Pandemic-Related Retail Changes May Help EV Adoption

A decade into the modern era of selling EVs, they still account for less than 2% of the US vehicle market. Challenges with charging and high purchase prices for EVs contribute to this low number. However, even people interested in buying an EV sometimes are stymied by car dealers more interested in selling internal combustion engine (ICE) vehicles. The COVID-19 pandemic forced changes on the retail ecosystem that may help automakers overcome this challenge. 

For years customers interested in buying an EV have complained about dealership salespeople that push them toward ICEs instead. This can be legitimate if a good salesperson understands the customer's needs (such as long distance travel or lack of ready access to charging) and guides the individual to the appropriate solution for their use case. In many cases, however, dealers just don’t want to sell a vehicle that might generate less service revenue over its lifespan. 

Rethinking the Franchise Model

The franchise dealer system in the US market limits the automaker’s ability to change how independent dealers do business. Newcomers like Tesla eschewed that model entirely in favor of direct sales, although that approach is illegal in many states. Traditional dealers have been reluctant to move to online sales models in part because they might lose the opportunity to upsell a customer when they are face-to-face. 

However, many businesses, including car dealers, are rethinking their models as a result of the pandemic. Lockdowns and consumers’ general reluctance to visit retailers of all kinds have driven e-commerce growth. eMarketer projected that e-commerce grew more than 32% in 2020 and vehicle sales are part of that. Every automaker worked with its dealers in 2020 to help accelerate the ability to conduct the entire sales process online and provide contactless test drives and final deliveries. Hyundai developed its Drive app, which lets customers choose a vehicle and set up a time for a vehicle to brought to them to test drive. 

Legacy Automakers Modify the Retail Experience

Many of these changes to how vehicles are sold and delivered are expected to become permanent. However, as legacy automakers begin to launch hundreds of new EVs in the next several years, they are taking further steps to lower the risk of their dealers hurting sales of those new models. Even before the pandemic, Ford created a new system for customers to order the Mustang Mach-E. Orders are placed online and customers select a Ford EV-certified dealer that will handle the final delivery. All other aspects of the transaction can be handled online, although customers also have the option to do it in person. General Motors is taking a similar approach with the new GMC Hummer EV debuting in fall 2021.

Cadillac is so intent on facilitating a good retail experience for customers with its upcoming EV lineup that it has offered to buy out any dealers that don’t want to commit to supporting EVs. Dealers will need to invest about $200,000 in training, parts inventory, chargers, and tools by 2022. An estimated 150 of the current 850 Cadillac dealers in the US have accepted payments of up to $500,000 to relinquish their franchises. The remaining dealers understand that Cadillac hopes to go all electric by 2030 and are committed to go along for the ride. Similar changes are likely across the automotive retail landscape. The increased influence of manufacturers through online sales and the filtering out dealers not committed to an EV future should help build electrification momentum.