The automotive industry is quickly shifting to an electric future, but are dealerships keeping pace? Experts Peter Harms, Saurabh Mahajan, and Ryan Monahan outline three hurdles dealerships face and how they can overcome them.
Electric vehicle (EV) registrations grew by 60 percent in Q1 2022, comprising 4.6 percent of all new car registrations. While customers are migrating away from internal combustion engine (ICE) cars at their own leisure, dealerships may not have the same luxury if they intend to maintain high-performing operations.
Dealerships have a unique challenge to address in today’s environment – ICE customers represent the majority of current revenue, but these cars will soon be replaced with EVs. EVs require different services and offerings, forcing dealerships to re-evaluate their businesses to stay competitive in the future. Revenue generating programs from ICE customers must be maintained as these vehicles phase out, but innovative programs for EV owners must be developed simultaneously to ensure future profitability.
There are some immediate gaps that dealerships should look to address to successfully accommodate EV customers, without impacting ICE business. Below are three hurdles dealers need to focus on as the industry electrifies:
- Customer Education: Enhance dealership resources to educate interested EV buyers and draw them deeper into the sales funnel
- Service Department Evolution: Update service department infrastructure and develop new revenue streams to prepare for more EVs in circulation
- Customer Lifecycle Management: Prepare to closely manage the EV customer to retain individuals throughout their lifecycle
Customer Education
EV customers have significantly more questions and concerns about vehicle ownership during the vehicle purchasing process than ICE shoppers. Among customers in the market for new or used cars, only 23 percent of consumers have indicated that they would purchase an EV. The root cause for this hesitation comes from ownership anxiety.
To put purchasing concerns into perspective, the top barriers for customers interested in buying EVs include concerns about:
- Lack of charging stations in a local vicinity
- Battery charging cost and time
- Range anxiety and battery mileage
- The cost of maintenance, specifically battery replacement
Over 40 percent of customers reference dealership websites and communications when researching and making their purchasing decisions. Dealership sites and marketing provide valuable opportunities to win sales by overcoming customer anxiety and educating individuals about EVs.
It’s clear that customers expect to learn everything they need to know about EVs from their dealership. It’s critical that dealers are ready and able to provide this information, as it’s crucial to closing the sale. Marketing for EVs should be geared toward highlighting the unique benefits of these cars and proactively handling common objections. Sales associates, meanwhile, should simultaneously be trained on articulating the vehicle’s value.
As EV customers move deeper into the sales funnel, dealership sales associates must focus on educating buyers to ease any concerns. This anxiety stems from purchasers needing to alter their previous ownership behaviors and learn EV-specific information. The sales force must be able to teach customers about frequently asked topics, specifically:
- Tax credits (federal, state, local, utility)
- Charger availability in their area
- Home charging capabilities
- Impact of towing on vehicle range
- City vs. highway impact on range, compared to ICE cars
- Ownership and repair best practices for EV longevity
Dealerships will need to invest in programs to train their staff on becoming adept at these skills, so associates can interact with customers effectively and improve sales performance.
Service Department Evolution
As the number of EVs sold within a dealership grows, service departments also need to evolve. Specifically, dealerships need to invest in new infrastructure to accommodate EVs, as well as develop additional revenue streams to compensate for lost service dollars from a shrinking ICE population.
EVs require different equipment and knowledge to receive quality service, pushing dealerships to invest in updated infrastructure and training within their service department. Specifically, dealerships need to incorporate:
- Stronger lifts to compensate for a higher volume of EVs with heavier frames
- Adequate charging stations to handle more EVs arriving at dealerships
- Tools required for EV specific repairs
- Technical training for specialists so they are prepared to service EVs adequately
The growth of EVs is also a threat to the revenue generated from the service lane. EVs require significantly less maintenance than ICE cars, which is only enhanced by more advanced technology, reducing repair rates. To compensate for this loss, dealers should begin creating new revenue-generating programs, specifically:
- Offering more “EV specific” finance and insurance (F&I) products to increase customer adoption
- Growing accessories sales for EVs to increase dollars per repair order
- Providing additional service offers, such as roadside assistance, pick-up, and delivery
- Offering EV specific services, such as battery replacement or technology troubleshooting
- Building out additional maintenance programs, such as car detailing
- Subletting repair services, including collision and glass among other categories
Dealers will suffer if they act reactively. The inability to accommodate EVs and create new revenue streams within the business will lead to higher risks in the future as more ICE cars are retired. Acting proactively allows dealerships to continue offering high quality service while growing their business for the future.
Customer Lifecycle Management
EVs have significantly lower maintenance and repair incidences, reducing dealer touchpoints with customers that are crucial for retaining individuals in the value chain. It’s important for dealers to make up for this gap by improving CRM communications and finding unique opportunities to keep customers engaged.
Dealerships can provide value to customers by improving communications following the point of sale, specifically:
- Sending initial ownership Best Practices to customers as they adjust to their EV
- Providing unique maintenance interval reminders for EV customers
- Promoting EV advertisements, such as charging discounts or unique accessories
- Communicating EV specific community events to customers
Sending similar messages to all customers and neglecting to segment EV customers will convey an impersonal experience that may push individuals toward other dealers and brands in the future. While this neglect may not have initial implications, its delayed effects will impact retention when the time comes for these individuals to renew their leases or interact with a dealership again.
Sending similar messages to all customers and neglecting to segment EV customers will convey an impersonal experience that may push individuals toward other dealers and brands in the future. While this neglect may not have initial implications, its delayed effects will impact retention when the time comes for these individuals to renew their leases or interact with a dealership again.
Conclusion
If they want to maintain revenue-generating, quality operations as EV sales grow, dealerships need to change their processes. Dealers should focus on treating EV buyers differently than traditional car owners, specifically:
- Educating customers that are interested in EVs to draw them deeper into the sales funnel and convert them to final sales
- Evolving service department infrastructures and customer offerings to accommodate EVs and claw back revenue from decreasing ICE cars in circulation
- Improving customer life cycle management for EV owners to compensate for fewer dealer touchpoints and retain individuals in the value chain for the long run
As dealerships are striving for future growth, we are committed to acting as a partner to drive enhanced growth. The firm is a globally leading strategy consulting firm focused on sales excellence and business growth to aid businesses in unlocking their potential.
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