I mentioned Jim Farley's thoughts on dealership planning for the EV generation in an article last July: A discussion inspired by Ford CEO's push for online-only sales of future electric vehicles. Last September, Ford required its U.S. dealers to invest in the necessary facilities and personnel training if they wanted to sell the next-gen EVs. A couple of months later in December, Ford announced that about 65% (1,920/3,000) of its dealers had agreed to make the necessary investments in the sale of EVs. In other words, the remaining 35% of dealers will keep the traditional model of selling cars, but they can only sell gas models and gas-to-electric models, not the next-gen EVs.
If we fast-forward to 2035, we see some states in the U.S. (e.g., California) will ban the sale of new gas cars (California even specifies that non-gas cars must account for 68% of the total sale volume by 2030). The Ford dealers that do not sell EVs will still be able to sell hybrids in practice, but it is doubtful whether the automaker will still offer hybrids at that time. If they have no cars to sell, they will be forced out of the market.
Like Ford, GM told existing dealers about switching to EVs and started to buy back the dealership rights of those unwilling to invest in equipment for the sale of EVs in 2020. In Germany, Volkswagen also provides consumers with the option of ordering ID.4 and ID.5 EVs online (starting in April 2022) or buying from dealerships. A different approach to EV sales Volkswagen is taking is that it will bolster the dealership's online business model organizationally and financially. The move means that the dealers will remain a key point of contact for customers to seek advice as well as for test drives, vehicle delivery, and after-sales service. As for Chinese EV startups, BYD, which currently dominates the Chinese auto market, Nio, Xpeng and Li, the working sales model includes both online and offline sales simultaneously in China. Whether a car is purchased online or offline, the car owner's designated local dealership handles the follow-up of the purchase.
The above brands sell EVs in a very different way from Tesla's direct sales and service, a business model pioneered by Apple. Tesla's showrooms and service centers worldwide are all managed by direct investment from the EV manufacturer, but to complement the direct operation, Tesla allows GM dealers to provide after-sales service to owners in areas that the U.S. showroom network does not cover in time through licensing, and in Taiwan, Tesla authorizes independent body shops to perform painting on sheet metal. The Tesla-approved body shops use Tesla-approved paint and paint processes.
As EV sales soar, will the dealerships of various auto brands in Taiwan make any significant change to sales and after-sales service? As far as I have observed, almost all Korean and Japanese auto brands only allow consumers to order EVs online on official websites, a strategy used to stabilize the prices at which the cars are sold while collecting information from prospective buyers. This way, automakers can communicate with potential car owners directly, modify marketing models immediately, and test the popularity of their products.
At the end of 2022, Luxgen followed Tesla's online pre-order model to warm up the market first. The plan, only asking NT$1,000 for a Luxgen n⁷ pre-order, successfully received more than 25,000 orders when mass production was still more than a year away. In fact, this online pre-order model has been used by Tesla for many years. The Model Y, currently the top-selling pure electric car in Taiwan, accumulated tens of thousands of orders in a similar way before it was officially introduced. The success of Tesla and Luxgen in the online pre-order model proves that consumers in Taiwan are receptive to purchasing cars online. It is believed to be a good example for other brands when they sell pure electric cars in the future.
One thing is bound to happen when the adoption of EVs becomes widespread, that is, traditional automakers will have to adjust the scale of their after-sales service operations in addition to changing sales models. Take Tesla in Taiwan, the car parc has reached 30,000 since sale started in September 2016, but there are only seven directly operated service centers now. The reason for this is that the demand of EVs to return to the factory for maintenance is not high. Actively building supercharging stations to meet the mobility need of car owners actually weighs more. Tesla has built 77 supercharging stations across Taiwan to date, not only to dissolve car owners' range anxiety, but also to prepare for future V2G (vehicle-to-grid) setup. In the future, in addition to the revenue earned from car owners charging their cars, other derived business opportunities will be crucial to Tesla's revenue growth.
Based on the usage situation of pure electric cars and Tesla's actual operating experience, dealers of traditional brands might want to consider transforming their service plants, many of which are located near main arteries, into energy storage facilities providing charging services, supplemented by basic maintenance and repair businesses. Let's not forget these existing maintenance bases are basically legal industrial sites with geographical advantages. It will be easy for the dealers to transform their service plants into charging stations since they will encounter fewer legality issues than third-party charging station operators. I believe the outline will be more clearly defined in three years after the market has evolved in reality.
Further, the future arrangement and utilization of the existing front-line staff of the EV dealership organization will be influenced by the brand's own ideas, the current business scope owned by each dealer channel, the investment in the vertical and horizontal industries related to automobiles, and other factors. What's more, Taiwan's major domestic brands such as Toyota, Nissan, Mitsubishi, and Hyundai often have agents with 25-100% investment in dealers. Alternatively, brands such as Ford, Kia, and BMW even have agents that own some direct dealers. Based on analysis of the strengths and weaknesses of their own business models, different brands have different strategic considerations and layouts for EVs as they become more popular, so it is unlikely to fully transfer the existing EV business models in other markets. However, we can expect to see changes in vehicle acquisition and after-sales service models based on better customer experience and a purchase model that is in line with the consumption habits of the new generation.
About the author - Kenny Liu
Graduated from Dept. of Aeronautics and Astronautics, Cheng Kung University in 1988, started his auto industry career since July 1990 after two year military service. Starting as a service engineer and a temp technician, product marketing specialist in Peugeot/ Daihatsu, marketing and dealer channel specialist in VW LCV from March 1992, then field manager in GM Taiwan from Feb. 1994, sales and service / parts head in Ford Lio-Ho from Sep. 1998 till retirement in May 2019. Kenny then started to work for JLR Taiwan as sales/service head and consultant/ lecturer. After that, he was invited to work at a Suzuki dealer of Taipei as the general manager until April 2022.