Auto dealerships in the U.S. have quite a lot of lobbying power, which means strong influence over lawmakers who can write laws in their favor or against them, but what would happen if automakers turn their backs on dealerships and lobby only for themselves? We could find out in the coming years if Ford Motor Company (NYSE:F) signs a deal with Alibaba Group Holding Ltd (NYSE:BABA) in China and finds success.
Ford selling cars with Alibaba in China
Citing a source at the automaker, Reuters reports that Ford is expected to sign an agreement with Alibaba that could allow it to try its hand at selling cars on the company’s online platform in China. The deal could be announced as early as tomorrow, and it would reportedly allow the U.S.-based automaker to sell cars on Tmall, which is Alibaba’s e-commerce division.
In addition to Ford selling cars with Alibaba, the agreement would also reportedly allow the automaker to test a store concept called an “Auto Vending Machine.” The sales on Tmall and having its own store concept will allow the automaker to test direct sales of its vehicles—a sales model that has been met with heavy opposition in the U.S. Tesla has been barred from sales in many states due to its direct sales model because automakers are required to sell their vehicles through dealerships in most states.
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Meeting about Ford selling cars with Alibaba
According to Reuters’ source, Ford Executive Chairman Bill Ford Jr. and Ford Chief Executive Jim Hackett are scheduled to sign a letter of intent with Alibaba in Hangzhou, China tomorrow. The letter of intent will reportedly set down the details of the partnership between the two companies.
The source said that by selling cars with Alibaba, Ford is angling for a position in the emerging vehicle marketplace in China—a future in which more vehicles are being sold online. The automaker is also said to be overhauling its strategy for China, where it has lost its momentum in growth.
Although a spokesperson for the automaker would not confirm or deny Reuters’ report about Ford selling cars with Alibaba in China, a spokesman did tell the news agency that the company plans to make an announcement in Hangzhou on Thursday. Alibaba is headquartered in Hangzhou.
A Ford Automated Vending Machine in China
Reuters’ source at Ford also reportedly provided details about what Ford’s direct-sales presence in China could look like. Under the terms of the agreement, the automaker could have franchised retail stores that would deliver cars that are bought online. The franchised retail stores could also repair and offer maintenance on the vehicles, which still makes the sales model sound like auto dealerships in the U.S.
However, the deal that will reportedly have Ford selling cars with Alibaba would also enable the automaker to use Tmall’s “Automotive Vending Machine.” That’s a fancy way of saying a massive parking garage holding vehicles that are sold directly to consumers online. Reuters adds that the cars being sold could come from Ford directly or from dealerships, but the companies are still working out the details.
Alibaba explains that Tmall allows consumers to browse the vehicles stored in Tmall’s “Automotive Vending Machine” and then decide whether they want to buy one on the spot or test-drive it first. Then the vehicle is transferred to the ground floor, where they take delivery of it.
Although this business model could include dealerships, Ford is on a slippery slope heading toward direct-to-consumer vehicle sales. It’s hard to imagine how dealers wouldn’t see this plan as a threat to their livelihood because of how Tesla sells its vehicles directly to consumers online. It’s also important to note that Tesla set up a presence on Tmall a few years ago.
However, dealers may not have much to say about Ford’s plan, particularly since this is said to be happening in China. But if Ford likes the business model, there’s no telling how long it would take to convince lawmakers and regulators to allow something similar in the U.S.