A very interesting article in The Washington Post, “Electric vehicles are hitting a road block: car dealers”, reveals how carmakers looking to put EVs at the center of their sales strategy are being blocked by their own car dealers.
The main reason dealerships hate EVs is that they don’t create the kind of revenue petrol and diesel vehicles do. Traditional cars need servicing every year or 12,000 miles, and tend to break down relatively frequently, unlike EVs, whose own diagnostic systems tell you when they need a part replaced or something is wrong.
Typically, only about 16% of a dealership’s gross profit comes from vehicle sales, while 43% comes from parts, labor and service, with the remainder from financing, incentives and used car sales. But an internal combustion vehicle has a hundred times more parts than an EV and the maintenance costs are also much lower: while an average internal combustion vehicle needs an oil change every six months, many EVs do not require significant maintenance until beyond 150,000 miles.
This significantly reduces the margins on the workshop side of dealerships and terrifies dealers, who are thus reduced to being a mere sales channel and will then rarely or never see the customer again. In addition, as EVs are a new technology customers know less about, they tend to make more visits and ask more questions at dealerships about how to drive them, range anxiety, or doubts about charging, which slows the sales process down and, therefore, is less profitable. All this coupled with the fact that, particularly in the case of traditional brands, EVs are already less profitable, because they haven’t learned how to improve economies of scale.
The result is that dealers are frantically trying to convince customers not to buy EVs, even if it means lying or scaring them by telling them that EVs spontaneously combust (totally false), and in many cases, they probably succeed by doing so. This is further proof that car dealerships are a business of the past, a relic left behind by technological change, and that in time, will disappear. In short, traditional automotive companies have no future unless they get rid of the structures that reduce their margins and are no longer necessary… but that they cannot eliminate as long as they do not take the issue seriously and stop selling petrol and diesel vehicles that, due to their overhauls and breakdowns, still need a dealership network.
Basically, traditional carmakers are caught in a vicious circle. And meanwhile, continue to sell internal combustion vehicles, — there are many, many cars driving around, pumping out noxious fumes — and are one of the main factors driving the climate emergency that is increasingly making life impossible on much of the planet. Why? Because we don’t understand the repercussions of new technologies.
(En español, aquí)
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This post was previously published on MEDIUM.COM.
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