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Want to negotiate the price of that new Mustang Mach-E? Good luck

Car buyers looking at Ford Motor Co.'s new electric vehicles might face greater challenges negotiating deals under a new pricing model — the latest in a string of examples of how EVs are changing the auto retail landscape.

Ford is moving toward seamless pricing for new electric vehicles both online and at its dealers, meaning the customer is more likely to pay the same price whether in the showroom or online. The shift started with the all-electric Mustang Mach-E SUV and will apply to future Ford EVs. It's a move the automaker believes will offer customers transparency and consistency.

Bob Rayes, 50, of Frisco, Texas, ordered his Mach-E online in January. It arrived in June. He reached out to his dealer prior to then to get the financing ready: "There was no negotiation," Rayes said. "They basically told me the number is the number. Ford wasn’t offering any rebates or discounts on them."

EVs represent many unknowns. How quickly they will sell and how much less in revenue from servicing they will provide dealers remain unclear. This is leading automakers to rethink their retail models, though state franchise laws seeking to protect independent dealers limit how much change can be made.

Tesla Inc. sells directly to consumers online, but it's had to challenge state statutes — including those in Michigan — in court. Volvo AB in March said it would go all-electric by 2030, selling those vehicles with "set pricing" only online, though it still will make use of its retailers. And General Motors Co. is considering a pilot regional delivery center for EVs later this year.

Ford isn't moving to direct sales, the Dearborn automaker insists. But what its dealers pay for the Mach-E, which starts at $42,895, is the same as the list price that consumers pay. In return for each Mach-E sale to a customer, the automaker pays a commission to dealers after they sell a vehicle. The 4.5% commission is for delivery and meeting conditions for advertising and being a certified EV retailer, according to part of a document outlining the program obtained by The Detroit News.

An additional 0.9% is available for dealers qualifying for the Ford Commitment Program, a way Ford assesses its retailers. The Ford Dealer Council was involved in the discussions about the pricing model. But the pricing model is creating concerns among some dealers.

The plan is good for low-production vehicles like the Mach-E, said Rhett Ricart, CEO of Ricart Automotive Group in Columbus, Ohio, which owns a Ford dealership. It's transparent for buyers and offers a decent margin since such models are typically higher priced.

"I looked at it with my management team, and we thought that was very fair," Ricart said. "It's a well-thought-out program."

Where it could become more cumbersome — and potentially more contentious — is with larger-volume models and those with gas- and diesel-powered counterparts like the F-150 Lightning all-electric pickup. It is scheduled for production next spring at a starting price of $39,974, excluding destination fees.

"It could cause confusion," Ricart said. "When you have a gas vehicle sold where you can negotiate and an EV at MSRP versus just a Mach-E, which is a set price, you risk losing business."

He added: "For the cheaper vehicles in the $30,000 to $40,000 range, that's going to be a bit of an issue. It would cost dealers more to get the vehicle in and have the capital to have inventory and have facilities when you get to a cheaper vehicle like that."

Ford did not specify if the Lightning will adopt the same pricing model as the Mach-E: "For Ford all-electric vehicles, we have taken a pricing approach that enables a seamless shopping process, both online and offline, for customers and dealers," Ford spokeswoman Emma Bergg said in a statement. "This approach to pricing and dealer margin is not a step toward direct sales. Ford dealers play an important role in the sales, service and ownership experience in their local communities."

Final pricing for all Ford vehicles is between the dealer and customer in compliance with franchise laws, she added.

The payment model actually is similar to how Ford operates its employee and family discount program called the "A-Plan." But dealers selling vehicles under that plan more often receive closer to 6% in commission.

"It's just been kind of confusing being something new," said Jason MacDonald, director of operations at Village Ford in Dearborn.

Examples have been shared online of some dealers pricing the Mach-E above the manufacturer's list price in the low supply environment amid a global microchip shortage. Ford has had dealers remove mark-ups on the Mach-E that were brought to its attention.

“The few that the dealers have had on their lots have been going for $15,000 over the sticker price,” said Kelly Davis, 62, of Huntington Beach, California, who recently ordered a Mach-E. She'll pay the list price after waiting six to eight months for it. “It’s crazy, but they buy them immediately.”

If dealers feel they can't make a profit on a vehicle, they won't sell it. That doesn't appear to be the case on the Mach-E, especially with low inventories and the electric SUVs selling in just 11 days on average, according to the automaker. The Blue Oval sold nearly 13,000 in the first half of the year in the U.S. compared to nearly 32,000 gas-powered Mustang coupes.

Historical data, however, indicates that days to sell increases more for EVs than for vehicles with internal combustion engines, said Ivan Drury, senior manager of insights at auto information website Inc. Those EVs, however, often haven't been comparable in terms of range and price.

"They weren’t competitive," Drury said. "They ended up sitting at the dealerships longer. As we start seeing with the Mustang Mach-E or when the Ford Lightning comes with a comparable vehicle, price is such a nonfactor anymore. We’ll finally get to see some true comparison."

GM eyes regional centers

Other carmakers are looking at different ways to stock and deliver EVs. GM is exploring the use of regional distribution centers owned or leased by GM for the Chevrolet Bolt electric car and Bolt EUV. It's investigating one or two locations for a pilot that could begin during the fourth quarter in California.

"Dealers cannot possibly stock every configuration, color, and combination of a vehicle," Chevrolet spokeswoman Kelly Cusinato said in an email. "Having a centralized pool for them to pull from would maximize customer choice and speed of delivery without burdening the dealer with stocking every combination."

Ultimately, that effort seeks to accelerate EV adoption, Cusinato added. GM is working with its dealer councils on the plans.

Discussions ranging from a distribution center to dealer rebates are ongoing within the company to help alleviate dealer concerns with the cost of holding EVs on lots, said Ralph Sorrentino, general manager of Jim Ellis Chevrolet in Chamblee, Georgia. Vehicles sitting on lots can cost more than $100 per day for insurance, to hold the vehicle and for other care.

"Why would dealers want to go and have a massive inventory of vehicles that are going to sit for 120 days?" said Sorrentino, who notes his dealership right now doesn't have a problem selling Bolts in the tech hub of Atlanta. "Nobody knows what the turn time is going to be on (electric vehicles). If you buy these vehicles and stock them on the lot, what about the financial implications that the dealers can suffer if the vehicles don't move? If they have to discount them and start losing money, there's not a dealer in the country who will buy them.

"That's the biggest conversation. How does the factory shield and help shoulder some of that expense when the factories have to make these electric vehicles?"

The Detroit automaker sold 20,288 Bolt cars and SUVs in the first half of the year. Brett Hedrick, general manager and owner of Hedrick's Chevrolet in Clovis, California, near Fresno, sees the value for a central center in the San Francisco Bay Area, where the state's largest EV market is.

"They sell 200 EVs a month," Hedrick said. "We'll sell three. In the central part of the state, people have to drive farther. It's not a 10-mile commute. I just hope we can stay ahead with the (charging) infrastructure."

Volvo's plan

GM's distribution centers are similar to Volvo's plans for "central stocks." Volvo has four U.S. ports that receive imported vehicles. Some or all could be used as these central stocks to deliver EVs, starting with model year 2022, as quickly as possible as Volvo moves toward online-only EV sales, said Ernie Norcross, Volvo Retail Advisory Board chairman and owner of Volvo Cars Memphis in Tennessee.

Dealers perhaps would have one of each EV option on their lots, but most sales would come from these stocks, Norcross said. Customers might have to wait to get their vehicle, but the stocks could reduce costs for retailers. That's especially important in the face of declining revenue from servicing since EVs don't require oil changes and have fewer parts.

The biggest concern around online sales for dealers was losing ownership of customers and being relegated to delivering and servicing the vehicles. That won't be the case, Norcross said. All online sales, whether a customer began on the manufacturer's website or with a dealer, will go through a dealer.

"Once that became apparent, these fears went away," Norcross said. "We are involved in the customer experience from the beginning."

That will allow Volvo to comply with state franchise laws that bar automakers from directly selling to customers. And while Volvo will set a price for the EVs online, local retailers will have some pricing flexibility once the sale is in their hands.

"Most franchise laws address pricing as a restraint of trade," Norcross said. "Consumers should be allowed to negotiate a price with the individual franchisee. Financing, leasing and trade-ins are a piece of that."

Tesla has rubbed against state franchise laws. Starting in 2014, the Silicon Valley automaker couldn't sell its EVs in Michigan, forcing buyers to drive to Ohio or Illinois to pick up or get their vehicle serviced. In January 2020, Tesla struck a deal with Attorney General Dana Nessel. It allows residents to buy from Tesla so long as its EVs are first titled out-of-state. It also allows Tesla to open service centers in the state through a Michigan-based subsidiary.

The Volvo Retail Advisory Board met with executives of the Swedish automaker and advised them on a comfortable margin for these EVs, Norcross said. This margin is the difference between what dealers pay for the vehicles in their invoice and the list price at which they sell them. That margin has not been made public, though Norcross said it's not less than what retailers make on vehicles with internal combustion engines.

"It’s comparable or better," he said. "It's a win for the network."

GM also says its dealers remain a crucial part of its business.

"From a Chevrolet standpoint, we see our network of dealers as a big advantage for customers from both a sales and service perspective, and that’s even more important as we transition to more EVs," Cusinato said. "As customers look to educate themselves, we are working hard to ensure we have a well-trained network of EV specialists at our dealerships who are ready to help. We also want a more common customer experience across our online tools and at the dealerships as it pertains to the whole purchase journey for Chevy EVs."

Still, all eyes will be on Volvo to see how it executes its move.

"If they're able to make it work," Sorrentino, the dealer, said, "others will be right behind them."

Twitter: @BreanaCNoble

Staff Writers Kalea Hall and Jordyn Grzelewski contributed.