30 Apr EVs Are Here…Is the US Auto Industry Ready?
Quick answer: No!
OK…that’s not very helpful, is it? Let’s dig in a bit…
The reality is electric vehicles (EVs) are about to start hitting showrooms like never before – as many as 80 new models over the next 5 or 6 years. Every major original equipment manufacturer (OEM) is bringing at least 1 EV to market and many are moving toward shared platforms and product architectures that will bridge the transition between internal combustion engines (ICE) and EVs cost effectively.
Faced with a traditional ICE pipeline that will dwindle fast as replacement EV offerings arrive, OEMs and their dealer networks have some interesting challenges ahead. For the OEMs, the case is clear. Global and national emissions standards are forcing the change. They really don’t have a choice. This means that dealer networks don’t, either.
For dealers, particularly those in the US, managing the transition to EV requires a serious look at every aspect of their operation. Collectively, the industry needs to solve for a lot of things in the next couple years including:
- Dealer Profitability After a few bumper years, auto sales growth has tapered off. Falling auto sales YoY and an uncertain dealer business case for EV (sales & service) raise questions about how ICE dealers will maintain their profitability in an EV world. How will the dealer sales and service model evolve to ensure that dealers remain profitable?
- Sales conversion times: The EV sales process is longer & more involved. Customers have more questions and salespeople are spending up to 3 times longer explaining the products, charging technologies, cost differentials and tax breaks. Faced with selling 3 ICEs or 1 EV, most dealers will favor the former – but they won’t be able to choose that option for much longer. In a blended sales environment, should dealers train everyone to sell and service EVs right away or is there a case for a phased transition?
- Confidence and knowledge: In many markets, retail salespeople are actively dissuading clients from EVs and steering them towards ICE. Of course, this is not the case in California and other states that have embraced and are actively promoting and incentivizing EVs, but it does illustrate a need to help retailers and their sales teams to be able to speak to every aspect of EVs. How will these dealers gain the confidence needed to sell EVs?
- Price: Price parity is forecast by 2025, but right now, EVs are more expensive than their similarly sized ICE equivalent. Dealers must justify the price premium during each sale and explain the various incentives and incentive eligibilities. What tools and support will dealers need?
- Relatability & Trust: EV buyers skew towards being affluent. When making purchases, they have high expectations that mainstream dealers sometimes struggle to meet. This is less of an issue for luxury vehicle dealers, but for others, learning to sell ‘premium’ in a mainstream environment is a hurdle they will need to overcome. In addition, consumers remain mistrustful of auto dealers. The industry has aimed over recent years to reset this perception, but more work is needed. Are consumers ready to trust auto dealers when it comes to EVs? What needs to change in the sales model?
So – lots of questions. Over the coming months, Strativity will be exploring each of these issues in more detail – so please keep an eye open for future posts. For now, here are a few ideas to get us started:
Digital solutions and tools are part of, but not the entire, solution. OEMs are already using online tools to take some pressure off the dealer network with new EV releases. On one hand, this is a valuable bridging strategy – technology is changing fast, and dealers have traditionally struggled to keep up. EVs are the tech shift of all tech shifts since horse-and-buggy gave way to the car! On the other hand, we are entering a period when dealers will sell EVs alongside ICEs and dealers need to lead, not lag!
Customers are better informed than ever. While they might be happy with an online price and a no-haggle sales and F&I process, they still want to engage with dealers during key moments. Interactions with dealerships are especially important in the excitement of test driving a new car, connecting with the brand, and addressing questions as they arise – not to mention focusing on service and repair support.
Navigating this industry transformation with care, teamwork, and an openness to change is the answer. For OEMs this means engaging with networks on issues relating to profitability, infrastructure, and training. For dealers, it means equipping teams to conquer their fears and understand their evolving role and the importance of their engagement with new technologies as something to be excited about and embraced.
At Strativity, we’re already working with OEMs and dealer networks on these opportunities. We’re confident that, for many, the future will be even brighter than the past.
Join us at Forrester’s 2019 CX conference in New York City on June 11th and 12th. We will be leading a workshop with two of our clients, BMW and The Met, focusing on how to successfully engage large teams in major transformation initiatives. For more information and to register, please visit: https://events.forrester.com/ehome/index.php?eventid=374365&