30 Aug The Franchised Car Dealer Service Business. Electrifying Possibilities? Or Terminal Decline?
A few days ago my car was coming up to its first MOT after 3 years. The dealer got ahead of me and called to book it in early. For previous services I’ve dropped the car off and taken a loaner for the day. But that’s time-consuming and a hassle, so this time I opted for collection and delivery. The whole process was seamless and a big thanks to Steve Shaw and the team at Cooper Tunbridge Wells.
Yet as someone who runs my own business, I couldn’t help wondering about the economics of the whole process. I’d pre-paid for my servicing and the only cost to me was £54.85 for the MOT test. It was great. I’d not had to go anywhere or deal with any inconvenience. My one big question is where was the profit, after running two people out in another car to my house to carry out the collection and delivery? Two taxi trips would have cost the best part of £25. Then there was the people’s time on top.
So why was I worrying about the economics of a situation that’s highly favourable to me? As a specialist writer on and in the automotive industry for more than 25 years, I tend to take a professional interest in these things. I know that aftersales has traditionally been where car dealers make their money. A well-run service and parts operation can cover the entire dealership running costs, if not more, making actually selling cars the icing on the cake. But even if dealers are turning a profit today, in spite of the huge lengths many of them go to in pursuit of superior customer service, are they going to make any profit tomorrow? And tomorrow is going to be very different. Why?
Electric cars are starting to gain a significant foothold in the market. There is credible evidence that they’re going to take serious business away from the car dealer. It’s early doors, no pun intended, and you can argue about the finer details. But there is no escaping the reality that servicing costs are substantially lower for electric vehicles than for a conventional internal combustion engine car. As I like to put it to people who don’t realise this yet, when did you last service your vacuum cleaner? The great truth for customers, and the great threat for dealers, is that electric motors are extremely reliable and require little maintenance. No oil. No filters. No belts.
The single biggest running cost of an electric car is the tyres – something few dealers are particularly good at selling. They currently have less than 10% market share of replacement tyres here in the UK.
Dealers are facing a double whammy. Less service work. And very different kinds of work. Technicians are traditionally more mechanically minded and can lack electronic skills. That’s going to need a lot of training, in the downbeat context of a fair few redundancies as less work appears on the horizon.
So is the coming of the electric vehicle all doom for dealers? Despite all the threats to the status quo, there are some positive outcomes. The preeminent manufacturer today, Tesla, is unconstrained by legacy dealer infrastructure. Given they have an electric-only fleet, they have approached servicing from a different angle. Since their cars can be remotely diagnosed for faults and maintenance priorities, thanks to telematics, they recognise that 80% of service work can be done on the road. To make this happen, they’ve fitted out a fleet of the Model S as mobile service vehicles.
When I make the transition to an electric car, rather than waiting in for a collection and delivery, the technician could come out to me. What’s more, instead of having a signed card from Steve Shaw hanging on my rear view mirror, I may even get to meet him and shake his hand.
Electric cars might – will – mean less service business for the dealer. But I’d like to think it will be more personal and rewarding for the technicians and more convenient for the customer. A reverse double-whammy. But for now, back in my newly serviced conventional vehicle, I thought about this with my day job hat on. What are the communication demands posed by these momentous developments? Marketing, Aftersales and HR Directors, on both the manufacturer and dealer sides of the equation, will need to crack 4 big challenges:
1. Own and communicate a real vision of the near future transition to electric vehicles.
2. Educate customers in their journey with high quality and timely information.
3. Support customers with relevant packages that protect their investment in conventional vehicles, while making ‘going electric’ an attractive option.
4. Support and educate employees, so that they have a sense of upcoming opportunity not impending threat.
These are not trivial tasks. But if they are neglected, the entire shape of the car industry as we know it today could disintegrate. And that’s bad news: for manufacturers and their workers, for dealers and their employees, and for consumers with trillions of pounds locked up in expensive conventional metal.
Photo credit: BMW Group