Canadian auto dealer takes a look at vehicle electrification, how it is changing the industry and its potential impact on the future of automotive retailing
Progress. It’s a fact of life. Things advance, evolve and (in theory at least) improve. In the automotive industry we’re arguably witnessing one of the biggest changes since the late 19th and early 20th centuries, when a whole host of inventors and entrepreneurs attempted to bring horseless carriages to market.
And just like those days, where all manner of configurations and propulsion systems were being tried out, today the next major leap emphasizes a number of different technologies. One approach, which is seen as making vehicles more efficient, cleaner and safer is the process of electrification. It began with gas/electric hybrids such as Toyota’s Prius and has now expanded to include pure electric vehicles (EVs) plug-in hybrids and the adoption of electrified or fuel saving features on regular passenger cars. In each case, the introduction of these vehicles and components has resulted in some unique challenges but also opportunities for dealers.
FUNDAMENTAL SHIFT AFOOT
Nissan, which manufactures the high profile, all-electric LEAF (short for Leading, Environmentally friendly Affordable Family car) has made a big push to ensuring the vehicle’s acceptance in the marketplace, which for dealers, means a fundamental change to the approach of selling and servicing. According to Neetika Sathe, Nissan Canada senior manager, Chief Marketing Management for the LEAF, many customers for the car are already sold on the vehicle before they even set foot in the showroom, so for the dealer the emphasis is much more on the overall buying experience than trying to sell the car.
Neetika Sathe, senior manager, Chief Marketing Management for the Nissan LEAF in Canada.
“For the LEAF it is virgin territory for many dealers,” she says. “With traditional internal combustion engined vehicles, customers already know about the vehicle and the sales process is often based on payments and price. For the LEAF the price and provincial incentives are set. Instead, selling the car becomes about creating awareness and imparting education, plus whether or not the vehicle fits into the customer’s lifestyle.”
Nissan began a gradual roll out of the LEAF in Canada, starting with dealers who, much like the car’s initial customers, were considered “early adopters.” Sathe says that it started with a total of 28 dealers located in the Greater Toronto Area and Ottawa; Montreal and Quebec City and also B.C.’s lower mainland (a further 16 have been added this year, with the goal of eventually ensuring every Nissan retailer in Canada is EV certified).
“The first wave of dealers very much opened their arms and embraced the opportunity to sell and service something different,” says Sathe. “It was a steep learning curve but they were excited and enthusiastic about the LEAF.” However, in order to effectively accommodate the vehicle, dealers have to undergo a rigorous certification program.
INVESTMENT REQUIRED BY DEALERS
“Dealers are required to have a minimum of two 240-volt quick charging stations, one in the service area and one for general use,” says Sathe. “These can be either purchased from the EV charger provider and then installed by the dealer, or provided as a turnkey solution with installation and warranty direct from the provider.”
GM’s e-Assist provides mild hybrid technology in the form of a belt driven electric motor generator to boost performance of a relatively small gasoline engine.
Additionally, a tools audit has to be performed to illustrate what equipment is required in order for the dealer to meet EV certification. If certain tools are not in the dealer’s inventory they need to be back ordered. Also, dealers need to ensure that their sales and service staff have undergone the training necessary for EVs. This includes assigning a sales manager and a sales leader from the front end and also a service manager and one or two technicians on the back end to learn about the vehicle. Sathe says that each of these aspects can take two to three months to complete and that the cost investment for certification can range from $25-$50,000.
“It’s a big undertaking but those dealers that are committed to the program will ultimately see the results,” she says. “We’ve already seen that those who successfully make the transition have earned a growing number of conquest customers from other brands or vehicles and also a greater number of referrals.” Sathe contends that the LEAF and future EV vehicles from Nissan won’t replace conventional cars but rather supplement them, providing a choice for consumers who see the benefits of pure electric propulsion.
OBSTACLES TO GROWTH
It’s a view that’s shared by Dave Hurst at analysis and forecasting group Pike Research. “Based on what we’ve discovered, pure electric vehicles aren’t likely to make a significant part of the overall auto market, especially here in North America,” he says. Based on forecasts, the firm predicts such vehicles, along with plug-in hybrids will only account for around 2.4 per cent of the overall market by 2020. “There are several issues which are likely to provide obstacles to the growth in popularity of EVs,” says Hurst. “First, is that North Americans, used to wide open spaces, generally don’t like the idea of range limitation when it comes to vehicles, whether they actually need that range or not.”
Dealers need to undergo an electrification certification program which includes workshops and seminars for their technicians.
He also notes that developing the infrastructure required to support EVs continues to pose a significant challenge. “Initially, the aim was to provide residential charging units, however, for both customers of EVs and also dealers selling the vehicles, the problem is that often, properties require assessment to see if they are suitable to accommodate charging stations. Furthermore, the costs for assessment and also for buying and installing units add to the price (around 5-15 per cent) of a vehicle with limitations that already retails for significantly more than a comparable gasoline or diesel powered car.”
He also cites that zoning laws in some locations and a lack of understanding by city and municipal officials are also proving significant obstacles. “Depending on the city and region, you might have to get a certified electrician to install the charging unit in your home, or there may not be a good understanding or motivation to encourage EV infrastructure development.”
And in terms of public charging stations, while California and some states and provinces have taken a fairly proactive approach, others areas of the continent such as the Prairies and the Midwest, haven’t and probably won’t likely commit significant resources to such programs, simply because the incentives aren’t there. “At present a lot of public charging stations are underutilized, because currently, there aren’t a lot of pure EVs or even plug-ins on the road.”
Hurst also says, that at least in the U.S., funding for EV infrastructure tends to come from federal sources because at the regional and municipal level, many agencies are currently struggling with very limited budgets on key areas such as education, policing and public works projects, so the resources required for pushing EV infrastructure development simply don’t exist or if they do, are extremely limited. On the commercial side, many companies haven’t invested heavily in EV charging because at present, they simply cannot see the returns.
MICRO-HYBRIDS
However, Hurst does say that regular hybrids and particularly what’s termed as micro-hybrids (internal combustion engine vehicles that use electrification for ancillary systems such as power steering, air conditioning and braking), are likely to see significant growth in the coming years. “Based on our own forecasts at Pike Research, we’re seeing that by 2020, regular hybrids are likely to remain fairly steady at around three per cent of the market, but the use in electrified technology for conventional passenger vehicles is expected to more than double, to around 10.5 million vehicles annually, which is most of the market.”
This is interesting because although consumers haven’t gravitated to high profile plug-ins and EVs in the same way that was predicted a few years ago, electrified ICE vehicles and even regular hybrids represent a different proposition. “What you’ve got are essentially affordable cars that are evolving and becoming more efficient,” says Hurst. “This is primarily driven by a need to meet upcoming fuel economy standards and emissions requirements, which (in the U.S. and Canada) call for an average 54.5 miles per gallon/ 4.3 litres per 100 km by 2025. At the same time, you’ve also got the traditional elements that make vehicles appealing, such as the ability to go virtually anywhere at any time.”
As a result, at least in the short term, micro-hybrids are seen as the most logical solution to the need to boost efficiency without sacrificing mobility, while keeping vehicle costs reasonable. And while research both from automakers and independent analysts points to EVs and plug-in hybrids remaining bit players in the overall vehicle market, at least for the foreseeable future, the technology they employ is likely to trickle down to more mainstream vehicles. Examples include advanced telematics such as Nissan’s CarWings used for the LEAF, as well as lighter, more powerful and efficient batteries, much in the same way regenerative braking technology and stop-start, first seen on hybrids is now spreading to more mainstream vehicles.
For dealers, this represents an interesting scenario, since despite the small market penetration expected by EVs and plug-ins, the concept of their technology spreading to other vehicles, is likely to make the idea of committing to them now more attractive over the longer term. By gaining a leg up during the embryonic stage, dealers will gain experience and likely reap the rewards of greater customer satisfaction, visibility and profitability down the road.
In fact Toyota, recognized as a pioneer in the vehicle electrification process, has said that it is firmly committed to hybrid technology and that it will represent the foundation of automobile propulsion in the 21st century.
WHAT CAN WE EXPECT?
Although it’s often difficult to gauge what kind of features will be found on the cars and trucks of tomorrow there are currently some very interesting developments in the realm of powertrain research. To gain an insight into these technologies Canadian auto dealer spoke with Anna Stefanpoulou, a highly respected Professor of Engineering at the University of Michigan who has also been a pioneer in the research and development of advanced powertrain systems including fuel cells.
Anna Stefanpoulou, a Professor of Engineering at the University of Michigan.
“For electric vehicles, the biggest driver is reducing battery costs and also storage issues. There is a lot of work to be done for improving diagnostics and battery management, maximizing battery energy with confidence. I see more customization for electric vehicles in the future, with manufacturing based on demand for specific driving patterns and needs. However, that will likely stress the need for maintenance and serviceability because of the custom nature of these vehicles.”
On the internal combustion side, Stefanpoulou says that we could seen engines that combine the best attributes of today’s gasoline and diesel powerplants. “Compression ratios are climbing on gas engines” she says, “while diesels are moving closer to the optimal (stoichiometric) air fuel ratio for minimizing emissions.” She also says that developments in valvetrain technology could see electronically controlled infinitely variable valves, enabling engines to generate neck snapping torque, while reducing emissions as much as 30 per cent.
