EVs Online Sales: Manufacturer Margins, Retailer Roles, and the Customer Experience [Expert Opinion]

The following content is a compilation of insights from discussions in our company's sphere of influence. It includes expert opinions, offering valuable perspectives related to the automotive industry. The information provided here reflects the understanding and interpretation of the experts involved in these discussions.

The push towards electric vehicle (EV) adoption presents a unique set of challenges and opportunities for manufacturers and dealers alike. The crux of the issue lies in the legislative measures targeting importers with specific sales quotas for electric vehicles, a policy designed to accelerate the transition towards cleaner transportation options. However, these mandates do not extend directly to consumers or dealerships, leading to a misalignment of incentives that complicates the EV sales process.?

Overcoming Profit Motives and Regulatory Disconnects in EV Sales

Dealerships operate with the primary goal of maximizing profits, naturally gravitating towards selling vehicles that offer the best margins. Given that electric vehicles often come with higher price tags and additional considerations such as charging infrastructure, convincing the average consumer to opt for an EV over a conventional petrol or diesel vehicle can be challenging. Unless a customer arrives with a predetermined preference for an electric vehicle, possibly driven by environmental consciousness, the likelihood of a dealer prioritizing an EV sale is relatively low.?

The situation is further complicated by the fact that the current regulatory framework places the onus on importers to meet EV sales quotas without directly incentivizing dealers to align with these objectives. This disconnect creates a scenario where dealers may lack the motivation to actively promote electric vehicles unless other mechanisms are put in place to make such sales financially appealing.?

Leveraging Financial Incentives to Boost EV Sales Through Dealerships?

Recognizing this challenge, manufacturers have the opportunity to implement strategies aimed at boosting EV sales through the dealership network. One potential approach involves enhancing dealer margins or offering additional financial incentives for electric vehicle sales. This could include targeted bonuses for meeting certain EV sales thresholds or providing discounts on the vehicles themselves, effectively reducing the cost to the consumer and making electric vehicles more attractive.?

Indeed, the introduction of attractive discount systems for end customers has shown promise in bolstering EV sales in the UK. By making electric vehicles more financially appealing to potential buyers, manufacturers can stimulate demand and encourage dealers to prioritize these models. Furthermore, the shift towards direct sales or agency models offers manufacturers greater control over the sales process, allowing for more strategic allocation of electric vehicles to meet legislative quotas and manage inventory effectively.?

However, this increased control also brings the responsibility of balancing supply and demand across different vehicle types, ensuring that dealers are equipped to meet consumer needs without being burdened with unsellable inventory. In this context, manufacturers must navigate the delicate balance between fulfilling regulatory requirements, supporting dealers in their sales efforts, and meeting consumer demand for both electric and conventional vehicles.?

Dispelling Myths: The Enduring Value and Profitability of Dealerships in Modern Automotive Sales Models?

The perception that dealerships are left without significant profit under such models is a misconception. In reality, while manufacturers may have more control over vehicle pricing and margins, dealerships continue to play a critical role in the sales process. Contrary to the idea of an entirely online sales world, the tactile and experiential aspects of purchasing a vehicle—such as seeing, touching, and test driving a car—remain fundamental to consumer behavior. This necessity ensures the continued relevance and importance of physical dealerships.?

Learn more: Driving Perfection: An In-Depth Look at the Pre-Delivery Inspection in the Automotive?

Dealerships offer customers the opportunity to interact with vehicles firsthand, providing test drives and facilitating the final steps of the purchasing process, including vehicle pick-up. These services are essential not only for enriching the customer experience but also for addressing practical considerations related to vehicle sales, such as final inspections, documentation, and delivery logistics.?

Transitioning to a Fee-for-Service Model in Dealership Compensation

Under the emerging car sales models, dealerships are compensated for their role in these final stages of the sales process. This compensation is not based on sharing in the profits from vehicle sales but rather on fees for services rendered. These fees are predetermined, typically at a fixed rate, ensuring that dealerships are remunerated for their contributions to the sales process. Such an arrangement reflects a shift from percentage-based profit sharing to a fee-for-service model, acknowledging the value of the services dealerships provide in facilitating customer interactions and completing sales transactions.?

Aligning Stakeholder Interests for a Successful Automotive Sales Model

This automotive agency model represents a strategic balancing act that seeks to align the interests of manufacturers, dealerships, and customers. For manufacturers, it offers greater control over pricing and margins, enabling them to navigate the competitive landscape of the EV market more effectively. For dealerships, it provides a clear structure for compensation, recognizing their essential role in the customer journey. And for customers, it ensures access to physical touchpoints where they can experience vehicles firsthand, a critical factor in making informed purchasing decisions.?