Fortune Minerals : COBALT NEWS

Unknown - June 13, 2021

Many auto dealerships are embracing the electric vehicle transition, but there are concerns about costs to be paid, staff training and impact on lucrative service department business.

After years of come-and-gone predictions that battery-powered sedans, pickups and SUVs would replace gas-guzzling, emissions-spewing models, the shift to electric vehicles is revving up. Beyond EV pioneer and market leader Tesla, virtually every major auto manufacturer is lining up to flip the e-switch and it is not just a big deal for consumers, but the thousands of auto dealerships across the country that will need to embrace the electric future…General Motors has said it's aiming to produce only EVs by 2035, with 30 new plug-in models arriving by 2025, marking a $27-billion investment. Ford, which previously committed $22 billion to EV development, just announced that 40% of its vehicles will be electrified by 2030. Toyota, Volkswagen, Daimler, Hyundai, Fiat Chrysler, Honda and other automakers are making similar pledges…In preparation for this onslaught of new models, franchise car dealers in the U.S. - many of them longtime small businesses located in suburban and rural communities - are gearing up. Salespeople are getting ready to put you in an EV today. And because EVs have fewer moving parts, service technicians are being trained to maintain them…Colonial is one of 2,300 Ford dealers, among a total of roughly 3,000, that have volunteered to become EV-certified, an investment that entails training sales and service personnel, upgrading battery-charging stations and purchasing special equipment, parts and tools. The remaining third have thus far opted out of spending nearly $50,000 for the certification. Other manufacturers are asking for upwards of $300,000 for the designation…EVs comprise less than 3% of overall new-car sales in the U.S. Tesla has dominated the market, making up about about 55% of it, according to Credit Suisse - though that's down from 72% a few months ago, reflecting the growth in competition…A Bloomberg New Energy Finance report estimated that by 2040, EVs will account for 58% of worldwide passenger vehicle sales, with China, Europe and the U.S., respectively, leading the pack…One genuine concern for dealers, however, is the fact that EVs don't require oil changes, transmission repairs and other service owners of ICE vehicles routinely bear - and that account for 50% of dealers' gross profits. A 2019 report from AlixPartners estimates that dealers could see $1,300 less revenue in service and parts over the life of each EV they sell…'EVs need tires, brakes, batteries, lights and some steering and drivetrain maintenance,' she stated. Rick Case Auto is already selling and servicing a limited number of EVs and hybrids, but 'within the last six months we've ramped up EV training for our salespeople and technicians and purchased new charging equipment' in anticipation of increased consumer demand for new electric models, Case said…Another issue on dealers' minds is direct-to-consumer (D2C) sales, the business model that's fueled Tesla's marketing of more than 385,000 EVs on U.S. roads to date. Tesla does operate about 130 company-owned showrooms, yet sales are transacted online. At last count, 33 states allowed D2C auto sales, with others' legislatures debating bills that would bypass the so-called franchise system that has legally connected dealers and manufacturers for more than a century…Generating foot traffic - the proverbial 'kicking the tires' routine - is the lifeblood of dealers' business models, so to survive they will have to adjust to consumers' appetite for buying directly online, a routine that only expanded during the pandemic. That means letting manufacturers take reservations and deposits online, as Ford and other manufacturers are doing, and finding ways to attract and foster long-term relationships with a new generation of EV drivers, such as special test-drive events, on-site charging and mobile service techs who make house calls. 'The dealer network has been around for a long time because they are able to pivot to where the market is and what customers expect and require,' Sutton said…The auto industry is at an inflection point in the transition to EVs, and dealers large and small will have to pivot once again. 'If you're going to play in the EV sector, you've got embrace it now - the charging infrastructure, the parts, the equipment, the labor,' Paladino said.