Customers wearing protective masks look at the interior of a vehicle for sale at a Ford Motor Co. dealership on February 1, 2021 in Colma, California.
David Paul Morris | Bloomberg | Getty Images
Detroit – as a vehicle manufacturer chase profits like tesla On new electric vehicles, they face an existential question: how to bring franchise auto dealers with them during the transition to EVs.
something like General MotorsAsking luxury dealers to go all-in on EVs or exit the business. others like ford motor are offering different “EV-certification” levels to dealers, while most other carmakers, or OEMs, know they need to change the sales process to fit the evolving industry, but are still figuring out Trying how to do this.
“I think we’re all building this airplane,” Michael Alford, president of the National Auto Dealers Association, told CNBC. “Depending on the OEM, the level of engagement or the intensity of engagement varies.”
Automakers and franchise dealers have a complex relationship that is supported by laws in many states that make it difficult for franchise dealers to bypass and sell new vehicles directly to consumers. (Tesla and other new EV startups have worked around Such rules to cut costs.)
Both the automaker and the franchised dealer want to maximize profits, but they are separate businesses that rely heavily on each other to be successful. Dealers rely on automakers to fill product and move lots, and car manufacturers in turn rely on dealers to sell and service vehicles as well as act as concierges for customers.
How this historic relationship is expected to be at the forefront of discussions between automakers and dealers at the National Auto Dealers Association show in Dallas through Sunday. The event attracts thousands of franchise dealers each year to hear from their respective automotive brands.
For dealers – from mom-and-pop shops to large publicly traded chains – EVs will mean a substantial investment in new employee training, infrastructure and their stores to be able to service, sell and charge vehicles. Depending on the size of the dealer, those upgrades can easily cost hundreds of thousands or even millions of dollars. Of course, they want to be sure that their investment will pay off.
Alford, who runs a Chevrolet and Cadillac dealership in North Carolina, said, “The tone and tenor of this subject matter has evolved, and I think it’s very clear this year that our legacy OEMs absolutely feel that we need to move forward.” are necessary for.”
Compete with Tesla
As more automakers introduce EVs, they are rethinking the sales process, which includes selling new vehicles largely, if not entirely, online. Tesla was one of the first automakers to embrace online sales for a large portion of its business, although it still has physical dealerships, information sites and service shops.
A major shift online could further limit the role of dealers to strictly processing, maintenance and delivery centers and eliminate the need for the large numbers of cars they sell to consumers.
“Overall, franchise systems exist for EVs even by traditional automakers, although they are all looking for ways to make it more competitive, so they say, with the Teslas of the world,” said Michelle Krebs. , Cox Automotive executive analyst.
Automakers believe that doing so will provide a more streamlined and harmonized sales process to consumers, but they also consider dealers to be their partners and provide a “strategic advantage” over other sales and maintenance issues.
A Tesla dealership on Wednesday, Jan. 26, 2022 in Colma, Calif.
David Paul Morris | Bloomberg | Getty Images
honda motor has said it plans to move more sales online for EVs, including 100% online sales for its luxury Acura brand. Mamadou Diallo, vice president of American Honda sales, said the plan is to facilitate the online ordering process, but with the vehicle being picked up or delivered by dealers. However, those processes are still being worked out, he said.
“We want to make sure that we provide the customers with the convenience they want without the intention of bypassing our dealer body,” Mamadou said during a media call on Tuesday.
Jay Vijayan, who helped build Tesla’s digital and IT systems, doesn’t believe selling EVs exclusively online will pan out. A mix of sales points is best, he said, which is why Tesla and new EV startups are selling online as well as opening new showrooms and service centers.
,apple Still opens new stores, right? And every company you’d think was going to go direct is also opening new stores in the automotive space, said Vijayan, founder and CEO of cloud-based dealer services provider Techion.
Wall Street analysts largely view direct-to-consumer sales as a means to optimize profits. However, Tesla has been growing pains when it comes to servicing its vehicles.
Ford CEO Jim Farley has said he wants the automaker’s dealers to cut sales and distribution costs by $2,000 per vehicle To be competitive with Tesla’s direct-to-consumer model.
automaker reaches
Ford has been among the automakers receiving the most pushback from dealers for its EV push, which includes EV-certification tiers that can cost more than $1 million per store, depending on the size of the dealership.
The Detroit automaker is facing legal challenges to the certification program from dealers who argue the plan violates franchise laws. A group of 27 dealerships in Illinois filed a protest with the state’s Motor Vehicle Review Board, and four dealers in New York filed suit against the automaker last month. According to Automotive News.
Ford dealer Mark McIver said he has signed up for the highest EV-certification level at his dealership near Kansas City, Kansas, but he has concerns about the cost and timing of the program.
McIver, owner of the Lincoln dealership, said, “I think we’re all concerned with what they’re giving us now, until we actually get some vehicles out of date and needing to be upgraded or replaced.” Will be.” ,
In addition to investment, dealers who choose to sell Ford EVs must adhere to five standards to be in good standing: Clear and non-negotiable pricing; charging input; employee training; and a better vehicle buying and ownership experience for the customer digitally and in person.
Ford plans to outline some changes to its EV-certification levels on Saturday, according to two people familiar with the plans. changes, such as informed earlier By Automotive News, the program will bridge the gap between the two levels. The bottom line comes with less capital investment, but also a smaller allocation of EVs from Ford.
Ford, however, is allowing dealers to opt out of selling EVs and instead sell the company’s gas-powered cars, unlike arch-rival General Motors.
GM has offered buyouts to its Buick and Cadillac dealers who don’t want to pay for selling EVs. About 320 of Cadillac’s 880 retailers made purchases, The Buick purchase is ongoing, according to a spokeswoman.
toyota motorCEO Akio Toyoda told dealers in September to thunderous applause that, for his part, has no plans to overhaul its franchised dealership network as it invests in electrified vehicles.
“I know you’re worried about the future. I know you’re worried about how this business will turn out. While I can’t predict the future, I can promise you this: you, me, we, it business, this franchise model isn’t going anywhere. It’s staying as it is,” said Toyoda, who will step down as CEO to be president In April.