The Future of Buying Electric Vehicles: Will Dealerships Remain Relevant?

Electric vehicles are revolutionising the automobile industry, as the market for electric vehicles continues to grow, the question of how consumers will buy them is becoming increasingly relevant. With the rise of new technologies and business models, will the traditional dealership model remain relevant?

In this article, we explore the future of buying electric vehicles and discuss why dealerships are here to stay.

Dealerships are here to stay

Despite the potential for disruption from new technologies and business models, the traditional dealership model is not going anywhere soon. Buying a car is a significant and emotional decision that typically requires a personal touch and some expert guidance, which dealerships have traditionally provided. The current dealership model offers a physical location where customers can test drive cars, negotiate deals, and receive after-sales support. Even with new agency models being trialled by some OEMs, the evidence shows that dealerships are still winning. For example, Carvana, a large business in the US, tried to create a vending machine-style environment for car purchases This suggests that while new technologies and business models may offer attractive alternatives to the traditional dealership model, they have yet to fully replace it.

Fragmentation of the value chain

The buying and selling of a vehicle involve a complex value chain that includes multiple stages and stakeholders. Customers need to consider financing options, insurance coverage, maintenance and repair services, and parts replacement. Additionally, they may require delivery services for their newly purchased vehicle. This means that customers are not just buying a car, but also a range of services that are essential for car ownership.

OEMs are not equipped to provide all of these services on the ground for the volume of consumers that need them. They are primarily focused on designing and producing vehicles, and they rely on dealerships to deliver services to their customers. Dealerships offer financing options, insurance products, and maintenance services that OEMs may not have the capacity to provide. Therefore, dealerships play a crucial role in the value chain of the car-buying experience.

Dealerships can adapt to change

The rise of electric vehicles is changing the way we buy cars, and dealerships will need to adapt to changing consumer preferences. Electric vehicles require less maintenance due to their simpler design and fewer moving parts. While this may sound like a threat to dealerships that rely heavily on after-sales service, dealerships can still play a role in executing some elements. Dealerships can provide these services and ensure that they are executed correctly. Additionally, as electric vehicles become more prevalent, the demand for specialized service centres will increase. Dealerships that specialize in electric vehicles will be well-positioned to meet this demand.

Furthermore, as electric vehicles come with more features and technologies, dealerships can provide value-added services. For instance, if a car has heated seats that are not standard, the dealership can switch them on from the software services. Dealerships can also offer training to consumers on how to use the car's advanced features, which can enhance the customer experience.