The other issue cited was lower dealer profits on EVs, particularly on maintenance. One advantage EVs have over ICE vehicles is lower maintenance costs. That's good for the consumer but bad for the dealer as the dealers make more money servicing the cars than selling them. Even if the sales personnel only care about their commission and don't give a rats ass about service department revenue, their boss certainly does. And he can incentivise his sales force to push vehicles he sees as more profitable for his dealership.
Electric vehicles threaten dealership profitsWhile the rising wave of vehicular electrification may be good news for proponents of clean air, it has dealerships worried about the future of the bottom line. Currently, as much as 44 percent of dealer income can be generated by the service department. As an industry, vehicle service generates an estimated $247 billion per year.
Service is so profitable, in fact, that dealerships will often accept a lower initial vehicle price for future potential revenue. Customers can haggle over heated seats or an upgraded stereo, but hourly labor charges and parts costs are non-negotiable.
Electric propulsion systems are mechanically much simpler than internal combustion ones, however, and will require fewer service visits. “No doubt service revenue will go down, because EVs contain about 40 percent fewer parts.” With no transmissions to maintain, no mufflers to replace, and no engine oil to be changed, future revenue from EV service will depend on brakes, tires, wheel alignments, and battery refurbishment.
And these are not just US problems. The same issues were found in a similar study in Europe:
Dismissive and deceptive car dealerships create barriers to electric vehicle adoption at the point of saleAs most consumers do not have pre-existing knowledge of electric vehicles (EVs), and current market conditions favour petrol and diesel vehicles, car dealership experiences may strongly influence EV purchasing decisions. Here, we show that car dealerships pose a significant barrier at the point of sale due to a perceived lack of business case viability in relation to petrol and diesel vehicles. In 126 shopping experiences at 82 car dealerships across Denmark, Finland, Iceland, Norway and Sweden, we find that dealers were dismissive of EVs, misinformed shoppers on vehicle specifications, omitted EVs from the sales conversation and strongly oriented customers towards petrol and diesel vehicle options. Dealers' technological orientation, willingness to sell and displayed knowledge of EVs were the main contributors to likely purchase intentions. These findings combined with expert interviews suggest that government and industry signalling affect sales strategies and purchasing trends.
Managers, industry experts and dealers believe the lack of willingness to promote and sell EVs derives from their low profitability, lack of EV models on site, lack of knowledge and competence about EV specifications, and that EVs take longer to sell. Given these factors, salespeople opt for the known and easier-to-sell conventional cars. Moreover, EVs were seen to negatively affect dealer profitability, not only from an initial investment perspective (setting up charging infrastructure and additional personnel training), but also due to a decreased need for maintenance and other services and consequent reductions in dealer revenue. These barriers resemble those in North America, in particular the lack of availability of EV models, longer lead times and willingness of salespeople to sell the technology.
These are areas where Tesla has a lead over traditional car makers:
1. Teslas are not fugly.
2. Tesla direct sales bypass both the dealer information problem and their disincentive to sell EVs because of their lack of service revenue and other reasons.
If only Tesla could actually make money selling EVs......
