Electric vehicle makers are working to include auto dealers in their future plans

Customers wearing protective masks look inside a car for sale at a Ford Motor Co. dealership in Colma, California, February 1, 2021.

David Paul Morris | bloomberg | Getty Images

Detroit – as automakers Tesla-like earnings chase For new electric vehicles, they’re faced with an existential question: How best to bring authorized car dealers with them as they make the transition to electric vehicles.

some like general motorsthey require luxury goods dealers to participate in all electric vehicles or Get out of work. Others like Ford Motor Offers dealers different “EV certification” levels Most other automakers, or OEMs, know they need to change their selling process to fit the evolving industry, but they’re still trying to figure out how to do it.

“I think we all build this plane as we fly,” Michael Alford, president of the National Automotive Dealers Association, a trade association that represents more than 16,000 new licensed dealers in the United States, told CNBC. “Depending on the OEM, the level of involvement or intensity of involvement varies.”

Automakers and licensed dealers have a complex relationship underpinned, in many states, by laws that make it difficult, if not illegal, to bypass franchised dealers and sell new cars directly to consumers. (Tesla and other startups own the latest EV worked around These regulations are to reduce costs.)

Both automakers and licensed dealers want to maximize profits, but they are separate companies that rely heavily on each other for success. Dealers depend on automakers for product to fill and transport parts, and automakers in turn depend on dealers to sell and service vehicles as well as act as doormen for customers.

How this historic relationship fits into an all-electric future is expected to be at the forefront of discussions among automakers and dealers at the National Auto Dealers Association show, which takes place Sunday in Dallas. The event annually attracts thousands of franchise dealers to hear about the auto brands.

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For merchants — from mom-and-pop stores to large publicly traded chains — electric vehicles will mean training new employees, infrastructure, and significant investments in their stores so they can service, sell, and ship the vehicles. Depending on the size of the merchant, these upgrades can easily cost hundreds of thousands or millions of dollars. Of course, they want to be sure that their investment will pay off.

“The style and the substance of this theme has evolved, and I think it’s very clear this year that OEMs have fully understood that we are essential going forward,” said Alford, who runs Chevrolet and Cadillac dealerships in North Carolina.

compete with Tesla

As more automakers introduce electric vehicles, they’re rethinking the selling process, including selling new cars largely, if not entirely, online. Tesla was among the first automakers to adopt online sales for a large portion of its business, though it still has physical dealerships, information sites, and service stores.

A larger online shift could reduce dealers’ role in rigorous handling and maintenance and as delivery centers going forward and eliminate the need for lots of cars that they then sell to consumers.

“On the whole, the franchise system remains valid even for electric cars by traditional automakers, even though they are all looking for ways to modify it to be more competitive, as they say, with the Teslas of the world,” said Michelle Krebs. Cox Automotive executive analyst.

Automakers believe that doing so will provide consumers with a more streamlined and coherent sales process, but they also consider dealers as their partners and offer “strategic advantages” when it comes to other sales and maintenance issues.

A Tesla dealership in Colma, Calif., on Wednesday, January 26, 2022.

David Paul Morris | bloomberg | Getty Images

Honda Motor It said it plans to move more sales online, including 100% online sales of its luxury electric vehicle Acura brand. Mamadou Diallo, Vice President of Sales for American Honda, said the plan is to facilitate the online ordering process, but with the car being picked up or delivered by dealers. He said that these procedures are still in preparation.

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“We want to move forward in ensuring we provide convenience with what customers are looking for, with no intention of going beyond our distributor body,” Mamadou said Tuesday during a media call.

Jay Vijayan, who helped build Tesla’s digital and IT systems, doesn’t think selling electric vehicles exclusively online will work. A combination of point-of-sale is best, he said, which is why Tesla and new startups are selling online as well as opening new showrooms and service centers.

an Apple Still opening new stores, right? Every company that thinks it will go direct is also opening new stores in the auto space, said Vijayan, founder and CEO of Tekion, a cloud-based dealership services provider.

Wall Street analysts largely view direct-to-consumer sales as a way to improve profit. However, there has been a growing hassle for Tesla when it comes to servicing its cars.

Ford CEO Jim Farley said he wants auto dealers to cut selling and distribution costs $2,000 per vehicle To be competitive with Tesla’s direct-to-consumer model.

The automaker is approaching

Ford is among the automakers receiving the most dealer support for its EV push, which includes EV certification levels that can cost more than $1 million per shop, 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 Illinois dealers filed a protest with the state’s Board of Automotive Review, and four New York dealers sued the automaker last month, According to Automotive News.

Ford dealer Mark McIver said he signed the highest level of EV certification at his dealership near Kansas City, Kansas, but was concerned about the cost and timing of the program.

“I think we’re all concerned that what they want for us now, by the time we really get some vehicles, is going to be outdated and need to be upgraded or replaced,” said McEver, who also owns a Lincoln dealership. .

Aside from the investments, dealers who choose to sell Ford electric vehicles will need to adhere to five criteria to stay in good standing: clear, non-negotiable prices; Freight investment Train staff and improve the car buying and ownership experience for customers, both digitally and in person.

On Saturday, Ford plans to explain some changes to its EV certification levels, according to two people familiar with the plans. changes, such as first reported By Automotive News, that would narrow the differences between the two levels of the program. The bottom tier comes with a lower capital investment but also a smaller Ford EV allocation.

Despite this, Ford, unlike its arch-rival General Motors, is allowing dealers to opt out of selling electric vehicles and continue to sell the company’s gas-powered cars.

General Motors has offered buyouts to Buick and Cadillac dealerships that don’t want to sell electric cars. About 320 of the 880 Cadillacs Retailers are buying. Buick purchases are underway, according to a spokesperson.

Toyota MotorFor its part, it has no plans to overhaul its franchise dealer network as it invests in electrified cars, CEO Akio Toyoda told dealers to thunderous applause in September.

“I know you’re worried about the future. I know you’re worried about how this business will change. While I can’t predict the future, I can promise you this: you, me, we, this business, this model given is,” Toyoda, who is stepping down as CEO, said. “I will not go anywhere. It stays the same. to become Chairman of the Board in April.

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