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 (F) 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 (TSLA). 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.
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.