A silver lining for electric vehicles and stationary operations
Dealership profitability relies on vehicle sales, yes, but just as significant – or more – of service department.
A 2019 Cox Automotive study showed that 49% of dealer gross profit came from fixed operations, although the COVID-19 pandemic most certainly reduced that as people drove less.
Either way, that’s a lot of money, and an emerging threat to that revenue is electric vehicles, as we’ve noted in this story. Electric vehicles do not have the typical maintenance issues of internal combustion engine (ICE) vehicles, such as spark plugs and air filters. Electric vehicles will still need tires, shocks and wipers, etc., and they will have other systems to adjust. But the general consensus is that fixed operations are going to have a hit.
A 2020 study by US-based Consumer Reports found that, compared to ICE vehicles, electric vehicles and plug-in hybrids had 50% lower average lifetime repair and maintenance costs for same distance traveled.
If around half of dealership profits come from fixed operations and EVs cut it in half, then retailers’ concern is understandable.
Fewer service visits means less revenue and fewer opportunities to upsell customers in new vehicles.
If there’s a silver lining, it could be winning back business from the aftermarket. Customers might want to keep going to the dealership for repairs after their EV warranties expire, instead of heading across the street to Canadian Tire or Costco, which is common with ICE vehicles. The JD Power 2021 Canada Customer Service Index shows that the aftermarket receives 54% of vehicle service visits.
“Additionally, aftermarket locations increased their share of overall industry revenue to 44% in 2021 from 40% in 2020, representing a change of over $200 million in relative revenue share. This reverses a multi-year trend of new-vehicle dealerships steadily taking a larger share of revenue. »
Will electric vehicles remove that needle? Logically, yes. Dealerships are the experts on the brand of electric vehicles they sell. They will have the specialized parts and their technicians will have the specialized training and tools. On the other hand, the aftermarket will have to be an expert on all electric vehicles from all automakers. This level of training and commitment to the tools and processes seems like a tall order.
Electric vehicles could prevent fixed-operating services from losing long-term business, but there’s another way to do it: by making customers happy.
But how? With communications. Spoiler alert, it increases satisfaction, according to the JD Power study. Prompt and detailed communication on needed repairs and basics: text message when vehicle is ready for pickup. No communication drives people crazy.
“That’s the big problem customers have with car dealerships, not getting timely information about…is my car finished and when will it be finished,” Kimoby’s Dan Robinson said in the August 5 Automotive News Canada podcast. He spearheaded the design of a platform that accelerates transactions and integrates communication between dealership departments and with customers.
“It’s not revolutionary, it’s what customers expect now.”
Bonus: Texting can also increase profitability by reducing the time it takes for customers to give the go-ahead for repairs. It “boosts productivity in the store,” Robinson said, adding that BMW required its retailers to have such a solution.
Whatever drop in service visits dealerships are experiencing with electric vehicles can be offset by efficiencies and increased customer retention – and by great service and communication – but that will require before everything from tools and special attention to customers.