May 27, 2023

It’s not just Tesla: Why dealers are wary of electric cars

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EVs.jpgBy Todd Wasserman From Mashable

For a guy who is supposed to be selling electric cars, Mike Kelly isn’t a big fan.

Kelly, a car dealer in Erie, Pa., who also happens to represent his district in Congress, said in a 2011 hearing on fuel efficiency ratings that he fired a guy at his Chevy dealership who ordered the electric Volt. Kelly claimed the Volt sells poorly and is overpriced.

“When you look at this, it makes absolutely no sense,” Kelly said during hearings on government fuel economy ratings last year. “I can stock a Chevy Cruze, which is about a $17,500 car and turns every 30 to 40 days out of inventory … or I can have a [$45,763] Volt, which never turns and creates nothing for me on the lot except interest costs.”

Kelly, a Republican member of the House who has sometimes aligned himself with the Tea Party, may not be representative of all car dealers. But he is certainly not alone. David Kiley, an analyst with New Roads Media, says car dealers are often ideologically opposed to electric cars. “You’ll find that many dealers are Republicans, and so have joined the bandwagon of [electric vehicle] naysayers, which is a popular theme among Republicans,” he says. “That’s a real phenomenon.”

The push towards EVs is being driven largely by the Obama Administration, which is requiring automakers to double their aggregate fuel economy by 2025. Putting EVs in the mix is one way to skew the average. Car buyers also get a federal credit of $7,500 when they purchase an EV.

Even if dealers agree in principle with EVs, they aren’t great for the bottom line. “Dealers want to move metal, plain and simple,” Kiley says. “There is more education and selling required for EVs than gasoline cars. As long as gasoline remains under $4 a gallon in most of the country, sales of EVs and plug-ins like the Chevy Volt and Ford C-max Energi are going to have steep hills to climb — because the infrastructure to support them is still lagging.”

Roger Lanctot, associate director of Strategy Analytics’ global automotive practice, says even in comparatively liberal and environmentally-friendly countries such as Germany, dealers are skeptical of EVs. “Dealers may not want to sell them,” says Lanctot. “This service business opportunity is different and dealers may be skeptical.” Their wariness is logical: Dealers have to foot the bill for infrastructure, like charging stations, and need to spend money training employees — all to sell cars that will provide them with less income than a combustion-engine model.

“By selling an EV a dealer may be slitting his own throat By selling an EV a dealer may be slitting his own throat,” Lanctot says.

This explains why “hundreds of cases have been reported of customers walking into a Nissan or Chevy dealer to buy a Leaf or Volt, then being aggressively steered toward a Sentra or Cruze,” according to Green Car Reports. (A Tesla forum outlines more stories of dealers steering customers away from EVs.)

The resistance also helps why dealers in various states — New Jersey being the latest — have been lobbying their statehouses to evict Tesla dealerships from the state. Tesla does not work with dealers, but instead sells its cars directly via its equivalent of an Apple store. Tesla founder Elon Musk has stated that because EVs require little maintenance, there’s no reason for his company to use the established infrastructure of franchise-owned dealerships:

Electric cars require much less service than gasoline cars. There are no oil, spark plug or fuel filter changes, no tune-ups and no smog checks needed for an electric car. Also, all Tesla Model S vehicles are capable of over-the-air updates to upgrade the software, just like your phone or computer, so no visit to the service center is required for that either.

Case closed? Not exactly. Charles Cyrill, a rep for the National Automobile Dealers Association, notes that Nissan sold more EVs through the traditional route of dealerships than Tesla managed last year — 22,610 Nissan Leaf EVs, vs. 18,803 Model S EVs, according to sales data from WardsAuto.

Also, a statement from NADA expresses enthusiasm for EVs:

Franchised new-car dealers are huge advocates of alternative-technology vehicles, including hybrid, natural gas, plug-in and pure electric battery vehicles. Ultimately, it’s up to car buyers to decide what they want to buy or lease based on affordability and their transportation needs. Dealers provide multiple options for sales, service and financing, and that’s good for consumers.

Kelly’s position, for one, belies the claim that dealers are “huge advocates” of EVs. But Lanctot believes that to paint dealers as unequivocally anti-EVs is false — and that the reality is more nuanced. “Range extenders” — auxiliary power units that are often standard on combustion-engine vehicles — offer an opportunity for dealers to provide maintenance,” he says.

Even Teslas requires some basic maintenance that could be lucrative for dealers. The company advises customers to bring their car in for inspection every 12,500 miles. Service plans start at $600, and the company claims some 85% of Model S reservation holders in North America live within 50 miles of a Tesla service station.

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