Fuel For Thought – Can the dealer of today serve the EV customer of tomorrow?


Automotive Monthly Newsletter and Podcast
This month’s theme: Can the dealer of today serve the EV
customer of tomorrow?


LISTEN TO THIS PODCAST

The jury is no longer out. Electric vehicles (EVs) are coming,
and in large numbers. We have heard the message loud and clear.
Nearly every major automaker in the United States has announced
significant investment commitments to transition a substantial
percentage of their product portfolio from internal combustion
engines (ICEs) to EVs.

  • The number of available EV models in the US is expected to
    increase 10 times over, from 26 in 2021 to 276 in 2030
  • The adoption of these offerings is also expected to be
    widespread
  • California’s share of EV sales in the United States is
    projected to decline from 35% in 2021 to only 12% in 2030
  • Tesla’s share of EV sales will decline from 71% in 2021 to only
    10% in 2030

To support this EV expansion, governments, companies, and EV
consumers will be required to invest considerably to build out
charging infrastructure, with the number of charging stations
increasing from 850,000 in 2021 to nearly 12 million by 2030.

But what will this transition mean for the average US franchised
dealer? What changes will be required to the traditional sales
process? Will service revenue be at risk? What investments will be
required? The pace of transition will differ dramatically across
brands, but the challenges and opportunities will be similar. The
brands and dealers that can create a simplified, customer-centric
approach through this transition will create a key differentiator
during this retail transformation.

The average franchise dealer will be tasked to sell, service,
and manage relationships with a traditional ICE vehicle customer
base, at the same time, trying to aggressively grow the EV
business. Even with the dramatic growth expectations for EVs, the
average dealer in 2030 will have a new vehicle sales mix of 70% of
ICE vs. 30% EV. On the service side, more than 80% of vehicles in
operation (VIO) will still be ICE vehicles. The prolonged dominance
of ICE vehicles will translate to hesitation from dealers to shift
their substantial resources to support EV growth. Sales manager
compensation will continue to be dominated by selling the
traditional ICE vehicle inventory. Service lanes and workshop
processes will continue to be organized around ICE vehicle
maintenance and repair requirements. The challenge will be to
maintain these core business operations while also laying the
groundwork for the transition to EVs and an evolving business
model.

Dealers are being asked to make significant investments in
charging infrastructure as they prepare for EV launches. OEMs are
establishing the prescriptive requirements based on sales
opportunity for each dealer. Although these investments are often
quite large, they are straightforward and relatively easy to plan
for. Specific EV training will be another key area of focus for
OEMs and dealer investment. Dealers may try to identify key EV
personnel as “experts” while increasing their general dealership
knowledge. This task is challenging when the majority of daily
business activity will continue to focus on traditional ICE
customers. OEMs will prioritize EV training requirements coinciding
with key vehicle launches, while also rolling out continuous
learning opportunities. Dealers will need to recognize the
long-term importance of these opportunities and prioritize the goal
of developing EV expertise across nearly all dealership roles. The
best performing dealers will look for immediate opportunities to
apply this EV knowledge. Many consumers, even those not ready to
purchase an EV, will have questions, providing an opportunity to
establish EV credibility within the existing customer base.
Understanding the reasons behind an EV purchase , proactively
identifying those customers, and creating targeted marketing will
accelerate the return on investment and establish a competitive
edge in capturing EV growth.

The transition to EVs for traditional franchise dealers
introduces a significant complexity risk. A distracted, disjointed
business will struggle, but a focused, harmonized business will
thrive. OEMs are aware of the risk. Ford recently announced its
network strategy to distinguish ICE dealers, such as those offering
the Ford Blue, from EV dealers, for example offering the Ford Model
e, creating separate, unique dealer-operating standards for each.
Ford dealers have clearly voiced some trepidation over this
approach and there will likely be some hurdles in the execution.
However, it is likely we will see more OEMs following Ford’s lead
as traditional automakers attempt to simplify the retail approach
and compete more effectively with EV-only brands, namely Tesla. If
successful, traditional automakers may find that fully leveraging
their dealer networks will provide the competitive advantage they
have been looking for to serve the EV customer of the future.

———————————————————–

Dive Deeper:

NADA Show Panel: How to
make dealerships the No. 1 resource for electric vehicles (EV)
buyers – Read More

NADA Show Panel: Marketing
measurement that works: Identifying the signals that drive
performance – Read More

Watch our webinar replay on
EV Charging Deserts: Where should we build an
oasis?

Download our Automotive
Credit Trading Whitepaper

Ask the Expert a Question –
Kristen Balasia

Ask the Expert a Question – Treffen
White

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Posted 22 March 2022 by Treffen White, Director Consulting and Professional Services, IHS Markit


This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.



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