Keeping in mind that the first few years of the transition to EVs will be slow and hard-fought between brands, here are some factors to consider.
How EVs Will Be Handled in Your Service Bays
Because EVs use simpler construction, with fewer parts to deteriorate or malfunction, your service department will likely experience a decline in parts revenue. Since EVs require much less regular maintenance, service department revenue will see significant reductions as well.
Over-the-air software updates will be done to customers’ EVs at their homes via the internet while they sleep, eliminating the need for them to come to your dealership for such procedures.
But there’s a silver lining to the EV service situation. EVs, with their heavier weight and high-torque motors, will wear out their tires much more quickly than equivalent ICE vehicles. This means that a focus on EV tire sales could earn you additional service income. You might even consider converting part of your service department into a tire sales area.
In addition, electric vehicles will not be immune to accidents, so if you have a body shop that’s certified to work on EVs, you will have a competitive advantage. If you do not have a body shop, you can sell EV parts to other shops.
Stocking Vehicles vs. Ordering Vehicles
EVs tend to be more expensive than comparable ICE vehicles, due to the high cost of their batteries. This will remain true for most of the rest of this decade, after which battery prices are expected to drop and price parity is achieved.
Until then, it will be more expensive to floor plan EVs compared to ICE vehicles. In addition, slower-selling EVs may sit on your lot for a longer period before they are sold, creating added costs for your dealership.
Some manufacturers, including GM and Volvo, are trying to help in this regard. They are planning to stock EVs at regional hubs, which dealers could pull sold units from, receiving them within days.
While this could reduce EV inventory and dealers’ floor-planning costs, it might also create a “race to the bottom,” with customers pitting competing dealers against each other in pursuit of the lowest price on the same units. Time will tell whether this is a good idea, and manufacturers may adjust the model if it doesn’t prove to be successful.
How Well Will EVs Sell for Your Dealership?
For most dealers, this is largely a matter of where your dealership is located. If you’re in an area that is EV-friendly, in terms of state regulations, climate. and charging infrastructure, your chances of success are good.
As of June 2021, the US Department of Energy reported that California is the top EV market, with 425,300 EVs, or 42% of the United States’ registered electric vehicles, located there. The next three most populous EV states are Florida (58,160), Texas (52,190), and Washington (50,250). These four states contain over half (585,900) of the 1,019,260 EVs registered in the US as of that date.
The numbers drop off quickly for the remaining states, with 433,360 registered EVs spread among the remaining 46 states — an average of only 9,420 per state, with some states coming in at under 1,000 EVs each (AK, MT, MS, WV) and some having less than 500 (ND, SD, WY).
Location, location, location.