EV carmakers work to fit auto dealers into their future plans

A customer wearing a protective mask looks at the interior of a car for sale at a Ford Motor dealership in Colma, Calif., February 1, 2021.

David Paul Morris | Bloomberg | Bloomberg | Getty Images

DETROIT — As automakers pursue Tesla-like profits with new electric vehicles, they face an existential problem: How to bring franchised car dealers together as they transition to EVs. The question is whether it is best to go.

some such as general motorsis asking luxury dealers to go all-in on EVs or get out of the business.Other like ford motor Most other automakers or OEMs recognize that they need to change their sales processes to match the evolving industry, but are looking for ways to do so.

Michael Alford, president of the National Auto Dealers Association, a trade group representing more than 16,000 U.S. new franchise dealers, told CNBC: “Different OEMs have different levels of engagement and intensity of engagement.”

Automakers and franchise dealers have a complex relationship, and many states are backed by laws that make it difficult, if not illegal, to bypass franchise dealers and sell new vehicles directly to consumers. increase. (Tesla and other new EV startups have avoided such regulations to cut costs.)

Automakers and franchised dealers both want to maximize their profits, but they are separate businesses that are highly dependent on each other for their success. Dealers rely on automakers to replenish and move products from lots, and automakers rely on dealers to sell and service vehicles and serve as concierges for their customers.

How that historic relationship fits into an all-electric future is expected to be at the forefront of debate between automakers and dealers at the National Auto Dealers Association show in Dallas through Sunday. The event draws thousands of franchise dealers each year to hear about their car brands.

For dealers, from independent stores to large publicly traded chains, EVs mean significant investment in training new hires, infrastructure and stores to enable vehicles to be serviced, sold and charged. Depending on the size of the dealer, these upgrades can cost hundreds of thousands or even millions of dollars. Of course, they want to make sure their investment pays off.

Alford, who runs a Chevrolet and Cadillac dealership in North Carolina, said, “The tone and spirit of this subject has evolved, and this year, legacy OEMs are fully aware that it is imperative that we move forward. I think it is very clear that

competing with Tesla

As more automakers introduce EVs, they are rethinking the sales process, including selling new cars largely, if not completely, online. Tesla was one of the first automakers to adopt online sales for most of his business, but there are still physical dealers, information sites and service shops.

As the move to online continues, the role of dealers may be restricted strictly as processing, maintenance and distribution centers, eliminating the need to sell large volumes of vehicles to consumers.

Michelle Krebs said, “In general, even with EVs by traditional automakers, the franchise system remains, but they seem to be looking for ways to fine-tune it to make it more competitive. , executive analyst at Cox Automotive.

Automakers believe that doing so provides consumers with a more streamlined and cohesive sales process, but dealers are partners and have a “strategic advantage” when it comes to other sales and maintenance issues. I think we will provide it.

A Tesla dealer in Colma, Calif., Wednesday, Jan. 26, 2022.

David Paul Morris | Bloomberg | Bloomberg | Getty Images

Honda Motor Co., Ltd. says it plans to move more sales online, including 100% online sales of its luxury Acura brand for EVs. American He said Honda’s vice president of sales, Mamadou Diallo, said the plan was to facilitate an online ordering process, but vehicles would be picked up or delivered by dealers. However, those steps have not yet been resolved, he said.

“We want to make sure we go forward with providing convenience to what our customers are looking for. We have no intention of bypassing the dealership organization,” Mamadou said in a media call Tuesday.

Jay Vijayan, who helped build Tesla’s digital and IT systems, doesn’t believe online sales of EVs alone will be successful. He said it was the perfect combination of selling points. This is why Tesla and new EV startups are selling online and opening new showrooms and service centers.

apple Are you still opening new stores? And every company looking to sell direct is opening new stores in the auto industry,” said Vijayan, founder and CEO of Tekion, his provider of cloud-based dealer services. increase.

Wall Street analysts have largely viewed direct-to-consumer sales as a means of optimizing profits. But when it comes to vehicle maintenance, Tesla has a serious problem.

Ford CEO Jim Farley wants to cut sales and distribution costs per vehicle by $2,000 so the automaker’s dealers can compete with Tesla’s direct-to-consumer model. .

Automaker’s approach

Ford is one of the automakers facing the most pushback from dealers for its EV push, including EV certification levels that can cost $1 million or more per dealership, depending on dealer size. is.

The Detroit automaker faces legal challenges to its certification program from dealers who claim the plans violate franchise laws. A complaint was filed with the state board of motor vehicle review, and four New York dealers filed lawsuits against the automaker.

Ford dealer Mark McEver signed up for the highest EV certification tier at his dealership near Kansas City, Kansas, but worries about the cost and timing of the program.

McEver, who also owns a Lincoln dealership, said, “By the time we actually have some cars, what they’re going to put us in will be obsolete and we’ll have to upgrade or replace it.” I think we are all worried about the need,” he said.

Aside from investing, dealers who choose to sell Ford EVs must follow five criteria to stay in good standing. Clear, non-negotiable pricing. billing investments; employee training; and enhancing the customer’s vehicle buying and owning experience, both digitally and in person.

Ford will outline changes to its EV certification levels on Saturday, according to two people familiar with the plan. This change narrows the difference between his two tiers of the program, as first reported by Automotive News. The lower tier has less capital investment, but also less EV allocation from Ford.

But unlike arch-rival General Motors, Ford allows dealers to opt out of selling EVs and continue to sell its gasoline vehicles.

GM has made acquisition offers to Buick and Cadillac dealers who don’t want to spend a fortune selling EVs. About 320 of Cadillac’s 880 retail stores have agreed to be acquired. A Buick acquisition is in the works, according to a spokesperson.

toyota motorCEO Akio Toyoda told dealers in September that he had no plans to rebuild the franchise’s dealer network as it invested in electrified vehicles.

“I know you’re worried about the future. I know you’re worried about how this business will change. I can’t predict the future, but I can promise you this. You, me, us, this business, this franchise model will step down as CEO in April and take over as chairman, said Mr. Toyoda.

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