GM and Ford depend on electrical vehicles. That is how merchants give it some thought
A sign will be unveiled at General Motors Detroit-Hamtramck Assembly on October 16, 2020, introducing the facility’s new name: Factory Zero, Detroit-Hamtramck Assembly Center.
After years of predictions that battery-powered sedans, pickups and SUVs would replace fuel-guzzling, emission-saving models, the switch to electric vehicles is in full swing. In addition to electric vehicle pioneer and market leader Tesla, virtually every major automaker is lining up to flip the electric switch, and it’s a big deal not only for consumers but for the thousands of dealerships across the country embracing the electric future have to ask.
General Motors has announced that it will only produce electric vehicles by 2035, with 30 new plug-in models to hit the market by 2025, representing an investment of $ 27 billion. Ford, which previously allocated $ 22 billion to develop electric vehicles, just announced that 40% of its vehicles will be electrified by 2030. Toyota, Volkswagen, Daimler, Hyundai, Fiat Chrysler, Honda, and other automakers make similar commitments.
In preparation for this onslaught of new models, franchise auto dealerships in the United States – many of them long-standing small businesses in suburbs and rural communities – are preparing. Sales reps are preparing to put you in an EV today. And because electric vehicles have fewer moving parts, service technicians are trained to maintain them.
“Electric vehicles are the big hot topic right now,” said Mark Paladino, general manager of Colonial Ford in Danbury, Connecticut and a 40-year veteran in the industry. He was still excited about Ford’s debut F-150 Lightning pickup, an all-electric version of the country’s best-selling vehicle line for four decades in a row.
Ford F-150 Lightning exceeds expectations
Paladino’s excitement is justified when you consider that in the first week of its official release on May 19, Ford.com collected 70,000 reservations for the Lightning, with $ 500 deposits for each, reported Jason Mase, Ford’s Cross Vehicle Marketing Manager. “Almost 70% of these customers were new to Ford, 90% ordered the highest equipment variant and 80% ordered the battery with extended range,” he reported. “It exceeded our expectations.”
Colonial is one of 2,300 Ford dealerships out of a total of approximately 3,000 who have volunteered for EV certification, an investment that includes training sales and service personnel, upgrading battery charging stations, and purchasing specialty equipment, parts and tools. The remaining third have so far opted against spending nearly $ 50,000 on certification. Other manufacturers charge more than $ 300,000 for the designation.
“We were all there right away,” said Paladino, adding that the family-run dealership had previously received training on several gas-electric hybrid models as well as Ford’s first electric vehicle, the Mustang Mach-E SUV, which was unveiled in December 2021. “We see electric vehicles as part of our business that is only going to get bigger, and we want to be in this world.”
Electric vehicles account for less than 3% of total new vehicle sales in the United States. Tesla has dominated the market, making up about 55% of it, according to Credit Suisse – although that’s down from 72% a few months ago, reflecting growth in the US competition.
Although electric vehicles now make up a fraction of the US auto fleet, they “will later become a significant part of a car dealer’s business,” said Chris Sutton, vice president of auto retail at research firm JD Power.
Read more about electric vehicles from CNBC Pro
A report by Bloomberg New Energy Finance estimates that electric cars will account for 58% of global car sales by 2040, with China, Europe and the US all ahead.
“By providing their sales and service expertise and serving as an educational resource for customers, they create value for the automakers,” Sutton said of the dealers. Though he added that many dealerships elsewhere are in wait and see mode as EV sales have so far been concentrated in the coastal states of Michigan and Texas.
Two thirds of car consumers are interested in electric vehicles
In addition to the manufacturers’ ambitious targets, the Biden government has proposed spending nearly $ 42 billion to build nationwide electric vehicle charging infrastructure, gas prices have risen, and ExxonMobil shareholders have elected three climate-friendly directors from an activist investment group are supported blackboard. However, support for Biden’s infrastructure spending plan, which is tied to infrastructure spending for electric vehicles, remains uncertain.
Car dealerships focus on the here and now. They should, therefore, be encouraged by a Cars.com survey that shows that two-thirds of Americans are interested in buying an electric vehicle despite obstacles like higher sticker prices than internal combustion engines (ICE) and the shortage of charging stations. Additionally, some EVs still qualify for a federal tax credit of $ 7,500, while states like California, New Jersey, and New York offer additional discounts of up to $ 5,000.
This data helps explain why the 17,000 members of the National Automobile Dealers Association (NADA) “can’t wait for EV products to arrive,” said NADA President and CEO Mike Stanton. “Dealers are in the business of selling cars and making customers happy, so why not sell electric vehicles?” he said, dismissing reports of lackluster enthusiasm among dealers.
Political support for climate change policies varies across the country, and over the past year Republican support has waned for the federal government to make clean energy action a top priority, according to a recent poll by Yale’s Climate Change Communication Program and George Mason Center for Climate Change Communication. However, there remains considerable support among Conservatives for giving tax breaks to people who buy energy-efficient vehicles or solar panels: 78% of moderate Republicans and 60% of Conservative Republicans. It was the only “climate-friendly energy policy” in the poll that received a majority support from both moderate Republican and Conservative registered voters.
EV service will definitely evolve and won’t be exactly the same. … Nobody panics about this, but we know this will change over time, so we’re working on it with our dealers.
Travis Hester, GM’s Chief Electric Vehicle Officer
However, a real problem for dealers is the fact that EVs don’t require oil changes, transmission repairs and other ICE vehicle service owners routinely carry – and that accounts for 50% of dealers’ gross profit. A 2019 report by AlixPartners estimates that over the life of each electric vehicle they sell, dealers could see $ 1,300 less in service and parts sales.
Although 70% of the aftermarket services for ICE vehicles are handled by independent shops, franchise dealers do not want to cede electric vehicles to them, especially since consumers are familiarizing themselves with battery charging and other special features. “Electric vehicle owners may trust dealerships more to provide service than aftermarket stores when they first started their ownership,” said Sutton.
The service element is occupied by Rita Case, CEO of the Rick Case Automotive Group in Ft. Lauderdale, which represents VW, Hyundai, Honda, Audi, Mazda and other brands at its dealerships in South Florida and Atlanta. “Electric vehicles need tires, brakes, batteries, lights, and some maintenance on the steering and drivetrain,” she said. Rick Case Auto already sells and services a limited number of electric and hybrid vehicles, but “within the last six months we have stepped up electric vehicle training for our salespeople and technicians and purchased new charging equipment,” in anticipation of increasing consumer demand for new electric vehicle models, said Case.
The 2024 GMC Hummer EV SUV and the 2022 GMC Hummer EV Sport Utility Truck or SUT.
GM prepped its 4,100 franchise dealerships last year for not only the refreshed Chevrolet Bolt – an early EV entry-level that went through a redesign – but also the upcoming electric GMC Hummer and Cadillac Lyriq. “Service is critical to what our dealers do today and will be in the future,” said Travis Hester, GM’s chief electric vehicle officer. “The EV service will definitely evolve and won’t be exactly the same” compared to that for ICE vehicles, he said, noting that some EV parts can last for 10-15 years. “Nobody panics about it, but we know that will change over time, so we’re working on it with our dealers.”
Meanwhile, Paladino cannot keep up with Colonial Ford’s conventional service demands. “We book and service every vehicle we can,” he said. “At the moment I’m on the road for three weeks servicing your car.”
Online car sales threat
Another issue that concerns dealers is Direct Selling (D2C), the business model that has driven Tesla’s marketing of more than 385,000 electric vehicles on US roads to date. Tesla operates about 130 company-owned showrooms, but sales are done online. At the last count, 33 states allowed D2C cars to be sold, with other lawmakers debating bills that would circumvent the so-called franchise system that has legally linked dealers and manufacturers for more than a century. NADA, state dealer groups and traditional automakers have spoken out in favor of maintaining the franchise system, claiming that there is a level playing field.
On the other hand, online marketing is nothing new to automobile manufacturers and dealers. Each brand maintains a website where buyers can view models and prices, and even customize a new car. But they will ultimately be referred to a local dealer who will finalize the transaction and aim to build a loyal relationship that includes routine maintenance, service, and possibly a future sale.
The generation of pedestrian traffic – the proverbial routine of “stepping on the tires” – is the lifeblood of the dealers’ business models. So to survive, they have to adapt to consumers’ appetites to buy directly online, a routine that only broadened during the pandemic. That means manufacturers can make reservations and deposits online like Ford and other manufacturers do, and find ways to create and maintain long-term relationships with a new generation of EV drivers, such as mobile service technicians making house calls. “The dealer network has been around for a long time because they can adjust to where the market is and what customers expect and need,” said Sutton.
The auto industry is at a turning point in the transition to electric vehicles, and retailers large and small will have to turn again. “If you want to play in the EV sector, you have to embrace it now – the charging infrastructure, the parts, the equipment, the work,” said Paladino.
While Case is waiting for greater demand for electric vehicles, she is “super positive” about the future. “I sell cars and I know for sure that people will want cars.”