Observations on global changes that will impact Canada: Part 1 of 2

The IAA Mobility conference held in Germany recently was deemed a success with more than 500,000 visitors coming to see new vehicles, brands, innovations and trends.

Having moved in 2021 from Frankfurt to Munich, the automotive conference has reinvented itself to be focused on mobility per se, rather than merely showing new vehicles.

It also coincided with the German Statistical Office reporting a national record in car ownership, with 78 per cent of German households having at least one car and a national park of 48.8 million vehicles in the country. A far cry from concerns around peak cars and certainly a reason why ever more challenger brands are entering the market.

From a Canadian perspective the IAA showcased some emerging trends and innovations that likely will be arriving on these shores soon — if not already present.

The success behind the week-long conference, is the now established approach to have both a trade-based conference, alongside and an attractive consumer presence known as the Open Space, spread across various locations in downtown Munich.

Prospective new car buyers could walk throughout the city centre looking and test driving not merely the newest EV offerings from domestic and imported brands like BMW, Mercedes-Benz, Volkswagen, Cupra, BYD, Lotus, Polestar or XPeng, but also try out a series of new e-bikes or e-scooters. A Community Lab was also set-up in-front of the iconic Rathaus showcasing community ideas around new mobility.

The key themes of the event were electric, the expansion of Chinese OEMs into Europe, micro-mobility, autonomous driving, charging, connectivity and sustainability.

The Chinese OEMs came in full force, not only with BYD, the world’s largest EV manufacturer presenting its models to the European market, but a series of less familiar Chinese brands growing — or planning to expand — their presence in Germany and beyond, including, Leapmotor, Dongfeng, Series and XEV.

The ambitions of Chinese OEMs in Europe are clear with ABI Research recently forecasting that 1.2 million Chinese EV imports will arrive annually by 2030 into Europe. New entrants showing their products at the IAA, as well as more established Chinese players, like SAIC’s MG, Geely’s Lynk & Co and Polestar, as well Great Wall-Ora, NIO and XPeng, as well as products produced in China for western brands from the likes of Tesla, BMW or Mercedes-Benz are expected to be included in the million plus imports coming from the middle kingdom.

With attractively priced products, a strong grip on battery technologies and supply, and increasingly improving quality, as recorded by J.D. Power’s IQS studies over years, Chinese brands present a real threat to the legacy brands and jobs across Europe.

Not surprisingly, European Commission President Ursula von der Leyen, announced on 13th September 2023 that there would be an inquiry into EVs coming from China, saying: “I can announce today that the Commission is launching an anti-subsidy investigation into electric vehicles coming from China. Europe is open to competition. Not for a race to the bottom.”

This hasn’t stopped major dealer groups, however, like Emil Frey Gruppe, Senger Gruppe or Sternauto-Gruppe establishing franchise and agency opportunities with Chinese OEMs, especially to feed the ever-growing demand for EVs.

With attractively priced products, a strong grip on battery technologies and supply, and increasingly improving quality, as recorded by J.D. Power’s IQS studies over years, Chinese brands present a real threat to the legacy brands and jobs across Europe.

The requirement to provide lower priced EVs and greater range of models, to a market transitioning away from ICE vehicles by 2035 across the 27 EU markets (and 2030 in the UK), can only be welcomed by consumers and retailers alike.

But as new Chinese OEMs presented their products at the IAA, it was also interesting to see that VinFast pulled out late in the day, and that NIO had a limited presence at this prestigious event. No announcement of an expected partnership with Mercedes-Benz was given during the keynote speech by NIO’s CEO Li Bin at the IAA, highlighting how some challenger brands won’t find it easy to establish a successful presence in a very competitive market like Europe.

Though micro-mobility vehicles may not resonate in Canada as a major growth sales opportunity, the increasing restrictions on vehicle usage, particularly in urban centres is not unique to Europe.

Smaller vehicles, be it from XEV with their YOYO 2-seater, UK-based and Chinese built MEV City, Spanish Silence SO4, or Swiss brand Microlino, demonstrate the expanding range of micro vehicles on offer. Often designed for short, single-person journeys, these micro-vehicles underline a growing trend in Europe for new urban mobility solutions.

Notably, with the increasing popularity of households to install solar panels and the ability to charge at home, avoiding high energy costs so evident in Europe, make micro-vehicles an interesting add-on to home energy eco systems, something that energy companies, charging providers and retailers are exploring.

Make sure to read part two of this column in our December issue.

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The automotive world can learn a lot from how other industries consistently deliver amazing guest experiences.

Six years into my career, I made a significant pivot—from Xerox and the world of office printers to automotive when I joined the Infiniti division of Nissan Canada.

Although I loved my time at Xerox and the incredible sales mentors I learned from, I didn’t have a passion for the sector. What that pivot ultimately taught me was how transferable skills and experiences are across industries.

So, despite my three decades immersed in automotive, and Dr. Gordon Shields’ experience across a host of industries, we both jumped at the opportunity to learn about the world of luxury hospitality and how it applies to our industry.

One of our clients, a rapidly growing luxury automotive brand, challenged us to help them create and consistently deliver a best-in-class luxury experience, not simply a great luxury automotive experience.

We got to work studying the characteristics of luxury.

We conducted a large-scale social listening research study¹ examining the voices of nearly 400,000 global luxury consumers and were invited to present the results at the 2023 Forbes Travel Guide Summit in Las Vegas (the NADA of the hotel industry).

Our research found six emerging trends in the luxury hospitality sector—from the receptivity of affluent travellers for local and sustainable cuisine to the desire for authentic, immersive local experiences.

Luxury hotels are adept at providing highlypersonalized experiences for each guest using their knowledge of guest preferences to anticipate and proactively deliver unique experiences. They treat each guest as a “segment of one”.

While sustainable cuisine may not have carry-over potential for dealers, one of the luxury trends we found certainly does: the accelerating importance of hyper-personalization—the idea that each customer is unique with distinct tastes and preferences.

Luxury hotels are adept at providing highly-personalized experiences for each guest using their knowledge of guest preferences to anticipate and proactively deliver unique experiences. They treat each guest as a “segment of one”.

In a mature automotive market like Canada, brand growth requires taking share from competitors. It’s the size of each slice, not the size of the pie, that matters most.

And how do we take share in a market where most OEMs design and build high quality vehicles? A differentiated customer experience. And this is where auto dealers, premium and volume brands alike, can take a page from luxury hospitality brands.

All dealers strive to provide good service, but how embedded is the idea of personalized service in the culture and processes of each store?

Do our team members strive to deliver the highest level of service at all times? Demands of a busy dealership can impede execution, so we looked at leading practices from luxury hospitality to guide us on how to establish new processes and change behaviours to enhance the customer experience.

It starts with understanding how customer expectations are formed — from being directed to a dedicated parking space at a retailer, being recognised and offered a preferred table, aperitif or dessert at your favourite restaurant, to enjoying (and expecting) the comfort, priority service and lounge experience of a business class flight.

Highly customer-focussed businesses use processes to deliver, and technology to track customer preferences, that not only anticipate their requirements but also deliver services even before the customer knows they need them (think of having large golf-style umbrellas near the service department and showrooms doors for example).

Examples from hospitality are plentiful including the “we’re looking forward to welcoming you” pre-check-in request letter or email message (The Lanesbourgh in London excels at this), asking guests for their room preferences—everything from the preferred pillow type, fruits, drinks and flowers they enjoy most, allergies to be aware of, to the name and needs of their travelling pet.

Hospitality processes like this are designed to identify customer needs in advance. In our auto retail world, this approach can be transferred directly to service appointments and new vehicle test drives. For example, asking prospective customers how long they wish to experience the vehicle on a test drive, which routes would they like to take (highways, city streets etc.), and their preference for sales consultant accompaniment or an unaccompanied experience.

Dealers can adopt a more personalized approach at new vehicle delivery by asking customers in advance what areas of the vehicle they most want to learn about and how much time they would like to spend during the handover. This level of personalization is especially important for new EV owners, many of whom are learning about the nuances of electrified vehicles for the first time.

One of the easiest and most impactful hospitality best practices relates to how customers are greeted on arrival. In a hotel, it is not uncommon for multiple guests to arrive at the check-in counter simultaneously. Next time this happens to you, notice how the front desk staff manage the queue. In the best hotels, the agent makes a point of smiling and making eye contact with every waiting guest. No words are spoken, the visual connection is enough to make each guest feel acknowledged and valued, and serves to reset their ‘time in the queue clock’. Think of the impact that such a small but cost-free gesture will have in your busy service department on a weekday morning or in the showroom on a busy Saturday.

Leading hotels make a point of “beating the greet” with every guest, no matter where in the hotel (our friends at Forbes Travel Guide use this concept in their hotel training programs). Guests are acknowledged with a smile and a friendly “Good Morning” when any hotel staff member comes within 3 metres of a guest in a public area. Imagine how our customers will feel when they receive the same acknowledgement and hospitality from our staff—on the lot, in the showroom, and in the service department. Cost? Zero. Impact? Significant. Customers feel welcome and your dealership differentiates itself from others.

Adapting luxury hotel practices may initially feel uncomfortable for dealership staff. We’ve seen this first hand in our onsite coaching programs. The biggest barrier? Awareness. Dealers tend to train staff to deliver processes without fully considering how we want our customers to feel at each of the touchpoints in the vehicle purchase and servicing journey.

A big part of our training and coaching programs involves putting team members in the customer’s shoes. Once our teams realize the power of delivering a customer-centric rather than a dealer-centric experience, the returns in staff engagement and customer satisfaction metrics are impressive. We evolve from a transactional experience to cultivating a long-term relationship with each customer. The view shifts from ‘this deal’ to ‘lifetime value’.

Successful auto retailers are learning that most service enhancements offered by luxury hospitality brands don’t come at great cost, if at all. Changing staff behaviours is about learning new skills and embedding them into present activities, a mindset rather than an expenditure.

A big part of the fun in supporting an ever changing automotive industry is proving that older dogs are perfectly capable of learning new tricks.

REFERENCE :

¹ Emerging Trends in Luxury Hospitality Report, Clarify Group Inc., March 2023

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Auto dealers who evolve, have a different, but bright future.

In 2019, Forbes magazine offered one of the best descriptions of disruption I’ve read:

“Disruption is rarely invited… it is almost always forced on us, particularly in a mature industry, when some external circumstance forces businesses to react, usually after trying to resist for as long as possible… and there are always winners and losers.”

This is an apt description for our industry, and, if we’re honest, for auto retailers in particular. It’s funny how decades of success create inertia to change. The winners and losers comment resonates as it implies we have a choice. I’d like to offer a few thoughts on how Canadian dealers can remain winners.

Respected industry analyst Steve Greenfield of Automotive Ventures LLC recently published a comprehensive dealership risk assessment. In this analysis, over 15 potential threats are examined across two dimensions: the likelihood of each threat happening (from improbable to very likely), and the anticipated consequences on the dealer’s business (from minor to catastrophic).

This is an interesting read. But what’s missing in my view is a discussion of how dealers can and should respond to these disruptive forces. Let’s take a quick look at three potential threats most likely to occur (or already are).

Are the consequences really this dire? If we do nothing—potentially.

1. Evolving Customer Expectations

The pandemic accelerated customer expectations for a truly omnichannel experience — the seamless blend of physical and digital engagement with their preferred automotive brand.

Expectations when buying a new vehicle are now shaped as much by experiences outside our industry as previous dealership experiences.

When I consider my own consumer preferences, I gravitate to brands like CIBC, Air Canada Aeroplan, Marriott Bonvoy and Amazon that provide convenient, transparent and personalized “know me” experiences.

Every research study I’ve conducted or read over the last three years confirms I am not alone. Canadians are asking the question: Why can’t my dealer do that too?

So what’s the antidote? How can dealers thrive in a market where customers expect more from us than ever? Successful dealers are adopting a new playbook in sales and aftersales that can be summarized in one, four letter acronym: TEFF. This stands for Transparent, Efficient, Flexible and Facilitated.

TEFF-aligned dealers are transparent in all interactions with their customers, work tirelessly to improve process efficiency to respect the customer’s time, strive to deliver a personalized experience at every touchpoint (in-person and/or online) and ultimately, help the customer to acquire and maintain their new vehicle.    

2. Electrification

Government mandates notwithstanding, OEMs are rapidly moving to an electric future. In Canada, EV adoption is approaching 10 per cent, though with an uneven pace across the country.

In the Prairies and Atlantic Canada, dealers are typically selling EVs to innovators and early adopters — customers seeking the latest technology and/or a lower carbon footprint. These folks are typically less price sensitive and often know more about their new EV than their salesperson or service advisor.

But in B.C. and Quebec, where EV adoption is already in the double-digits, dealers are, or will soon be, selling to customers in the early majority. The needs and expectations of these customers are fundamentally different — less “green” motivation, keen to understand if and how an EV fits into their life, and especially whether they can achieve a lower cost of ownership.

Successful dealers understand the need to pivot — from a sales to advisory model where the most valued skill on the showroom floor is no longer closing but the second “F” in the TEFF playbook, Facilitate.

The dealer’s role is to help the customer acquire their new EV, not to sell it to them.

Most EV buyers need help understanding and adjusting to the “EV ecosystem” including differences in driving dynamics, batteries and regenerative braking, public and home charging options, the various OEM and third-party mobile apps and cost of ownership realities.        

3. Impact on service

Electrification will almost certainly put pressure on dealership fixed operations revenues and profits — fewer moving parts means less frequent service.

This is not new news. But how can dealers mitigate the impact?

While there are no magic bullets, here are three examples of how some dealers are already innovating to a successful future:

Go all-in on tires, especially winter tires, and make the seasonal tire exchange as convenient as possible. The weight and torque of EVs means more frequent tire replacement than with ICE vehicles. And with longer maintenance cycles, seasonal tire storage gives your service team two opportunities a year to provide great service to your EV owners including alignment and suspension work. I’ve heard this described as “velvet handcuffs” but most customers appreciate the convenience. And dealers benefit from retaining work that might otherwise be done elsewhere.

Get serious about EV charging as a profit centre. The average EV customer spends between $1,500 and $4,000 buying a Level 2 charger and installing it at home or at work. Why can’t dealers capture these parts and labour gross margins instead of third-party providers? Oh, and you will deliver a superior, TEFF-aligned customer experience in the process. One of Germany’s largest VW dealer groups Kuhn & Witte created a new “Power Paket Electrik” business providing charger sales and installation to customers across their network.

Pursue new mobility opportunities. EVs are not the only vehicles Canadians are interested in buying. eBikes and eScooters are big business. As one German dealer remarked at a mobile.de conference in 2022: “I have the same margin on a good eBike as I do from a Volkswagen Polo.” Kuhn & Witte is not the only dealer group that has expanded to new mobility sales and service — Canadian dealers like Colbourne Ford in Cape Breton and Roy Foss GM in the GTA are both actively promoting eBikes on their websites.

Sir Winston Churchill famously remarked: “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” In a rapidly transforming industry, it sometimes feels like we’re competing on a playing field that’s tilted upwards. How do successful dealers respond? They level the playing field.

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What are the implications for dealers of brands that exhibit vs. those that don’t?

Does an auto show deliver a return on investment for exhibiting brands?

This was one of many questions that that Jason Campbell, General Manager, and his team at the Canadian International AutoShow (CIAS) were contemplating as they finalized plans for the 2023 show—the first in three years.

As most readers know, some popular automotive brands in both the volume and luxury segments decided to sit this one out, and other shows across Canada. No doubt, auto show participation requires a significant commitment of financial and managerial resources.

So, how did things play out this year at CIAS?

Clarify partnered with CIAS to conduct visitor experience research—both during the show itself with 1,325 EV Test Track participants, and immediately after the AutoShow, with online feedback from 15,599 visitors, all consumers aged 20+ with no affiliation to the automotive industry.

Consumers roared back in 2023, almost setting a new record with over 350,000 visitors over the AutoShow’s ten public days.

Nearly two-thirds of visitors (65 per cent) intend to purchase or lease a new vehicle within the next 24-months, of which more than half (58 per cent) are in-market now with plans to buy in the next 12 months.

While some visitors came for the entertainment value (Family Day especially), the majority of visitors reported overwhelmingly practical reasons for attending—to see what’s new (brands, models and innovation) and to help them decide what vehicle to buy next. Nearly 1 in 3 visitors specifically wanted to learn about electric vehicles (EVs) and 1 in 10 wanted to experience an EV on the indoor Test Track.

What became clear in our analysis of the data is that the AutoShow attracts in-market buyers.

That’s great news for the AutoShow and especially for dealers in southern Ontario, but does the AutoShow actually influence consumer behaviour?

The data says yes.

The AutoShow is a catalyst for buying behaviours that OEMs and dealers alike care about. A significant portion of visitors have or will soon engage with brands online or in-person as they take the next step in their new vehicle journey:

• Nearly half will go online to learn more about a model (47 per cent);
• Nearly 1 in 3 consumers will visit a dealer (32 per cent); and
• Nearly 1 in 4 visitors will test drive a model (23 per cent).

Among the 10,103 respondents intending to buy within the next 24 months, two-thirds declare the AutoShow was helpful or very helpful in their choice of new vehicle (66 per cent).

Even more compelling: over 2 in 5 visitors (44 per cent) report the AutoShow led them to add at least one brand to their consideration list. Put another way, the AutoShow creates meaningful conquest opportunities among visitors for brands and models they might not otherwise have known about, let alone considered.

The AutoShow is like a rising tide—it lifts all boats to some extent—causing consumers to consider a wider range of options than had they not attended.

To gauge the AutoShow’s impact on consumer behaviour, we compare which brand(s) visitors already own with the brand(s) they have added to their consideration list. By subtracting ownership frequency from incremental consideration frequency, we are able to see the conquest opportunity created for each brand.

On balance, exhibiting brands generate significantly higher conquest opportunities than non-exhibiting brands. When we examine conquest opportunity creation across the 36 highest volume brands in Canada, the Top 10 were all exhibiting brands.

Furthermore, the Top 5 conquest opportunity creating brands—Kia, Vinfast, Cadillac, Jeep and Hyundai—all went beyond static displays to provide experiential opportunities for visitors like Camp Jeep and the chance to drive the EV6, VF8, Lyriq and Ioniq 5 on the indoor EV Test Track.   

At the other end of the spectrum, the weakest 5 brands in terms of conquest opportunity creation—including both volume and luxury marques—were all non-exhibiting brands.

While this may not be surprising, the difference between the strongest and weakest brands is stark. The “out of sight, out of mind” risk for non-exhibiting brands is real because they are failing to keep pace with the new conquest opportunities created by aggressive exhibiting brands like Kia, Vinfast and Cadillac.

In all three cases, each brand generated incremental consideration (visitors adding these brands to their consideration list) at a pace over 3.7 times higher than their existing share of ownership amongst AutoShow visitors. In the case of the weakest brands, the difference was negative.

Two additional insights with implications for OEMs and dealers alike:

1. The AutoShow’s consideration impact is most pronounced with younger Millennial and Gen Z visitors (age 39 and under), despite this demographic traditionally believed to be most receptive to digital marketing efforts. These younger visitors added the most number of new models to their consideration set of any demographic.The AutoShow and the experiential opportunities it provides clearly resonates with younger visitors beyond what digital engagement can deliver.
2. The majority of AutoShow visitors (79 per cent) are not very familiar with electric vehicles. Less than 4 per cent of visitors own an EV.

When asked what powertrain(s) visitors would consider next, ICE vehicles remain the most popular option (56 per cent).

While zero emission vehicles (ZEVs) register meaningful consideration, the relative popularity of plug-in hybrids is higher at 32 per cent than full battery electrics at 25 per cent. While it is likely the difference between PHEVs and BEVs is unclear for some visitors, it also reflects consumer hesitation with BEV range, charging infrastructure, pricing and availability.

Hybrid vehicles (no plug) are the second most popular powertrain option (47 per cent), despite the federal government’s proposed 2035 ZEV mandate.

The bottom line: the transition from ICE to EVs will be a long road. Consumers need education and a lot of handholding to make the transition.

The 2023 Canadian International Auto Show delivered what it set out to do for exhibiting brands. It delivered in-market buyers, it provided strong EV educational and experiential opportunities to visitors, and it created incremental conquest opportunities.

Do we really have to wait until February 2024 for the next CIAS?

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Order-to-delivery is going to be with us for a while, and we need to improve our approach for how we keep our customers in the loop.

The rules of the game have changed.

If you think back to the days of pre-pandemic and pre-supply chain constraints, dealers had more inventory than they knew what to do with. The vast majority of customers were selecting vehicles from dealership’s inventory, and if the dealership didn’t have it on the lot, they could get it through a dealer trade. 

That’s not the world we live in now, and will not be the world we are fully back to for some time to come.

I don’t have a crystal ball, but my prediction is that most OEMs—and dealers—have seen the benefit of a more balanced system of supply and demand. Dealers won’t want to go back to the world of a huge floor plan expense for their inventories, and huge incentives from manufacturers to move vehicles. 

Perhaps most importantly, consumers seem to have accepted the order-to-delivery process of ordering in advance and waiting to get what they want. With a big caveat: they are happy with the process as long as their dealership keeps them in the loop about the status of their vehicle order.

What we’ve seen in our research, and in anecdotal conversations with consumers and dealers, is that we are not really doing a great job as an industry keeping consumers informed.

Since this is now becoming a big part of the buying and delivery experience, we need to adapt our tools and processes to ensure we deliver a next level experience that can actually add value and excitement.

Apart from being the right thing to do, and part of our overall efforts to elevate the experience in our industry, staying in regular contact with our buyers can also help prevent order cancellations. 

When you consider the diagram above, representing a buyer’s emotions during a typical order-to-delivery experience, we can see the customer’s stress level rising on the Y-axis as the time elapses between purchase and delivery on the X-axis. 

When they place their order for the vehicle they want, and place a deposit, their stress level is pretty low. They are excited about their purchase. As time goes on, however, their stress level rises, particularly if they aren’t hearing anything about the progress of their order. As those stress levels rise, they are more likely to consider putting a second or third deposit on other vehicles, or canceling their order.

The way to ease their concerns is to proactively reach out to them with updates that are meaningful steps in the build, ship and delivery journey. This is a great way to maintain advocacy, and retain loyalty.

This type of status update on order tracking information and transparency is also what consumers are used to when they order from Amazon, an Uber or even fast-food. Some fast-food restaurants provide an app that helps their hungry customers track the order every step of the way: order received, food being prepared, food on its way. 

Proactive communication, even if the news is not always what our customer wants to hear, is always preferable to leaving them wondering what is happening. 

In an ideal scenario, we see at least five key touchpoints, for keeping customers in the loop and engaged. Here are those touchpoints and some sample talking tracks for each.

Purchase-to-delivery touchpoints:

Customer order entry: “We are happy to report your new order has been entered in our production system.”

Vehicle scheduled for production: “We are happy to confirm your new vehicle is scheduled to be built in May.”

Vehicle has been built: “We are happy to share with you that your new vehicle has been built.”

Vehicle is in transit from the factory: “We are very pleased to confirm your new vehicle is on rail to our dealership.”

Vehicle has arrived at the dealership: “We are thrilled that your new vehicle has arrived safe and sound at our dealership.”

When we master this process, we can also start to add additional value to each of these touchpoints, by providing things like videos with key features of the vehicles to get them excited, or accessories and protection packages you might offer, or coordinating the exact delivery time and date that suits their schedule.

Just as dealers need to adapt, OEMs have to provide more transparent and accurate information to their dealership network. Some are building online portals to help, but until those new tools are available, there are things dealerships can do right now with the information they have.

Going silent and avoiding your customers isn’t a strategy. Being proactive and gathering all the information you can, and being honest and transparent with your customers about things you don’t yet know, is the way to go. 

That way you can help build their excitement every step of the way, and result in a delivery event that will be highly anticipated and enjoyable. 

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New streams of revenue are out there for those who are willing to adapt

The future is green, or at least moving closer to zero emission in the coming decades. The recent new vehicle registration market share figures from S&P Global Mobility for Q3 2022, showed zero-emission vehicles (ZEVs) represented 9.5 per cent of sales in Canada, up 70 per cent compared to the same period last year (5.6 per cent ZEV share in Q3 2021). ZEVs include battery electric, plug-in hybrid, and fuel cell electric vehicles—the common characteristic being they all have the capability to operate on electrons alone.

Indeed, in the major urban areas, ZEV sales accounted for a notable chunk of the market in Q3, with a 24 per cent share in Vancouver, 16 per cent share in Montreal, and even in the “no rebates for rich people” market of Toronto, one in 10 vehicles sold in the third quarter. All up from the same period in 2021.

Growing consumer interest in ZEVs and increased awareness of environmental issues, alongside an expanding range of attractive ZEV models on offer in Canada, have helped promote sales. Without supply constraints, ZEV share would be even higher—waiting lists for most ZEV models are now measured in months.

Good news for the sales department, but how encouraging is all of this for fixed operations?

This thinking is consistent with Clarify’s TEFF retail success model: Transparent, Efficient, Flexible and Facilitated—in particular the opportunity of providing customers with a more facilitated (“easy”) transition from ICE to EV ownership.

A recent study commissioned by CLEPA, the European Association of Automotive Suppliers, in partnership with Roland Berger, stated that “BEVs have around 30 percent lower aftermarket replacement part revenue potential than ICE vehicles”. Overall service and parts revenues will decline over time for workshops unless they adapt to changing market conditions.

The number of gasoline vehicles dwarfs the number of ZEVs on the roads today, and service revenues will remain strong for these models, however, not indefinitely. There is both need and opportunity for dealerships to look at the transition to electric and changing mobility needs of consumers as a real opportunity to grow revenues outside the standard business model.

These opportunities are varied and require bold thinking. Indeed, change doesn’t come as easy to an industry used to managing its business successfully the same way for decades. In our view, however, the skills already contained within most Canadian dealership service operations can be adapted to capitalize on these new revenue streams.

Some examples worthy of consideration include:

Charging Installation

EV customers, most of whom are new to electric cars, need advice regarding the charging solution that works best for them. A significant number of them need a home or work-based charger. This growing cohort provides notable revenue opportunities, not only with offering customers an installation service, but the charging box too.

This thinking is consistent with Clarify’s TEFF retail success model: Transparent, Efficient, Flexible and Facilitated—in particular they have the opportunity of providing customers with a more facilitated (“easy”) transition from ICE to EV ownership.

Letting your new EV customers fend for themselves when it comes to home charger selection and installation, is not only a huge missed opportunity to enhance the customer experience—and their advocacy of your dealership to family and friends—but also a missed revenue opportunity.

Why would dealers allow Amazon and the local electrician to earn these EV transition dollars? With average Level 2 wallbox chargers selling for $1,000 and charger installation costs ranging from $1,500 to $3,500 (depending on the customer’s electrical panel) including both materials and labour, the gross profit potential is meaningful.

One of the co-authors recently spent over $3,450 (before tax) on his EV transition and would have been more than willing to include the equivalent amount on the dealership’s bill of sale had it been offered as a facilitated service.   

Do dealerships have experience in the sale of specialized automotive parts and accessories, installed by highly skilled technicians (rhetorically asked)? The main difference is that we’re now talking about installation at the customer’s home or office, not on the vehicle itself.

Can these logistics and liability risks be managed with the skills we already have? Yes.

And for those dealers who don’t want to establish an in-house EV charger installation team (or not yet), there are good options available like RocketEV.ca, a third-party service that dealers can offer directly to their customers, generating a commission revenue stream in the process—and with a better, TEFF-aligned customer experience.

When you consider that less than two per cent of Canada’s nearly 23 million light vehicles are ZEVs today, demand for charging solutions will be robust over the next three decade ICE to EV transition.

As Frank Schlehuber from CLEPA comments “The ability [of traditional automotive service providers] to collaborate and be open for new business models will be key success factors”.

New Finance Models

Subscription models are growing, especially in Europe including OEM-sponsored programs from Volvo and Porsche (both in Canada too), Jaguar Land Rover, Hyundai, Mercedes-Benz, and new challenger brands like NIO from China.

Subscription services are offering customers the flexibility of short term subscription terms, often including insurance and the ability to swap models.

Importantly, this arrangement offers dealers the ability to market used vehicles on a subscription basis, and thus secure service work for the duration of the vehicle’s subscription lifecycle.

The move towards offering a vehicle-as-a-service (VaaS) provides a guaranteed revenue stream for retailers.

However, this option is not merely open to the OEM, with providers like Australian based LoopIt providing a “subscription in a box” solution as a white label.

Importantly, this arrangement offers dealers the ability to market used vehicles on a subscription basis, and thus secure service work for the duration of the vehicle’s subscription lifecycle.

E-bikes and New Mobility

The sales growth of e-bikes, e-scooters and premium bicycles has been phenomenal, with the global e-bike market alone anticipated by Vision Research Report to grow from USD $41 billion in 2020 to USD $120 billion in 2030.

So why can’t new car dealers—especially those in urban markets—participate in this growth by providing customers with sales and service options for a wide range of mobility solutions beyond the core passenger vehicle business?

As Christoph Seyerlein from the German business magazine, Manager Magazin at the Mobile.de Mo:re Conference recently commented “I know a dealer who recently told me, ’I have the same margin on a good e-bike as I do from a Volkswagen Polo’.”

Underlining not only the sales potential for e-bikes, but also considering that a number of bikes share similar parts to EVs, could open the service bays to extra business.

Certainly, OEMs are entering the market with their own e-bike offerings, including Audi, BMW and Mercedes-Benz. Cynics may see these products as merely PR exercises, but for some dealers this is a growing source of revenue.

Mobility Advisory

The traditional role of the automotive retailer and service centre was to focus on the product. Electric vehicles, however, come with a new ecosystem for customers to manage. Most notably how to best look after their vehicle’s battery life, how to manage charging and determine the total cost of ownership.

As dealers are the mobility experts in their local markets, they have the opportunity to advise not only single vehicle purchasers on their transition to an EV, but also expand to advise on how small businesses, say local tradespeople, logistic companies or organisations wanting to change their fleets to electric can move effectively.

Providing advisory services not only allows dealers to gain additional revenue from sales and installation but opens up a wider customer base than perhaps was previously untapped.

In essence, retailers and workshops can expand the services they provide their community by embracing new mobility solutions and electric vehicles, in order to grow their businesses toward the new greener future. New streams of revenue are out there for those who are willing to adapt.

The post The green dividend: cashing-in on EVs? appeared first on Canadian Auto Dealer.

I’ve never thought of myself as an early adopter.

If my lovely wife had a dollar for every time she encouraged me to “try something new”—say other than navy blue sweaters or penne a la vodka when we go to our favourite Italian restaurant—and was met with resistance, she could have long since retired.

But here we are, the proud owners of a 2022 Hyundai Ioniq 5. 

After fourteen ICE vehicles between us over the last three decades, two hybrids among them, we now use electrons for the vast majority of our kilometres driven. Full disclosure, there is still an ICE powered Honda in the driveway. I’m not quite ready to navigate road trips from the GTA to visit our son in Nova Scotia on electrons only. Not yet.

I am not trying to give myself any credit. I am hardly the first Canadian to buy an EV—over 200,000 have already done so. But the reality is that we are still in the earliest stages of EV adoption in this country, and frankly in the world, other than possibly the People’s Republic. EVs represent barely more than one per cent of all light vehicles on Canadian roads. Lots of pundits are talking about Canada having reached the ICE to EV inflection point, I presume based on the number of new EV models for sale or “coming soon”.  But with under two per cent penetration of all vehicles on the road, I think proclamation of an inflection point is still ahead of us.

Do I think we’ll get there? You bet. There is too much momentum from governments, vehicle manufacturers (established and new), parts suppliers, energy companies and, frankly, from consumers. The wait list for every EV on the market is now measured in months or years, not days or weeks. To be sure supply remains constrained, but EV demand is growing.

Our motivation to acquire an EV is multi-faceted. Like many other Canadians, we want to significantly reduce our carbon footprint. Hurricane Fiona is just the latest example from among hundreds of climate change induced catastrophes in the last year, caused by our warming oceans.

We understand that EV production can be carbon-intensive, especially the battery and the mining of the rare earth minerals required. But when the entire lifecycle of an EV is considered—and especially in provinces like BC, Manitoba, Ontario, Quebec, PEI and Newfoundland-Labrador where the grids are mostly powered by non-carbon generating sources—driving an EV results in a meaningful green dividend. Not to mention my pleasure at being able to ignore the machinations of the per litre price of liquified dinosaur goo. 

My second motivator is equally straightforward. Practice what I preach. If I want to maintain the credibility I enjoy advising clients across the automotive and mobility industry, I had better walk the talk. This reminds me of the Toyota Way maxim of Genchi Genbutsu, roughly translated to “go and see for yourself”.

Plus, as I’ve discovered, driving an EV is great fun. Quiet. Refined. Technologically sophisticated. And quick as heck. My jaw is sore from the permanent grin on my face these last few weeks. And, being fortunate enough to have my own garage, it is particularly satisfying to charge the battery overnight, for a fraction of the cost of filling an ICE tank.  

With nearly a month of EV ownership under my belt, I’d like to share a couple of insights from my EV purchase and delivery journey.

In many ways, the buying experience is similar—prospective EV customers need information, answers to questions, a test drive, financing options and a well planned, thorough delivery.

But other aspects of the experience are different. With an EV, you are buying more than just the vehicle, you’re also buying the EV ecosystem that surrounds the vehicle. While many early adopters know as much or more about the vehicle and the EV ecosystem as their salesperson, for most Canadians, this will be all new. I’m in the business—I already know all of this.

But fast forward a few years, when we actually reach the EV inflection point, and we’re now selling to customers in the early majority of the adoption curve. The needs and expectations of these buyers will be different from the early adopters. Less green motivation. Performance and cost of ownership benefits will matter most. They’ll need a lot more hand holding, probably a second test drive, and critically, extra support from their product advisor to adapt to the EV lifestyle. Most new EV owners will also require a second delivery.

The support needed includes everything from selecting and installing a home charger to downloading and using the functionality of the vehicle app, and how to navigate the (still) complex world of public charging. There are good resources available to Canadians to help them quickly navigate this complexity—including ChargeHub, Plug n’ Drive and others—but these resources should be provided to the customer by their product advisor. New EV buyers should not be left to fend for themselves. 

In Clarify Group’s vernacular, this is the second “F” in our automotive retail experience model TEFF, the four critical components to success:  Transparency,  Efficiency,  Flexibility, and a  Facilitated experience (from facile, the French verb “to make easy”).

The delivery of a facilitated EV experience is currently a huge challenge for most dealerships. But this is also a huge opportunity when they get it right. The new direct-to-consumer challenger brands will struggle to match the high touch, facilitated experience that established brands and dealerships like Hyundai, Kia, Genesis, Ford, GM, Nissan and VW have the potential to offer.   

I am happy to report that my product advisor was extremely knowledgeable, prepared and added value to my purchase experience. He was genuinely excited to deliver my EV including providing me with a thorough product demonstration. My new Ioniq was delivered in perfect condition with a full charge. While my advisor did not proactively raise items like the BlueLink connected app, or discuss home charger installation options with me, this is almost certainly because he knew I already had familiarity with them (I told him as much). Will he provide a more facilitated EV experience to his other customers who are not as well informed? Time will tell. 

A missed opportunity was the lack of proactive communication with me during the extended wait for delivery. My expectations were set clearly at the time of order that delivery would be several months away, potentially as long as a year. But in the interim period, I didn’t have the benefit of any status updates. Again, I know the dynamics of how this all works. But most consumers don’t. In the absence of information, customers assume. And almost never correctly. My first update from the dealership came when the vehicle was about to arrive at port. I appreciated that. It allowed me to initiate the purchase of my home charger and its installation, as well as my insurance. A more transparent, TEFF-aligned experience would include regular (read monthly) updates, assuming the customer has not asked us to refrain from updates, and in the manner the customer prefers. I prefer text, and my advisor was happy to oblige me.

Overall, my journey to EV ownership has been very positive, both the vehicle and the retail experience. Will every first-time EV buyer at your dealership feel the same? 

The post Practicing what I preach appeared first on Canadian Auto Dealer.

How can dealers manage the new subscription-based upgrade model without alienating consumers?

Herbert Diess, former CEO of The Volkswagen Group, commented at the end of June that global revenues for the automotive industry are forecast to reach circa CAD $6.5 trillion by 2030, up from CAD 2.6 trillion today, with around 25 per cent coming from software-enabled revenues. He stated that the future of the Volkswagen Group is not merely reliant on building well-designed vehicles, but as a manufacturer of edge devices, providing connected mobility solutions for a rapidly changing market.

As consumers increasingly look forward to a world of autonomous driving, the in-car experience will become more important and lucrative for service providers. Volkswagen’s investment in its own underwhelming, proprietary software solution, CARIAD, which was possibly one of the key reasons for Dr. Diess’ recent departure, highlights the importance Volkswagen places on winning the in-car software battle.

Indeed, OEMs across the globe are increasingly looking at how they can evolve their business models beyond selling vehicles via a franchised network, to managing fleets and ensuring recurring revenues are generated throughout the lifespan of each vehicle.

Vehicle-as-a-Service (VaaS) is becoming a common mantra from leading OEMs as they look at transitioning away from the traditional sales model with the dealer as their end customer to a more direct connection with end-customers via an increasingly complex array of intermediaries. 

The move away from a purchase finance and lease model to a subscription approach is driven by the increasing need for OEMs to find alternative revenue streams with richer margins partly to help invest in new EV initiatives, as well as counter the lower service revenues being generated by BEVs.

Research from Germany-based automotive consultancy, Berylls Strategy Advisors, expects a third of Gen X and half of Gen Z EV buyers will take-up a VaaS offering. With each subsequent subscription for the same vehicle offering incremental onboarding profits, Berylls expects the long-term profitability for OEMs to increase by 40-50 per cent with VaaS.

This subscription model has naturally created a run of new providers entering the space, including Finn, Sixt and VivelaCar in Germany, Flexigo, Onto and WagonEx in the UK, as well as OEMs like Audi, Jaguar, Land Rover, Lexus, Lynk & Co and Porsche providing direct subscription offerings. Volkswagen recently purchased Europcar, a major rental provider in Europe, as a base to offer subscription vehicles to their customers.

The subscription model is attractive to customers as it offers greater flexibility and transparency to the ownership experience, with a simple-to-understand monthly payment plan, inclusive of insurance, taxes and maintenance costs and the ability to hold the vehicle for only one month or over several years based on individual customer requirements.

However, as attractive as VaaS is for customers, the jury is clearly out when it comes to advancing the option to include actual features in the car.

Subscription-based upgrades have worked for other industries such as gaming. For example, 30 per cent of revenue from Electronic Arts’s highly successful FIFA 2020 game came from its Ultimate Team payment add-ons. Printer manufacturers moved away from making money from the product, rather now from their high-margin OES replacement toners, and Nestlé reinvented the coffee business model with the introduction of Nespresso capsules. However, for vehicles, the change in approach may be harder to achieve due to the far higher prices, emotional attachments, safety concerns, as well as image questions that play in the customer’s mind. 

BMW ignited indignation recently in some European markets when it was discovered that the brand was charging extra for front heated seats in selected models and markets. This approach would be inconceivable in Canada and other cold climate markets. However, for the OEM, it was an example of how it can look at connected services as additional features, with the required hardware already embedded in the vehicle as part of a manufacturing efficiency process, initiated and charged for through over-the-air (OTA) updates.

Audi, Mercedes-Benz, Tesla and other premium automotive brands are also offering connected services be it: Remote Parking Assist, Beginner and Valet Modes or Adaptive High Beam Assist by Mercedes-Benz in some key markets, or Tesla with Enhanced Autopilot (EAP) in Canada. Such additional features can be seen as offering more choice to the customer.

From a remarketing standpoint, being able to add-on a popular feature at a click of a button can be a powerful tool to lock in a new subscriber or buyer, as well as new software features that can be remotely updated into a used vehicle that could add instant value to the car. However, how does it work for the end-customer?

Interestingly, across different industries we have seen divergent trends. Some companies are trying to make the customer’s life easier with simplified price points, and with no hidden charges—think Airbnb, Discover Bank, Genesis, Uber, Zappos. Or, consider the more differentiated approach, where customers are offered a base price—say, on an airline booking—and then subsequently asked to pay for additional ‘standard’ features, including seat selection, airport charge, baggage and/or booking fee alongside ‘additional’ features, like lounge access, advance boarding, travel insurance, and even pre-ordered food on board or a text message confirmation. Though providing choice, it never leaves the customer feeling particularly happy with the final price unless they go for the very basic option. It certainly doesn’t feel like a premium or luxury experience.

In German, they refer to perceived unfair incremental increases in the base price, with hidden additions as Abzocken, or in English a ‘rip-off’. The sense that the OEM is trying to find every way to charge extra, even at very low amounts to build up a larger revenue stream per customer. Naturally, it can be argued that all these features are bespoke options, but with a car, and especially a premium vehicle, it may be expected that some of the optional features should be standard. Moreover, for core infotainment and comfort, as well as all safety features, it is hard not to expect them from a premium brand included in the base price.

Adding complexity to the sales or subscription process may be attractive for the OEM in terms of incremental revenue, but for the dealer trying to communicate the value of each additional upgrade it may be harder to achieve than expected. A recent North American example is GM’s decision to require a three-year subscription to OnStar and GM Premium Connected Services for all 2023 model year Cadillac, Buick and GMC vehicles. Dealers were put in an awkward position trying to explain why these previously optional services were now mandatory. Many US customers cancelled their pre-ordered vehicles. In Canada, GM recently changed the approach to include these services as part of the MSRP, at least for Cadillac vehicles—for now.

Moreover, any transfer of ownership needs to be handled efficiently with no surprise costs to both the former and new owner. Who wants to keep paying for a feature they either don’t use, can’t use, or don’t want?

Although such subscription services are only in the nascent stage in Canada, the trajectory is clear from some major OEMs. The opportunities to gain greater earnings from VaaS is surely attractive for both new and established players, alike, but it also highlights a challenge to some traditional players who may be squeezed out of the market. 

While the increased complexity of the ownership experience will be interesting to follow, for it to be accepted without hurting a brand’s image, it needs to be seen to add value for the customer, and not a burden. In essence, it requires an effective communication strategy on why some features are standard and others are additional cost-based items. In the end, the customer needs to feel they own the experience and are gaining the best value whatever the price-point. Dealers are in the best position to accomplish this objective, being closest to the customer, at least in the transition period towards what is expected to become a VaaS future.

The post Vehicle-as-a-Service is the new OEM mantra appeared first on Canadian Auto Dealer.

We are old enough to remember when economists, sociologists, and futurologists alike, predicted the end of the long hours culture in favour of a new utopia called the “leisure society.”

The argument ran in the 1960s and 1970s that technology would take away routine and time wasting activities to allow us to enjoy the free time we all deserved. In some ways that happened, but as we freed up time from one domestic chore or another time-wasting office activity, other tasks arose to fill the vacuum. Unfortunately, we were misled.

Similar forecasts have emerged around the end of oil and the decline of automotive vehicle sales—and specifically whether we have reached “Peak Car.”

After the financial crisis of 2007-2009, global automotive sales grew rapidly for over a decade, peaking in 2017 and 2018. The biggest driver of sales growth was from consumers in emerging markets like China, India, South-East Asia and Latin America. 

As economies grew, so did people’s requirements for personal transport. For many, a vehicle remains not only a necessary form of individual transport but also a sign of personal achievement, an aspiration, and a major step up for a family compared to a small scooter in a city like Mumbai or São Paulo.

Global auto sales understandably dipped through the pandemic but are on the upswing again as of 2021, albeit constrained by various supply chain challenges and lingering pandemic restrictions in countries like China.

Source: LMC Automotive, May 2022

This growth in demand, however, will be tempered by external pressures, most notably related to climate change. Governments, particularly across developed markets, are calling for the end of internal combustion engine (ICE) vehicle sales, with Ottawa setting targets to stop in 2035, and the United Kingdom, France, Spain, Taiwan, Singapore and California amongst others, announcing similar bans on gas and diesel-powered vehicles. 

Moreover, growing focus on reducing congestion and emission levels, especially in urban centres, is promoting the wider use of public transport, and adoption of micro-mobility and vehicle sharing and hailing alternatives. 

This growth in demand, however, will be tempered by external pressures, most notably related to climate change. 

Indeed, many younger cohorts in major urban centres are less likely to own or lease a car, or even apply for a driving licence, than their counterparts even a decade ago.

But does this mean we have reached Peak Car?  

According to a recent report from Bloomberg Green, while we may not have reached Peak Car, we have almost certainly reached Peak ICE—in fact, it is already in the rearview mirror, cresting in 2017. 

Source: BloombergNEF Long-Term Electric Vehicle Outlook 2022
Note: Electric vehicles include plug-in hybrid vehicles

As global sales of electric vehicles (BEVs and PHEVs) accelerate out of the pandemic, the mix of sales is shifting in favour of EVs. While it will take some time before EVs outsell ICE vehicles in most major markets (Norway is the notable outlier at 92 per cent of sales as of March 2022), the reality is that ICE will become an ever smaller percentage of total sales.    

Although still lagging the EV penetration of other G7 nations like France (21 per cent), UK (23 per cent) and Germany (26 per cent), Canada’s EV share of new vehicles sold reached 8.3 per cent in the first quarter of 2022, led by BC and Quebec. In fact, EV sales in the major cities of Vancouver and Montreal are approaching one in every five new vehicles sold (Source: IHS-Markit). 

Despite government targets, however, the ultimate decision-maker is the Canadian consumer. 

While EV demand is growing, the sales trajectory remains unclear. A recent study by J.D. Power found that nearly half of Canadians (47 per cent) have no intention of considering an EV as their next vehicle. 

Analysis by Clarify Group finds at least four major constraints to EV adoption: 

Product: OEMs are increasing the supply of new EV models, both BEVs and PHEV variants, with increased range and quicker charging times. The total range of models on offer, however, remains limited in Canada. Aside from Tesla, most OEMs have only one or at most a few EVs available for purchase and with lengthy wait times. 

Affordability: The premium purchase prices of most EVs available for sale today eludes the majority of Canadians. For early adopters, price sensitivity is often secondary to the desire to own new technology, but for the majority, current EV price points are challenging. As BC and Quebec approach the transition from early adopters to early majority buyers, the price gap between an EV and a comparable ICE vehicle will be harder to overcome. Ontario will need to reconsider its “build them and hope consumers buy them” EV strategy. OEMs will need to introduce vehicles in lower priced segments that represent the majority of vehicle sales.

Source: Clarify State of Charge Canadian EV Monitor, April 2022 (blue line represents the level of digital engagement of Canadians on the topic of EV cost of ownership); Gasbuddy.com (red line represents Canadian average price per litre of regular unleaded gasoline)

Sources: NRCan.gc.ca, zap-map.com, IEA-EV Data 2021, OECD

Cost of Ownership: Many Canadians remain uncertain of the costs of EV ownership compared to the ICE vehicles they know. The good news is that recent inflationary pressures are causing Canadians to be more receptive: Clarify State of Charge data reveals that as gas prices increase, there is a corresponding increase in social media engagement on the topic of EV cost of ownership. But the math is not always fully understood—this represents both a need and a great opportunity for OEMs and dealers to educate interested prospects, especially given that gas prices are expected to remain elevated for the foreseeable future.

Charging Infrastructure: Range anxiety remains a challenge, but charging anxiety may be the real challenge for OEMs. Today, Canadians have access to over 16,000 public charging points, well below international comparisons, especially considering the huge geographic expanse of our country. As EV sales increase, pressure on the infrastructure will grow. Or, perhaps, EV growth will remain below its potential until the charging infrastructure grows. Chicken or egg? Indeed, many Canadians living in multi-family buildings have limited access to home charging. Avoiding charging anxiety will be an important barrier to overcome for many Canadians.

Implications for Canadian Dealers?

So what does all of this mean for Canadian dealers? The answer: it’s complicated. With Peak ICE behind us, dealers will need to operate with a foot in both camps—ICE and EV—for some time to come in both sales and after-sales. 

The answer: it’s complicated. With Peak ICE behind us, dealers will need to operate with a foot in both camps—ICE and EV—for some time to come in both sales and after-sales. 

Customer needs and expectations are different, not only between ICE and EV customers but across the EV adoption curve as dealers in BC and Quebec enter the “early majority” phase of the adoption curve.

Dealers will need to wear multiple hats, facing increased complexity—in staffing, training and infrastructure investments among other challenges.

So while the tide is indeed turning, dealers need to carefully measure the hype against the reality, especially with their brands—and perhaps most importantly for the customers in their markets. 

EV leadership, though, will have to come from the top. Your teams will watch your interest and curiosity with EVs, and will act accordingly. Make sure to talk with your customers and gauge their interest and hear their concerns. Only then can you know the issues they are facing and develop strategies for your sales and service teams to address them. 

An EV future is coming. It just won’t arrive all at the same time across Canada.

The post From peak car to peak ICE: how near are we? appeared first on Canadian Auto Dealer.

What can Canadians learn from the European experience with selling electric vehicles?

The Canadian auto dealer team asked me to reflect on lessons learned from the growth of electric vehicles (EVs)—battery electric vehicles (BEVs) and plug-in hybrids (PHEVs)—over recent years in the UK and Europe, and what Canadian dealers and OEMs could do better to support the consumer transition to electric.

The dangers of making such broad comparisons are obvious at any time but even more challenging during a period of restricted vehicle supply, and concerns around energy security as Putin wages his odious war in Ukraine. However, I accept the challenge.

Sales of electric vehicles in the top three auto markets in Europe continue to break records: February 2022 EV registrations reached 25 per cent of total vehicle sales in Germany, 26 per cent in the United Kingdom, and 20 per cent in France.

The smaller markets of the Netherlands (EV share of 28 per cent), Sweden (52 per cent) and Norway (86 per cent) show how far it can and likely will go. Compared to less than 6 per cent EV sales in Canada in 2021, Europe is considerably farther along the EV adoption journey.

As the prominent German economist Rudiger Dornbusch famously remarked: “…in economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.”

It is now clear that EV adoption in Europe has surpassed the early adopter stage and now is hurtling down the Autobahn towards mass adoption.

For example, Tesla outsold Porsche in Germany in 2021, Nissan Leaf was the fastest selling used vehicle in the UK last year, and the Fiat 500e is proving to be an increasingly trendy EV for the growing number of low-emission zones and chic-urban centres in Europe.

The sales journey hasn’t been without its challenges. Aside from the obvious barrier of limited models on show (now thankfully starting to change with improved new models entering the market from all main legacy OEMs and challenger brands, alike), six areas have frustrated the European consumer, dampening EV adoption:

1. Unprepared sales channels: Both direct and brick-and-mortar sales networks across Europe have (and some continue to) struggle promoting the core benefits of EV ownership.

With limited information online, and often with ill-informed sales consultants, consumers often knew more about an EV model than the retailer. As a senior head of a leading UK automotive dealer group told me: “Salespeople were intimidated by these customers.”

With investments in training, however, OEMs and dealers have adopted a more product focused approach to selling EVs and forward thinking dealers are now better prepared to meet the needs of EV buyers. As European markets have transitioned from early adopters (highly informed) to mass market consumers (less informed than early adopters), automotive retailers are now back in the driver’s seat.

2. A smorgasbord of terms: EV terms are a nightmare, ranging from inconsistent references to range measures (WLTP versus kWh/100 km), multitude of charge types: CHAdeMO, CCS, Type 2, Tesla Type 2, Rapid DC, etc. as well as confusion around charging times, capacity requirements and charging limits.

Even the home wallbox can be a 3kW, 7kW, 11kW or even higher if you can afford one and your vehicle accepts it, making any consumer’s head spin. Successful EV retailers understand that buyers can be confused and provide their customers with simplified explanations and access to key market-wide information resources.

3. Lacklustre promotions: Despite significant retail advertising and promotion, European retailers initially witnessed more interest among fleet buyers as companies and local authorities were mandated to deliver on their sustainability goals.

The promotion of many new EVs failed to excite new private (retail) buyers, save for Tesla, and a few other players. EVs were promoted to the masses with limited appeal. Fortunately, OEMs and retailers now promote tech, driving fun and convenience, dialling-down on environment attributes and removing dull engineering references.

4. Struggling to communicate Total Ownership Costs (TOC): Consumers (and arguably brands) aren’t clear how to calculate the cost of EV ownership. It remains badly communicated to buyers, with confusion around varying charging costs (home, public, work, etc.) maintenance requirements, and anticipated residual values in favour of promoting headline incentives and grants to countenance the higher ticket price. EVs are not effectively promoted as good value for money.

5. Constantly changing incentives and government grants: The sheer variety of incentives and government grants covering not only new vehicle purchases and the installation of home charging wallboxes, but road duties, business taxes and other benefits in kind, add to the complexity for the consumer.

Further, consumer rebates came with variations related to specific vehicle segments and types, as well as the timeframes applied to each offer. All told, the experience for buyers felt more like an accounting exercise than a straightforward and enjoyable purchase. Successful EV retailers became adept at simplifying and guiding the customer through this maze.

6. Fragmented and limited charging infrastructure: The rapid growth of public charging points typically hasn’t matched the demand where EV owners travel, creating frustration among queuing drivers or unused charging points in locations with low EV density.

Pricing and charging speeds, which are typically badly signed, vary greatly. Moreover, the inoperability of charging stations to accept universal payments, preferring specific Apps or membership RFID cards reduces the access to public charging points for many EV drivers.

It also increases anxiety among owners and dampens consideration among the sizable population reliant on street parking. Retailers have risen to the challenge by encouraging EV buyers to use the best aggregator charging network apps, educate them on journey planning, and providing access to their own free charging stations.

Greens shoots of growth

Despite these challenges, it is encouraging to see the introduction of a large selection of new models entering the European markets across all segments. Increasingly the EV ecosystem is becoming more integrated:

Utility companies and insurance players are now offering EV-tailored tariffs and premiums;

Subscription platforms are being introduced to promote adoption outside of longer, fixed-term financing; and

Concerns related to energy security, alongside a sizable environmental lobby in Europe, is promoting ever greater use of renewables and a focus away from fossil fuels.

Baker said that as EVs are more attractive to female buyers with a greater focus on tech, interiors, sustainability, and fun to drive attributes, OEMs and retailers need to move further away from old ICE references related to torque, engine size, and power.

Untapped potential

However, one major untapped market remains in the automotive industry—its inability to engage fully with female buyers.

A recent study by AutoTrader UK revealed that 20 per cent of women hadn’t considered an EV as their next vehicle compared to only 10 per cent for men. Further, 62 per cent of women were not aware of any government grants available.

“There’s a huge communication piece that is missing between the car industry and women.” says Erin Baker, Editorial Director at AutoTrader. “I think that is partly because women want to be talked to in a slightly different way about cars.”

Baker said that as EVs are more attractive to female buyers with a greater focus on tech, interiors, sustainability, and fun to drive attributes, OEMs and retailers need to move further away from old ICE references related to torque, engine size, and power.

Implications for Canada

So, what does all of this EV transition experience in Europe mean for Canada? In my view, there are five key lessons for Canadian OEMs, dealers and related industry stakeholders:

1. To accelerate EV adoption, there needs to be clearer, uncluttered communication around each product’s key benefits, including clarity as to the cost of running an EV over a 1, 2 and 3 year period;
2. Requirement for the EV ecosystem of players, including government, to work together to enhance interoperability, price transparency, range metrics and charging standards, all key aspects of the EV experience;
3. The charging infrastructure needs to grow in-line with vehicle adoption;
4. Consumer incentives should be used innovatively, with clear guidelines and timeframes; and
5. The wider market must also embrace and address the unique needs of women to accelerate EV consideration and adoption.

As we’ve seen from Europe, the market can move faster than first expected, so best to be prepared now for tomorrow’s rapid growth.

The post EV lessons from Europe appeared first on Canadian Auto Dealer.

Few Canadian provinces are investing in consumer incentives for EVs. It’s time to change that.

The good news: The number of Zero Emission Vehicles (ZEVs) in Canadian driveways grew by 58 per cent in 2021 according to a recent Automotive Insights report from IHS Markit. 

The bad news: ZEVs still only represent 1 in every 20 new vehicles sold in Canada (5.6 per cent) in 2021 according to the same report.

Transport Canada uses the term ZEV to describe vehicles that can operate without producing tailpipe emissions. ZEVs therefore include battery electric (BEV), plug-in hybrid electric (PHEV), and hydrogen fuel cell (FCEV) vehicles.

The Canadian government is committed to reaching 100 per cent ZEV sales by 2035, not dissimilar to aggressive targets set by the US, UK and Germany. Convincing the other 19 in 20 Canadian new vehicle buyers to switch from the routine and comfort of a combustion vehicle feels like a very tall order given the transition runway is only 13 years away.

There are some positive signs.

2022 will bring the introduction of new ZEV models in the segments Canadians care most about—utilities, crossovers and pickup trucks—and from manufacturers and local dealers they know and trust. 

So-called legacy manufacturers like Ford (Mustang Mach-E), Hyundai (Ioniq 5), Kia (EV6), Nissan (Ariya), Volkswagen (ID.4) and Porsche (Taycan) have already launched ZEV models to critical media and consumer acclaim. Providing meaningful choices for consumers “beyond Tesla” is critical to ZEV adoption. Even Elon Musk agrees with this assertion.

We are also seeing promising signs that OEMs are moving to adopt software-driven product development practices similar to Tesla. The days of discrete and unchanging vehicle features by model year don’t exist in the ZEV world. 

Ford’s recent announcement the company is separating the traditional combustion (Ford Blue) and electric (Ford Model e) businesses into separate divisions is emblematic of the need to bring continuous innovation to consumers in real time. When Canadians realize that some aspects of their vehicle actually improve over time, ZEV adoption will accelerate.

But significant challenges remain including:

• Weak consumer knowledge and low engagement—recent data from Clarify’s State of Charge EV Monitor confirms the digital engagement of Canadians on the topic of electric vehicles is only a fraction (one third) of the level of overall automotive topic engagement.
• Range anxiety—with many BEVs now offering 400 kms or more on a single charge, range anxiety may be more imaginary than real, but this perception nevertheless prevents some Canadians from seriously considering ZEV options.
• Charging infrastructure—more precisely the lack of visible public charging options (with the possible exception of Tesla’s supercharging network) and poor reliability of charging stations currently installed.
• Affordability—According to Clarify’s State of Charge EV Monitor, nearly 60 per cent of Canadian households have annual incomes below $100,000. Until ZEVs are readily available at price points under $40,000 (new and pre-owned), engagement and adoption for most Canadians will remain low.  

Another significant challenge in meeting the 2035 ZEV target is that 80 per cent of provinces are not in the ZEV game. In fact, 71 per cent of all ZEVs sold in Canada last year were in BC and Quebec. This is as good an example of the 80/20 rule as you are likely to find.

Ontario is of particular concern. Canada’s largest province delivers nearly 40 per cent of total new vehicle sales annually. Yet only 3.3 per cent of Ontario’s 664,000 new vehicle deliveries were ZEVs in 2021 compared with 5.6 per cent nationally, 9.5 per cent in Quebec, and 13 per cent in B.C. With a largely urban and suburban population and with 91 per cent of the power grid coming from non-carbon emitting sources (2017 Canada Energy Regulator Landscape Report), Ontario has the potential to be a strong ZEV market. 

But, while the Ontario government is actively pursuing investments in ZEV supply (raw materials, R&D, component parts and manufacturing), it has so far resisted making investments on the demand side. Strong consumer rebate programs in B.C. and Quebec are a key reason for their ZEV leadership.

2022 will bring the introduction of new ZEV models in the segments Canadians care most about—utilities, crossovers and pickup trucks

The extent of the “Ontario challenge” is starkly clear when comparing provincial ZEV performance in the form of a ZEV penetration index. At an estimated index of only 58, Ontario punches well below its super heavyweight class. In relative terms, with an estimated index of 235, middleweight B.C. outperforms Ontario by a factor of four.

While the ZEV sales situation in the other seven provinces (rest of Canada) is even worse with an estimated penetration index of only 25, the reality is that Canada cannot hope to achieve its 2035 target without a significantly different approach in Ontario. 

While consumer rebates are not the only answer, they are a key means of temporarily bridging the affordability gap until ZEVs reach cost of ownership parity with ICE vehicles, and until consumers have more ZEV choices in affordable, high-demand segments like compact utilities. 

Strong consumer rebate programs in B.C. and Quebec have accelerated the ZEV transition from “early adopters” to “early majority” buyers. The Maritime provinces have recently introduced rebate incentives. Ontario and the Prairie provinces—the ball is in your court.

As a wise mentor was fond of reminding me, hope is not a strategy.

The post Government incentives can help launch the EV sales wave appeared first on Canadian Auto Dealer.

A powerful new tool, State of Charge Canadian EV Monitor, launches to measure EV consumer behaviour

The pace of automotive innovation continues to accelerate. Almost every OEM has made a company-changing announcement regarding their transition to electrification and the multiple billions of dollars in capital committed to achieve it. 2022 marks the beginning of an electrified vehicle onslaught in Canada across PHEV, BEV and Hybrid categories.

What makes this cadence significant is that we are about to see electrified vehicles in the segments Canadians care most about––utilities and pick-ups. Among the most eagerly awaited launches are the Kia EV6 (coming on the heels of its corporate sibling the Hyundai Ioniq 5), Genesis GV60, Nissan Ariya, Mitsubishi Outlander PHEV, and the Ford F-150 Lightning.

The EV-only disruptors are also pushing aggressively––the Lucid Air is now available in Canada, with VinFast and Rivian vehicles not far behind.

All indications point to the federal government moving to convert the 2035 goal of 100 percent zero-emission sales from “we should” to “we will” along with the legislative teeth to ensure it. All the focus is on EV supply. Build it and they will come.

As I learned all those years ago in Intro to Economics, however, market efficiency is only achieved when demand and supply are in balance.

Are we paying enough attention to the demand side of the equation? Where do Canadians really stand on EV adoption? Are they ready and willing to commit to electrified vehicles on the 2035 timeline? The planet may be screaming “yes,” but are Canadians?

The good news is that industry leaders––across OEMs, Suppliers, AutoFi, Dealers, Charging Providers and Policymakers––now have a new tool at their disposal to understand the demand-side of the equation: where do Canadians sit on the question of EV adoption and how is awareness, understanding and, most critically, intention shifting over time?

All indications point to the federal government moving to convert the 2035 goal of 100 percent zero-emission sales from “we should” to “we will” along with the legislative teeth to ensure it.

I consider it a professional privilege to author this column, and so avoid using this space for commercial purposes. I find myself, however, in the role of “proud parent” based on the work Clarify has been doing to bring an entirely new perspective to the disruptive challenges and opportunities we face. Thank you in advance for this small indulgence.

Source: Clarify State of Charge powered by Polly, representing the engagement of Canadians (representative sample of the general population consisting of over 191,000 adults (18+) from Nov 2018 to Nov 2021. Engagement = estimated number of Canadians discussing the broad topic of “electric vehicles” (excluding specific brands and models) during this time period.

Specifically, Clarify Group is excited to share with you some early insights from the State of Charge Canadian EV Monitor, an industry-wide study of EV consumer behaviour. State of Charge tracks the awareness, attitudes, behaviours, preferences and barriers to EV adoption on a scale and with a speed, frequency, and cost effectiveness that traditional research techniques simply can’t match.

Through use of sophisticated AI and augmented research techniques, State of Charge delivers the predictive insights that automotive decision-makers need to navigate their path forward.

Whereas traditional survey research works well when trying to understand where an industry or brand has been, augmented research delivers superior predictive insights by avoiding the significant disconnects between what consumers say they will do, compared to what they actually do.

Think of the 2016 U.S. presidential election. How many polls predicted a Democratic White House? Most of them. Why? Because respondents said one thing in the survey and did something completely different in the privacy of the voting booth. It’s clear at least some Canadians are doing the same thing when it comes to their EV intentions.

New tools for new challenges

One of the most interesting (early) insights we’re seeing in State of Charge relates to the engagement of Canadians on the broad topic of electric vehicles. For this particular analysis, we excluded discussions related to specific EV brands and models, preferring to first understand the broad level of awareness and engagement of Canadians. To put this analysis in context, we tracked the digital engagement of more than 190,000 Canadian adults over a three year period (Nov 2018 to Nov 2021).

Some things we expected, but a few things surprised us. A few examples:

Not So Surprising Findings:

• When compared to the volume of engagement across all automotive related topics, EV engagement is only at one-third the level. Clearly we are still in the early innings of the EV adoption game. Current levels of engagement are not sufficient to drive to the 2035 target. State of Charge will track this KPI carefully over time because engagement is a necessary first step to intention and ultimately adoption.

• EV engagement is highest in Quebec and BC, the two provinces most aggressive in EV adoption policies and incentives. Both provinces score above average in the Clarify EV Engagement Index at 114 and 113 respectively. The EV Engagement Index is calculated by comparing the proportion of total engagement to the relative size of the population. In this example, there is proportionately more EV engagement in these two provinces than we would expect given their relative size within Canada. By comparison, EV engagement in Saskatchewan (96), Ontario (92) and Manitoba (72) lag, at least in part due to provincial government resistance to EV purchase subsidies.

Surprising Findings:

• While EV engagement is correlated to household income, it is not perfectly so. Conventional wisdom holds that EV engagement is highest in the most affluent Canadian families. In fact, the EV engagement “sweet spot” is actually among households with annual incomes between $150,000 and $199,999. While the wealthiest households ($200,000 and higher) do “over-index” on EV engagement, it is at roughly two-thirds the level. EV engagement falls dramatically in households with incomes below $80,000. Given these households represent nearly 50% of all Canadians, it is clear a combination of generous government incentives (for new and pre-owned EVs) and the introduction of lower priced EV models will be needed to move the sales needle. It is hard to seriously consider an EV when the price points of most vehicles available exceed annual income.

EV engagement is highest in Quebec and BC, the two provinces most aggressive in EV adoption policies and incentives.

You’ll see and hear a lot more about the State of Charge Canadian EV Monitor in the months ahead. We anticipate it will become an indispensable tool for decision-makers across the industry to better understand demand dynamics. We’ll finally have predictive—not historical—research insights with which to maximize the strategic bets of stakeholders across the industry.

The transition to EV? Bring it on.

The post How interested are Canadians in buying EVs? appeared first on Canadian Auto Dealer.