Electric vehicle manufacturers are working to ensure that car dealers meet their plans for the future
Shoppers wearing protective masks inspect the interior of a car for sale at a Ford Motor Co. dealership. in Colma, California on February 1, 2021.
David Paul Morris | Bloomberg | Getty Images
DETROIT. As automakers chase Tesla-like profits from new electric vehicles, they are facing the existential question of how best to attract franchised auto dealers as they transition to electric vehicles.
Some like General Motorsare asking luxury goods dealers to go all-in on electric cars or go out of business. Others like Ford Motor offer various levels of “EV certification” to dealers, while most other automakers or OEMs know they need to change their sales process to fit the evolving industry, but are still trying to figure out how.
“I think we all build this plane while we fly,” Michael Alford, president of the National Automobile Dealers Association, a trade association that represents more than 16,000 new US franchise dealers, told CNBC. “Depending on the OEM, the level of engagement or intensity of engagement varies.”
Automakers and franchised dealers have a complicated relationship, which in many states is supported by laws that make it difficult, if not illegal, to bypass franchised dealers and sell new cars directly to consumers. (Tesla and other new electric vehicle startups are circumventing such rules to cut costs.)
Both automakers and franchised dealers want to maximize profits, but they are different businesses whose success depends largely on each other. Dealers rely on automakers to fill and pick up products, and automakers in turn rely on dealers to sell and service cars and serve as customer concierges.
How these historic relationships fit into an all-electric future is expected to be at the center of discussions between automakers and dealers at the National Automobile Dealers Association Show in Dallas on Sunday. The event attracts thousands of franchised dealers every year to learn about their automotive brands.
For dealers ranging from family-owned stores to large public chains, electric vehicles will mean training new employees, infrastructure and significant investments in their stores to be able to service, sell and charge vehicles. Depending on the size of the dealer, these upgrades can easily cost hundreds of thousands or millions of dollars. Of course, they want to make sure their investment pays off.
“The tone and content of this thread has changed and I think it’s very, very clear this year that our legacy OEMs are absolutely aware that we’re needed to move forward,” said Alford, who manages Chevrolet and Cadillac dealerships in North Carolina.
Compete with Tesla
As more automakers adopt electric vehicles, they are rethinking the sales process, including selling new cars largely, if not entirely, online. Tesla was one of the first automakers to move online for much of its business, although it still maintains physical dealerships, information sites and service centers.
A greater shift online could limit the role of dealers to rigorous handling, service and delivery centers in the future and eliminate the need for large batches of vehicles that they then sell to consumers.
“In general, the franchise system remains in place even for electric vehicles from traditional automakers, although they all seem to be looking for ways to tweak it to make it more competitive, as they say, with the Tesla of the world,” said Michele Krebs. , executive analyst at Cox Automotive.
Automakers believe that this will provide consumers with a smarter and more seamless sales process, but they also consider dealers as partners and offer “strategic advantages” when it comes to other sales and service issues.
Tesla dealership in Colma, California on Wednesday, January 26, 2022
David Paul Morris | Bloomberg | Getty Images
Honda Motor said it plans to move more sales online, including 100% online sales of its luxury electric vehicle brand Acura. Mamadou Diallo, US Honda’s vice president of sales, said the plan is to simplify the online ordering process, but still have the car picked up or delivered by dealers. However, according to him, these procedures are still being worked out.
“We want to continue to provide the convenience of what customers are looking for without having to bypass our dealership,” Mamadou said on a media call Tuesday.
Jay Vijayan, who helped build Tesla’s digital and IT systems, doesn’t believe selling EVs exclusively online will pay off. He said it’s best to combine points of sale, which is why Tesla and new electric vehicle startups are selling online, and opening new showrooms and service centers.
“An Apple still opening new stores, right? And every company that you think is going direct is also opening new stores in the automotive space,” said Vijayan, founder and CEO of Tekion, a cloud dealer services provider.
Wall Street analysts mostly viewed direct-to-consumer sales as a means of optimizing profits. However, when it comes to car maintenance, Tesla has problems.
Ford CEO Jim Farley said he wants the automaker’s dealers to cut sales and distribution costs by $2,000 per vehicle in order to be competitive with Tesla’s consumer-facing model.
Ford is among the automakers that have received the most negative feedback from dealers for its EV promotion, which includes EV certification levels that can cost upwards of $1 million per store, depending on the size of the dealership.
The Detroit-based automaker is facing legal challenges with its certification program from dealers who claim the plan violates franchise laws. A group of 27 dealers in Illinois filed a protest with the state motor vehicle review board, and last month four dealers in New York filed a lawsuit against the automaker. according to Automotive News.
Ford dealer Mark McAver said he signed up for the highest level of electric vehicle certification at his dealership near Kansas City, Kansas, but is concerned about the cost and timing of the program.
“I think we’re all worried that what they’re forcing us to install now, by the time we actually get some cars, will be outdated and need to be upgraded or replaced,” said McAver, who also owns a Lincoln dealership. .
In addition to the investment, dealers who choose to sell Ford electric vehicles will need to meet five standards to stay in good standing: clear and non-negotiable pricing; accrual of investments; training; and an improved car buying and ownership experience for customers, both digitally and in person.
Ford plans to make some changes to its electric vehicle certification levels on Saturday, two people familiar with the plans said. Changes like first reported Automotive News will reduce the differences between the two levels of the program. The lower tier features less capital investment, but also fewer EVs from Ford.
Ford, however, unlike General Motors, allows dealers to opt out of selling electric vehicles and continue to sell the company’s gas-powered vehicles.
GM has offered a buyout to its Buick and Cadillac dealers who don’t want to fork out to sell electric vehicles. About 320 of Cadillac’s 880 retailers completed the buyout. The Buick buyout is ongoing, a spokesman said.
Toyota Motorfor its part, has no plans to overhaul its franchised dealer network as it invests in electrified vehicles, CEO Akio Toyoda told dealers in September to thunderous applause.
“I know that you are worried about the future. I know you’re worried about how this business will change. While I can’t predict the future, I can promise you this: you, me, us, this business, this franchise model is here to stay. It remains as it is,” said Toyoda, who will step down as CEO to become chairman in April.