Liz Najman – CBT News https://www.cbtnews.com Your #1 source for auto industry news and content Thu, 31 Aug 2023 14:22:40 +0000 en-US hourly 1 https://wordpress.org/?v=6.2.2 https://d9s1543upwp3n.cloudfront.net/wp-content/uploads/2023/04/cropped-CBT-logo-scaled-1-32x32.png Liz Najman – CBT News https://www.cbtnews.com 32 32 Are American shoppers really over EVs? https://www.cbtnews.com/are-american-shoppers-really-over-evs/ Thu, 31 Aug 2023 09:03:40 +0000 https://www.cbtnews.com/?p=189382 It would be easy to fall for the headlines about wavering EV demand in the US. In the past few weeks, editors have rushed to publish articles suggesting that no one wants to buy EVs and that unsold electric cars are littering dealer lots, all backed by market data.  “The nation’s fully-electric cache is reportedly […]

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It would be easy to fall for the headlines about wavering EV demand in the US. In the past few weeks, editors have rushed to publish articles suggesting that no one wants to buy EVs and that unsold electric cars are littering dealer lots, all backed by market data. 

  • “The nation’s fully-electric cache is reportedly up by 350 percent this year, with nationwide inventory sitting at over 92,000 vehicles. That translates to a 92-day supply of EVs, which is almost twice the current average for gas-burning cars.” (Jalopnik)
  • “Genesis, the Korean luxury brand, sold only 18 of its nearly $82,000 Electrified G80 sedans in the 30 days leading up to June 29, and had 210 in stock nationwide — a 350-day supply, per Cox research.” (Axios)

But when you look closer at what’s buried in these headlines, some trends emerge.

Electric Cars or Luxury Cars?

Many articles use luxury electric car trends to diagnose electric car demand. Frequent mentions include:

  • Genesis G80 starting at $82,000 
  • GMC Hummer EV starting at $100,000
  • Audi’s Q8 e-tron starting at $74,400 

Auto News points out that EV registrations for other high-end brands, such as Lucid ($94,550+) and Porsche ($111,700), are stagnating this year, too. 

In other reports, the numbers are clear. OEMs are increasing their production of luxury vehicles, eliminating budget priced models, and the price of new cars is rising. The same goes with used cars – the lower the price, the less inventory. With soaring interest rates, it’s harder and harder for people to afford cars – even if they want them. 

Overall market data drives home the mismatch between available inventory and increasing sales. According to J.D. Power, in June, EVs were 8.6% of retail sales and 6.7% of available inventory. What this means is that, especially with the shift to direct-to-consumer sales, inventory is not a great representation of overall demand, or even purchases.

Tax Credits Matter

There is evidence that shoppers still want EVs, but are looking for a lower price. Doom and gloom headlines don’t mention that cars like the Model Y, the price of which recently dropped from $67,440 to $49,380, doubled its deliveries so far in 2023. And that the Chevrolet Bolt saw sales grow from 360 in Q1 2022 to 19,700 in 2023 when it became eligible for the federal tax credit and dropped the starting price. In fact, GM reports that most of its EV inventory in-transit is already sold, with the exception of the pricey Hummer EV. 

The effect of the federal tax credit cuts both ways: Kia and Hyundai, which are known as affordable brands, lost access to the $7,500 credit this spring and have seen their sales numbers plummet. However, Hyundai has pivoted its strategy to leasing, which has preserved some of its new-found lead in the EV world. A section of the Inflation Reduction Act allows commercial entities to pass through the $7500 credit to lease customers. 

Cost per Range Mile

The one example that jumps out is a surplus of the once hard-to-find Mustang Mach-E, which has a mid-range sticker price ($42,995 – 59,995) but a relatively high cost per range mile. Cost per range mile is a metric that we use to discuss how much of the purchase price of an EV goes to the range, as opposed to things like speakers, leather seats, and brand recognition.

From what we’ve found in our research, shoppers looking for utility, particularly those new to electric, are likely to prioritize cost per range mile. 

For the Mach-E, the cost per range mile is between $172/mi and $222/mi. For comparison sake, both the Volkswagen ID.4 Pro, the Model Y Long Range, and most Model 3 trims have a lower cost per range mile (around $153/mile) – and also qualify for the federal tax credit. 

Similarly, the entry-level Audi Q4, which starts at $49,800, is also flagged for being stuck on dealer lots. It falls into the same middle ground as the Mustang Mach-E. Although the cost per range mile on the Q4 is $187/mile, Audi is seen as a luxury brand, and many budget shoppers may not even look at the brand. 

A Maturing Used EV Market

I spend a lot of time researching the used EV market in order to produce Recurrent’s Quarterly Market Reports, and what I’m seeing on the ground is that the used cars are already undergoing a much-needed course correction in pricing. Since the used market is not as constrained by MSRP, it can respond to market demand for affordable, entry-priced vehicles. 

Since July 2022, the Recurrent Price Index, which tracks a bundle of common and widely available models, has fallen 28% to $30,330. The share of used EVs priced under $30,000 has risen 200%, with nearly 40% of the used market below that price. As a comparison, the average listing price for a used gas car right now is above $27,000.

My guess is that as supply for high-priced EVs piles up, many traditional OEMs follow in Tesla’s footsteps and slash prices until demand picks up. Ford is already doing so with the F-150 Lightning and the Mustang Mach-E, although CEO Jim Farley worries about accelerating depreciation for those customers who already bought their electric ponies.

Other EV market experts at Recurrent expect prices to balance themselves for the rest of 2023.

“As for pricing, the used market will continue to go down on all EV fronts. No chance it doesn’t. Tesla prices will decrease due to market influences, not brand woes. Other OEMs will continue to see a lack of demand because people don’t want their cars [as compared to cheaper Teslas]. And they won’t become appealing until the prices warrant people’s attention – frankly, that’s what we need to increase adoption at a higher rate in the used market” – Michael Wheatley, Recurrent

What do you think? 

  • Should OEMs lower prices, even if it means upsetting customers who may have purchased an EV at a higher price in 2022 or 2023?
  • How much do federal tax incentives sway new – and used-car purchases?
  • Is price per range mile a good metric when it comes to understanding demand, particularly for economy EV shoppers?

Let me know in the comments or on Twitter/X @recurrentauto

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How ‘dirty’ are electric vehicles? The answer might surprise you https://www.cbtnews.com/how-dirty-are-electric-vehicles-the-answer-might-surprise-you/ Mon, 05 Jun 2023 09:05:07 +0000 https://www.cbtnews.com/?p=184906 Headlines and social media are filled with electric cars: the good, the bad, the controversial. However, one topic that remains elusive is the truth about how “green” electric vehicles really are. Here, we separate fact from fiction. In order to truly consider the carbon impact of electric vs. gas cars, we need to look at […]

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Headlines and social media are filled with electric cars: the good, the bad, the controversial. However, one topic that remains elusive is the truth about how “green” electric vehicles really are. Here, we separate fact from fiction.

In order to truly consider the carbon impact of electric vs. gas cars, we need to look at their lifecycle emissions. This means cumulative emissions from production to operation to end-of-life. There are nuances to consider in each step along the way, so I’ll include considerations that may change the math as time goes on.

If you’re not interested in all the details, the short of it is this: electric cars become “greener” than their gasoline counterparts in around two years of normal use, regardless of how local electricity is generated. After this “break even” point, EVs will always be cleaner than a combustion engine because of the much higher fuel efficiency of electric motors.

Production and manufacturing: the bad news

Fact: Electric cars are more emissions-intensive to produce than gas cars

Fiction: Electric cars are not green because they are more emissions-intensive to produce

The mining, refining, and manufacturing stage is where EVs get a reputation for being more carbon intensive, and in fact, at this stage of their life, they are. The battery and its manufacturing process is responsible for 35% of lifetime EV emissions, whereas a gas car produces 75% of its emissions from use. Plus, there are ethical and environmental issues surrounding the sourcing of raw materials needed to make electric vehicle batteries, like cobalt and lithium. Battery production also uses 50% more water than manufacturing traditional combustion vehicles. 

Overall, making a new, electric sedan creates more than 10 metric tons of carbon dioxide emissions, compared to around 6 metric tons for a comparably sized gas sedan. So, when EVs are first put on the market, they are “in debt” so far as carbon accounting goes, and a gas car is technically a cleaner option. 

However, when you get to actually using the car, the math quickly changes. 

Considerations: As the electric vehicle market grows, so too do two key industries that will help decarbonize. The first is the growth of the used electric vehicle market, since second-hand EVs have already reached the stage of their life where they are cleaner. The second is battery recycling, which can recapture and reuse up to 95 percent of the minerals that would need to be mined and refined for a new battery. 

Finally, as more and more of the world turns to renewable energy, the emissions intensity of the manufacturing process will also decrease. 

Operations: 

Fact: Today, all-electric vehicles are not truly emissions-free, since the grid still produces emissions to generate electricity

Fiction: Dirty electricity generation negates the environmental benefit of EVs

A common criticism about EV terminology is that so-called “zero-emissions vehicles” (ZEVs) are not really zero emissions, since the electricity required to power them has an associated, upstream emission. The argument often talks about the additional coal power needed for electric cars – and everyone knows that coal is way worse than gasoline!

And while it’s true that non-renewable fuel still accounts for 80% of electricity production nationally, upstream emissions for an EV are about 1.3 metric tons a year, compared to 5.8 metric tons for an ICE. How is this possible? It comes down to the efficiency of an electric motor. Data from fueleconomy.gov shows that in a combustion engine, 16-25% of the energy put into the car makes it to the wheels, while the other 75-84% is lost as heat. In an electric motor vehicle, 87-91% of the energy put into the car makes it to the wheels. That’s a huge difference. 

Even for the 21% (and falling) of the country that relies on coal to generate electricity, that power makes it much farther in an electric motor. Here’s another way to look at it. The Honda Civic, which has often been held as a highly efficient gas car, averages around 36 MPG. The Toyota Camry gets up to 39 MPG on the highway. The Tesla Model 3, fully electric but around the same size, gets the equivalent of 132 MPG. That’s over three times more efficient! And, there are at least 17 other EV models available in the U.S. that deliver fuel economy above 100 MPG equivalent.

Considerations: The lifetime emissions savings from an electric vehicle does depend on the local electricity generation. In regions and countries where the grid relies heavily on coal, the difference between a gas and electric car is not as pronounced. However, as the US moves towards renewable energy, the benefit of going electric will increase – as will the cost savings for drivers. This doesn’t even factor in the ability to fully power your car with home solar, for free.  

An Important Note about Zero Emissions

When people criticize the term zero-emissions vehicles, they do so because there are still atmospheric emissions associated with powering the vehicle. However, there is a great benefit from the fact that electric vehicles produce zero tailpipe emissions. This past year, a major study across California showed notable air quality improvements in communities that had high EV adoption. Real world data shows that an additional 20 ZEVs per 1,000 people lowers the rate of asthma-related ER visits by 3.2%. Considering that ground-level air pollution contributes to at least 200,000 early deaths a year, tailpipe emissions are a topic that should not be ignored. 

End of life:

Fact: EV battery recycling is not where it needs to be yet

Fiction: The EV battery recycling industry won’t grow quickly

There are fears about EV batteries piling up in landfills as we shift to an increasingly disposable future. Luckily, electric car batteries are also lasting longer than anticipated, so are in high demand for storage and backup power. 

Although EV batteries are very recyclable, with up to 95% of lithium, cobalt, nickel and copper being recoverable and reusable, additional regulation and economies of scale are necessary to make it profitable. There is still time to build up battery recycling, and the Department of Energy is heavily investing in its growth. 

As of now, decommissioning an EV is a slightly more emissions intensive process than decommissioning an ICE car, largely due to not having infrastructure in place. However, multiple studies have shown that in both cases, the end-of-life emissions pale in comparison to those from production and operations. 

Moreover, provisions in the Inflation Reduction Act will incentivize manufacturers to recycle and recapture battery parts. Since tax credit eligibility for new cars requires that their batteries are sourced or recycled in North America, there is a built-in market to recycle and reuse battery materials and components.

Considerations: In 2021, the International Council on Clean Transportation found that “battery electric vehicles (BEVs) have by far the lowest life-cycle [greenhouse gas] emissions. Emissions over the lifetime of average medium-size BEVs registered today are already lower than comparable gasoline cars by 66%–69% in Europe, 60%–68% in the United States, 37%–45% in China, and 19%–34% in India.” 

Importantly, this study did not include any hypothetical projections about second-life battery use or the growth of the recycling industry. This means that as these two industries accelerate, as they already have in 2023, the lifetime emissions of EVs will be even more favorable. 

There’s a lot to love about electric cars, and a lot to be critical about. However, one thing is clear: they are the greener choice, and as EV adoption increases and the related industries grow, they will only become an even cleaner option. 

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Opinion | The EV transition will be great for America https://www.cbtnews.com/opinion-the-ev-transition-will-be-great-for-america/ Mon, 16 May 2022 09:03:31 +0000 https://www.cbtnews.com/?p=157883 In the continuing saga of misinformation that I read in Facebook comments, one that always gets me is that EV technology is un-American, or somehow ruining America.  In fact, the opposite is true – the EV transition can reinvigorate and revitalize American manufacturing, unions, career paths, and infrastructure. Here are a few ways how.  American […]

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In the continuing saga of misinformation that I read in Facebook comments, one that always gets me is that EV technology is un-American, or somehow ruining America. 

In fact, the opposite is true – the EV transition can reinvigorate and revitalize American manufacturing, unions, career paths, and infrastructure. Here are a few ways how. 

American manufacturing

Historically, manufacturing was a backbone of the domestic economy. People could rely on it for well-paying, steady jobs, often without a college or postgraduate degree. However, American manufacturing has been hit by globalization and offshoring, and while it once contributed around 25% to national GDP, that number fell to 11% in 2019. And, that was before the pandemic! 

There have been many proposals to reinvest in manufacturing in the US, and specifically in auto manufacturing. Ford, GM, and others have made huge capital expenditures into EV production facilities around the country in the past year, partially to meet the growing demand for electric vehicles, and partially due to strong local incentives to attract business. Cities and towns are vying for this investment; they are often economically depressed due to reliance on the underperforming manufacturing sector and are eager for the influx of money, jobs, and people that accompany reinvestment. 

Ford invested $11.5 billion into EV and battery facilities in Kentucky and Tennessee, also creating 11,000 jobs. Some of these will be high tech positions, but many will be reliable and steady positions that underemployed sectors of the population can secure. GM similarly reinvested in Michigan with what was, before the Ford announcement, the “single biggest manufacturing investment in its history to boost its own plan to expand EV and battery production—in the same state as its Detroit headquarters.” This $7B investment promises 4,000 new jobs and the preservation of 1,000 existing ones. Overall, there have been at least a dozen battery factories planned in the US this year and this says nothing about the jobs that will be created by building and repairing chargers and other EV infrastructure and industry support such as certified EV technicians.  

Supply chains, again

It’s not just the local and federal incentives that are encouraging American auto companies to onshore production. The ongoing supply chain issues are often centered around lack of accessibility to semiconductors and battery parts and had significant economic ramifications for the auto industry throughout 2021. If chip production and battery manufacturing happens domestically, a lot of the supply chain issues will be resolved. 

Before recent events, the American electronics industry imported 88% of its semiconductors from countries like Japan, South Korea, and Taiwan and 85% of lithium ion batteries from China and East Asia. Climate change, politics, and shipping delays from East Asia led to a rare bipartisan push to onshore production, including a $52 billion package to build the domestic semiconductor industry. Onshoring semiconductor and battery manufacturing not only provides employment and US revenue, but it alleviates transit and logistic delays in getting necessary parts. Finally, it brings R+D and technological innovation back home, letting the US take a leadership position in high tech once again. 

Battery recycling – a growing industry

Finally, to close the loop entirely, battery recycling companies, such as Redwood Materials and Li-Cycle, are popping up domestically and forming partnerships with EV powerhouses such as Tesla and Ford. They are a necessary part of the EV transition since battery recycling provides raw materials that would otherwise have to be sourced, mined, and shipped back to the US. As the dozen-plus new domestic battery factories come online, they can expect to trash “30% or more of their material to defects, rejects and cuttings, until they figure out what they are doing and get their yield rates up.” These scrap parts – anodes, cathodes, and raw materials – can be recycled to supply many of the supplies needed once the plant is making production-ready batteries. As this newer industry develops, it too will provide employment and stimulate satellite industries, as well as guard against future supply chain issues. The Department of Energy recently announced heavy investment in battery recycling for just these reasons.

Infrastructure

One of the most interesting and compelling ways that EVs can revitalize the country is by shoring up our aging, insufficient electric grid and providing a stopgap solution for the transition to greener energy. Our electric grid is not up to the challenge of the 21st century: both climate change and rapid urbanization mean that peak demands often exceed generational capacity. Think back to just last year: harrowing tales from Texas’ winter power loss and intentional shut offs during the Pacific Northwest heat wave. Many of the horrific losses were due to lack of electricity for those who rely on it, which is to say nothing of the economic impact of losing power. 

There are a few ways to deal with this issue. New, conventional power plants can be built to generate an ever increasing supply of energy, but this also requires serious investment in new transmission lines, leads to more polluting energy, and increases customer’s tax and utility burdens. Moreover, it offers no solution or way out of the system that is driving climate change. On the other hand, many states are adding renewable energy to their electric mix. The addition of green energy and utility scale battery storage is great, but still requires a lot of time, construction, and system updates to integrate with the traditional grid. The easiest solution is one that is mostly software based: the integration of EVs into our power grid.

While our insufficient electric grid is often cited as a reason not to invest in electric transportation, the truth is that EVs are well suited to address the immediate crisis. Electric vehicles are essentially batteries on wheels, especially considering that most privately owned cars are parked for 95% of the day. Most modern EVs store enough energy to power the average American household for at least a day – more, if electricity use is limited to essentials. A concept called “vehicle to grid,” also known as V2G, allows for bidirectional energy flow between the grid and a car battery. So, not only can you charge the car from a household plug or charger, but you can also return that energy to the grid, or use it to power any electric appliance. The upcoming Ford F150 Lightning has this capability, as does the Nissan LEAF. 

What EVs allow us to do is “balance the increasing mismatch in electrical usage and generation that occurs as weather-dependent solar and wind energy sources come online.” There are pilot programs for this sort of technology across Europe where more vehicles are V2G enabled, but this tech is still nascent in the US. Nuvve is one US-based company working on software to optimize energy flow. Marc Trahand, Nuvve’s executive vice president of marketing, explains “V2G can also become a valuable grid ally in states such as California that generate immense amounts of renewable energy during the day but then have to rely on other, often “dirty” greenhouse-gas-producing sources of power to meet the spike in demand when consumers come home and start turning on their appliances.”

The next time someone claims that the EV transition is unAmerican, clinging to a past version of America that was powered by coal and natural gas denies us our place as the leader of technology and innovation. The thing that has long made America great is our ability to meet new challenges with ingenuity and bravery, find homegrown solutions for global problems, and to support the working class with well-paying and reliable employment. A “full-throttle” investment in electric transportation and EVs will do all these things.


Did you enjoy this article from Liz Najman? Read other articles on CBT News here. Please share your thoughts, comments, or questions regarding this topic by submitting a letter to the editor here, or connect with us at newsroom@cbtnews.com.

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How electric cars are changing the way consumers buy cars https://www.cbtnews.com/how-electric-cars-are-changing-the-way-consumers-buy-cars/ Mon, 31 Jan 2022 10:03:48 +0000 https://www.cbtnews.com/?p=150957 The auto industry, for both new and used cars, is one of the most rigid hold outs in the transition to digital sales. While you can book travel or open a bank account with a few clicks, you generally need to go to a dealership to purchase your next car.  Some iconoclast brands are now […]

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The auto industry, for both new and used cars, is one of the most rigid hold outs in the transition to digital sales. While you can book travel or open a bank account with a few clicks, you generally need to go to a dealership to purchase your next car. 

Some iconoclast brands are now breaking this trend, and the effects could be permanent.

Carvana and Tesla offer a digital-first experience, and GM and Ford are updating their models to include online buying experiences for used cars, but the franchised car dealership model that has been around for 120 years is still finding its place amid new sales models and consumer expectations. 

The Traditional Dealership Model

Dealerships came about in an era when having a distributed sales model allowed for greater geographic product reach and increased profit for manufacturers, who were smaller operations and needed a specialized sales team. As cars became more mainstream, dealership associations lobbied to have this separation of sales and manufacturing codified: laws exist to prevent car manufacturers from directly selling cars to customers and from breaking off relationships with existing dealers. The justification for this was that independent dealerships offered price competition and protection for consumers. Moreover, local dealerships were embedded in their communities. But, times have changed. As anyone who has recently been to a traditional dealership can tell you, car salespeople are often working for the company and their own bottom line. 

The traditional dealerships model may no longer be serving dealers or manufacturers, either. Independent dealers have to pay for physical locations with cars on the lot, ready to be sold. “Dealers have to cover the cost of financing all those cars sitting around, waiting for a buyer. And automakers usually wind up producing more cars than they need to, in hopes of satisfying every shopper’s desire. That means more parts, more labor and more cost. Inevitably, though, they end up spending more on advertising and incentives to clear out the slow sellers.” This model has led to periodic and predictable clearance sales (e.g. “Toyotathon”) to purge remaining cars on the lot and make room for new models. 

A confluence of recent events has caused a major degradation in the dealership model. The first trend is common across all industries: there has been a major contraction of local and independent dealers as they are bought and centralized by larger, national chains. This leaves customers with less room to haggle, as prices, sales quotas, and incentives are often set at a higher level. This also reduces the price competition that dealerships are said to ensure and removes the community connection that so many dealerships once had. 

Sales and Research Moves Online

digital retailingOnline car shopping is another major trend that changes how consumers interact with a brick-and-mortar dealership. This trend predated the pandemic, but was accelerated by shutdowns and health concerns about going into public spaces. As the availability of online car sales grew, so did the realization that many of the stresses and headaches of the dealership could be avoided online, particularly with used cars. A newer demographic of shoppers, including women and minority customers, found that having a set price and purchasing anonymity gave them a lower pressure, more pleasant experience. As the New York Times reports, “consumer satisfaction with car shopping has reached an all-time high in recent years, as the pandemic shifted more of the experience away from dealerships, digitally or elsewhere.” 

However, Michelle Krebs, executive analyst at Cox Automotive, says that the data indicates that those dealerships who have been able to make the transition to online sales benefit. “It turns out that dealers are more profitable than ever since shifting to online sales…’The deal happens faster because the consumer knows exactly what they want, and there’s not a lot of haggling on the price.’” She adds, “consumers really like it. Surveys show they want more of it.” 

And, it’s not just online shopping that threatens the traditional dealership model. The ability for customers to do research, price comparisons, and secure financing online reduces the need for dealers to provide these services. “Third-party digital channels for research…are increasing vehicle pricing transparency and enabling consumers to make product comparisons easier, thus limiting the ability of dealers to capture margin on the vehicle and to influence customers’ buying behavior.”

This effect is felt most acutely in the used car market, which traditionally has more negotiable pricing and a more geographically limited stock of available vehicles. Shifting the model online gives customers more options: a greater geographic pool of cars and greatly increased transparency. Recent production delays due to the semiconductor shortage have shifted a lot of focus on to the used car market in the past year and dealers with a robust online presence have been rewarded. CarMax saw a record number of customers buying online at the end of 2021, and they shifted to more digital appraisals for the vehicles they were buying. Ford released an online buying platform last year to recapture used vehicle sales for dealerships. It “allows customers to ‘transition directly from the research phase into the purchase phase,’ making for easier buying experiences and offering advantages over third-party sites.” GM is catching up by offering its own digital platforms for used vehicle sales that integrates used inventory across franchises, and offers buyers perks such as OnStar and SiriusXM. 

The above trends have combined to force dealerships to shift models. Many now have fewer cars on the lot and have shifted focus to being service centers. Despite pressure from dealership organizations, more and more states are reconsidering their direct sales bans. In the used car market, it seems that a shift to online search and sales is all but inevitable – customers will not go back after having tasted what online offers them. 

Where Do Electric Cars Fit In?

So, where do electric cars fit into this? Study after study has shown that unless a dealership has dedicated time and resources to EV education, salespeople are woefully undereducated in explaining and selling electric cars. Moreover, since electric cars require far less maintenance, selling one will net the dealership less revenue in service and repairs. Even if there is no ill intent, most salespeople will talk more about and encourage shoppers to go with an ICE car. 

Related: General Motors to invest billions more in battery plant and EV production

Tesla was very aware of the knowledge gap about electric cars. When it came on the scene, the company insisted on selling cars directly to consumers through online sales and company-owned physical stores. It set itself apart from the typical car buying experience by offering fixed pricing consistent across the company. While the company has struggled with direct sales bans and still has sales caps or restrictions in many states, it has worked hard to lobby against dealership protections. 

Traditional car manufacturers, especially those shifting to electric cars, are taking notice of Tesla’s success. Thanks to supply chain issues restricting car supply in the past few years, many OEMs have shifted to a pre-order system for new (and electric) cars. Ford CEO Jim Farley explains, “You cannot imagine … how much money we waste by not — by guessing what our launch mix is for a new product.” Ford used a pre-order and reservation system for their highly anticipated electric Mustang Mach-E in 2021. However, because of direct sales bans and laws that don’t allow OEMs to dissolve relationships with dealers, the pre-ordered Mustangs still had to go through a dealership for sales and hand-off. That’s where problems came in. Many dealerships, aware of the high demand for the new electric Mustangs, demanded “market adjustments” from customers before delivery of the vehicle. Ford has strongly denounced these practices, which generated ill will towards dealerships in the EV community. To be fair, though, it’s debatable how market adjustments differ from Tesla’s frequent and covert price increases over 2021.

The used EV market is still in its early stages, but with online retailers leading the sales, the trend toward online research and shopping is strong. 

Pre-Ordering: The New Model?

European shoppers have pre-ordered their cars with all the options and specifications since WWII. While American shoppers are not quite ready to order a new car sight unseen, many manufacturers are shifting to a pre-order model. This generally involves putting down a deposit on a car with the color, trim, and specifications that you want, then going to take delivery at a local dealership. The final sales price is usually determined by the dealer, but purchasing can happen directly from the manufacturer. Especially with supply shortages, pre-orders help manufacturers and dealers understand market demand and how to prioritize a limited parts supply. It saves labor by not making cars that no one wants, and reduces storage and lease costs that dealers incur by holding cars on a lot. 

It remains to be seen whether or not the shift to pre-ordering is temporary or a harbinger of things to come. However, pre-orders for upcoming electric cars, suggest that the consumer appetite is skyrocketing. 

This presents a tremendous opportunity. I can’t think of any other business where hundreds of thousands of consumers are making $1,000 pre-payments online only to pay dealerships another $70,000 after a year (or more!) of waiting. In order to stay competitive in a market that is increasingly moving online, and capture new revenue opportunities, franchise dealers must adapt with these eager EV pioneers.

We can concede that 2021 was the year when electric cars became inevitable. Dealers can lean into this shift by educating themselves and their sales teams about electric ownership. Since they are embedded in communities, dealerships are a crucial tool to bridge the knowledge and enthusiasm gaps for customers, especially in places where adoption has been slower or may feel forced. New technology needs ambassadors, and there is no better place to look.


Did you enjoy this article from Liz Najman? Read other articles on CBT News here. Please share your thoughts, comments, or questions regarding this topic by submitting a letter to the editor here, or connect with us at newsroom@cbtnews.com.

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