October 18, 2021

Column: Auto dealers face a business revolution as EVs gain market share | Money

Dealers say they’re willing to sell whatever consumers want to buy. But they also say that consumer preferences reflect dynamic factors in the marketplace, including the price of gasoline, and that the auto industry hasn’t been especially skilled at anticipating those factors.

“When gas prices went up, everyone wanted compacts,” Holter recalls. “Then when they stopped going up anymore, we were stuck with all this inventory.”

Dealers may also be wary of EVs because they know that the advanced vehicles are destined to upend their traditional business model.

“Very few dealers make money selling new cars,” says Howard Drake, the owner of Casa Automotive Group — which includes Casa de Cadillac and Subaru, GMC and Buick dealerships, all in Sherman Oaks. “You make all your margin fixing cars” — that is, through repair and warranty service.

The maintenance costs of EVs are as much as one-third lower than those of conventional cars, however, because they have fewer moving parts or mechanical systems that are expensive to fix or replace, such as transmissions. (The largest potential cost, which is replacing the battery, doesn’t factor in until relatively late in an EV’s life; the warranty on the Bolt’s battery covers eight years or 100,000 miles.)

“One of the problems with the business model,” Drake told me, “is that if you take away the service, the cost of the car is going to have to go up just because the warranty charges subsidize the front-end. Guys are going to have to make more selling an EV because they’re going to make less fixing it.”

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