From Model T to Model e
The big news in the automotive world last week – other than the possible effects on our industry of the shameful events in the Ukraine – was the announcement by Jim Farley of Ford that he was going to split the business into two separate divisions, one focused on electric vehicles ‘Ford Model e’, and one on combustion engine vehicles ‘Ford Blue’. This does not come as a total surprise as he had expressed the view in an earnings call last month that the old business was holding back the new, stating that “running a successful ICE business and a successful BEV business are not the same. I’m really excited about the company’s commitment to operate the businesses as they should be.”
The share price jumped by almost 10% the following day suggesting that investors liked the idea that a beautiful Tesla-like butterfly might be emerging from the less attractive chrysalis of the old Ford Motor Company. Manufacturing and marketing will be shared across both divisions, but product development, purchasing, sales and distribution will be dedicated. Needless to say, this has caused quite a stir amongst North American dealers, some of whom have been profiteering from the excess of demand over supply for the F-150 Lightning battery electric pick-up truck, much to the annoyance of senior Ford executives. A separation of the sales and distribution functions hints at a potential differentiated sales model, although there are no announcements yet, and some significant hurdles to jump in the USA if that differentiation was through an agency or direct sales model.
It does raise the broader question however of whether different products demand a differentiated approach which cannot be delivered by a single organisation, or perhaps a single person? This is true not only of the car manufacturers themselves, but also of the distribution networks who sell and service the vehicles. At the moment, we look at the world from the perspective of the internal combustion (ICE) vehicles as these still represent most of the sales, the vast majority of the parc and almost the totality of our experience for anyone who has been working in the industry for more than a couple years.
As a result, many behaviours, communications and decisions are influenced by that ICE-heritage. Dealer sales executives for the most part have not lived with BEVs for months and years like some of their pioneering customers, so cannot talk from experience about range or charging issues. Engineering still sets out recommended service schedules that reflect the needs of an ICE car, not the much simpler and occasional ones of a BEV. Network managers in the manufacturers welcome this as they can still look for the cross-subsidy from aftersales in dealerships that is key to them turning a profit, and their colleagues in network planning still manage standards that call for combined 3S dealerships with more workshop bays than will be required as aftersales work inevitably declines.
If we instead think about the world from the ‘Model e’ perspective rather than the ‘Blue’ perspective, I want sales executives who are genuinely enthusiastic about the products they sell, I want service schedules that highlight one of the great advantages of electric propulsion, and I want new approaches to providing that service that may further hit the need for fixed workshop capacity. I also want to exploit the higher technology levels that are typical of BEVs, even against the latest ICE products. Can I find ways to maintain the customer relationship into their ownership (or user-ship) experience through selling features on demand or over the air services? We’ve been talking about these things as an industry for over twenty years, but nobody has yet come up with a convincing proposition that customers will spend their own money on. Does that really mean that it does not exist, or is it because we’ve not been trying hard enough, possibly with people from the wrong background, still being held back by yesterday’s business?
The Ford split is something that might be replicated in other parts of the industry. Dedicated BEV sales staff in (possibly dedicated) showrooms and online channels, dedicated ICE and separately dedicated BEV service teams in both franchised and independent repairers, dedicated subscription offers that leverage the operating attributes of the different powertrains. All these things may make sense as we move forward, rather than expecting staff and facilities to cover two very different roles which require different skills and mindsets.