When Not Making an “Investment” Pays

  • June 18, 2024

Ford’s plan was to limit which Ford dealers could sell Ford EVs to those that agreed to “invest” large sums of money in alterations to the dealerships’ facilities – such as building out EV-specific service bays and adding on-site/high-voltage DC “fast” chargers for customers’ use. Dealers that made the “investment” would be part of Ford’s new Model e network, riffing on the Model T and implying an equivalence in forward-thinking smartness.

Dealers that didn’t make the “investment” would become second-class Ford dealerships that didn’t get EVs to sell.

For which those dealers are probably thanking their lucky stars – given how difficult it has become to sell EVs (and not just Ford EVs). Those that did make the “investment” not only lost the money they spent but gained an inventory of devices buyers don’t want that cost them – and Ford – money.

$100,000 per device, according to Ford. Not counting the costs of all that “investment.”

The solution? Try to sell more devices by sending devices to all Ford dealers. Including the ones that didn’t “invest” in them.

“We want to make these great vehicles more accessible to everyone,” said Marin Gjaja, who is  chief operating officer for Ford’s EV business.

This will certainly help clear the glut of devices Ford – the company – has had to stockpile because Model e dealers that made the “investment” are already overflowing with devices they can’t sell. But it’s bad news for Ford dealers that didn’t make the “investment” – that will now likely be stuck with devices as part of their allotment, which is industry-speak for the mix of new vehicles (and now, devices) a dealer gets from a manufacturer each month.

Ford dealers – any-brand dealers – want to get vehicles that sell rather than sit. The sooner they sell, the better. Because the longer a vehicle sits on a dealer’s lot, the more it costs the dealer in interest. Dealers are in fact the first owners of new vehicles; they buy them from the manufacturer – they take out short-term loans at interest – with the object of selling the vehicles they stock up.

Ideally before the next interest payment time rolls around.

“Great vehicles” don’t sit. There is no glut of Mustangs or F-150s, both of which are great vehicles – as evidenced by the eagerness of people to buy them.

With devices, the pressure to sell is compounded by the problem of keeping them charged while they sit. As readers of this column already know – and as people who already own EVs can attest – a device left unplugged will lose charge because devices are always burning power, even when they aren’t moving. The device’s battery must be kept from getting too cold when it is cold outside – and too warm when it is hot outside. This is necessary to prevent damage to the battery – and possibly to whatever’s near the device, such as your house, by reducing the risk of its battery spontaneously combusting.

That’s why devices have what are styled thermal management systems – which are essentially a heating/cooling system for the device’s battery. It’s like having a second AC/heat system. One that’s always running and so always burning power. Left unplugged overnight on a cold night, a device will typically have lost 10-15 miles of the range it had when parked the evening prior. It’s like having a pinhole leak in the gas tank of a vehicle that isn’t a device – except it can’t be fixed. All that can be done to avoid the loss is to keep the device plugged in when not being used.

Which is an interesting thing in that vehicles with engines burn no power when they are parked and so “emit” nothing when they are parked.

Devices don’t “emit” anything either.

But their burning of power while parked does require more power to be generated (and so, gasses “emitted”) elsewhere. Does it matter to the “climate” whether the “emissions” come from the tailpipe or the smokestack?

So much for “zero emissions” devices.

To staunch the trickle-loss of charge arising from just sitting, dealers must regularly “top off” their fleet of sitting devices. Hence the need for the “investment” in “fast” chargers. Else the dealer would have lots of difficulty keeping its inventory of devices charged up because of the time it takes to charge a device up. A single 30 minute test drive can suck 30 percent or more of the charge out of a device’s battery and that doesn’t leave much when a fully charged battery doesn’t endow the device with much range to begin with.

Devices also depreciate at hair-raising rates because of spreading awareness about the cost of replacing a device’s wilting battery pack. Instead of losing 30-40 percent of its value over the course of five or so years – as is typical for vehicles that have engines – devices with batteries are losing that much (or more) of their original value after as little as one year. This is one of the latest reasons for the ebbing of buyer (and lender) as well as dealer enthusiasm for devices.

A 2024 device that’s still sitting on the lot by fall – which is only a few months from now – is in peril of having to compete for the dwindling number of potential device buyers who will prefer a 2025 (model year) device. The latter devices are already being manufactured, even though it’s only midway through calendar year 2024. That’s just how the business has always worked.

The problem is the business has changed.

The government now mandates – effectively – what must be made. But it hasn’t yet mandated what people must buy. They still have the freedom not to – and so long as they have that freedom, devices are going to remain a harder sell.

Especially for the dealerships that “invested” in selling them.

. . .

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