenly you are left to sell your own car by the side of the road, or hope the newly-minted “facilitator” dealership wants to carry on in the used car trade.
With a Statista report noting that used cars typically outsell new cars by at least two to one in any given year—sometimes nearly three to one—that is a lot of business that dealerships will not want to miss out on. And if Ford forces dealers’ hands to only sell new cars via this agency model, it may produce an effect that Ford would rather not deal with; a bunch of dealerships jumping ship to competitors’ models.
Is Ford Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Hold consensus rating on F stock based on four Buys, eight Holds and two Sells assigned in the past three months, as indicated by the graphic below. After a 13.92% loss in its share price over the past year, the average F price target of $10.89 per share implies 8.68% upside potential.
