The upcoming Ford Mustang Mach E is a good start to the company’s transition away from traditional fossil fuels, however, their efforts might be hindered by the use of a traditional dealership network.
Ask basically anyone who has ever had to buy a car through traditional means, nine times out of ten they’ll tell you that their time at the dealership sucks. The process is never quick, there’s a bunch of back and forth, prices can’t be met or be upfront, and there are little things here and there attempted to be tacked on to help increase profits (no, for the last time I don’t want your paint protection). I’d go as far to say that the average customer is displeased with the good ol’ bait and switch.
Despite these hurdles, as long as you have enough patience and strong intentions you will be able to get the car you want. Even if that means taking a couple weeks to shop around multiple dealerships looking at the same exact car with different pricing.
There is one aspect of purchasing from a dealership that you probably won’t be able to win against with just sheer patience, and that’s if the car has a substantial dealer markup. With exclusivity comes opportunity. Dealerships take full advantage of low volume cars and attach ridiculous premiums, because they can.
A week or so ago it came to our attention that many Ford dealerships were adding markups of anywhere from $5,000 to $15,000 on their allocated Mustang Mach E models. Dealer markups are not a new thing, but they are typically used on very limited, highly desirable cars because at the end of the day it won’t be hard to find a buyer who will pay over sticker price. They however should not be used on vehicles that have the intention of becoming mass-market appeal.
The Mustang Mach E will have a price of anywhere from low $40k to high $50k, depending on the trim. That means a $15,000 markup is anywhere as much as a 30% premium.
A 30% premium.
Look, it’s hard enough to convince most people to try electric cars. It’s still very much an uphill battle especially when legacy automakers are still trying to convert their existing clientele from the traditional vehicles they’ve become accustomed to throughout their lives. Paying a premium on a mass-market car just makes this even harder. Mach-E reservation holders are cancelling left and right.
When Tesla sells their cars, they do so direct to the consumers. Being able to set retail prices allows them to have full control and beyond. The price you see online is the price you pay. As a result, Tesla is consistently one of the leading automakers in customer satisfaction.
While it’s clear Ford is taking note of Tesla’s success, their sales process puts a lot out of their hands. When Ford or any other dealer-based automaker releases an electric car (or any car for that matter), they not only have to make sure that it’s actually a good car that people will want to buy, but also hope that the dealership experience doesn’t make their already hard task harder.
In order to prevent the expected, Ford has instituted a policy that prevents dealers from advertising the price of the Mach E above MSRP. However, once the dealer is in contact with the potential buyer, there is nothing that Ford can do, the dealer is free to set whatever price they wish. This means that if you place your $500 online deposit for a Mach-E today, once you go to finalize your deal at the dealership, prices could very easily change. We’re already seeing it happen with dealerships informing reservation holders of their current set premium.
Ideally, competition between dealers would make it so that dealers would be forced to get rid of their markups, or at the very least significantly decrease them, but for the time being it looks like most are putting a premium on a mass-market car. After all, it’s hard to compete if both competitors are required to advertise the same price. Potential customers won’t know of the Mach-E’s true price until they give a call or walk through the door.
It will be a terrible shame if the dealership model and dealer markups result in the failure of the Mach E, which by most accounts, looks to be a very solid and competitive electric car. Such an event could lead to Ford having to cut back their electrification plans or perhaps even rework how they plan to sell future electric cars and might catalyze direct-to-consumer sales like many new electric automakers are planning.
Is any type of markup acceptable? Do you think a direct-to-consumer sales method is inevitable in the future? Let us know down in the comments below.