The wave of electrified vehicles is pending, but it is coming. Dealers need to be ready to meet consumer demands for more information and education—directly in the showroom.
With Canadian new vehicle transaction prices reaching all-time highs this year—exceeding $42,000, according to Power Information Network—one might be tempted to celebrate.
Dealer margins are healthy, and there are several reasons for this surge in vehicle pricing, with the continued shift in consumer preference from cars to trucks being among them.
Another factor driving these stratospheric prices is the ever-increasing level of content, from infotainment and convenience features like connected apps, wireless charging and heads-up displays, to safety-related tech like 360 degree cameras and advanced driver assist systems (ADAS).
The problem is that not every owner understands, appreciates, or uses all of this technology. As J.D. Power vehicle technology expert Kristin Kolodge recently commented, “high vehicle prices are fine if owners are getting value for their money, but some features seem like a waste to many owners.”
J.D. Power’s most recent 2021 Tech Experience Index Study, representing feedback from more than 110,000 American owners of 2021 model year vehicles, found that for over one-third of advanced technologies, fewer than half of owners ever used the feature during the first 90 days. This is a staggering finding with negative implications for automakers and dealers alike.
For the OEMs, eager for cash flow to fund expensive electric and autonomous vehicle programs, significant profits are being left on the table by adding expensive tech to vehicles that customers never use.
The risk for dealers is similar: customer frustration, as they don’t understand features in their vehicle, and resentment, since they’re paying every month for features they don’t use.
“This group of customers will come with a different set of expectations than the Innovators and Early Adopters.”
As if unhappy owners weren’t enough, dealers also suffer when these uber expensive vehicles are financed over long terms, which is the only way many customers can afford the monthly payment. According to PIN, fully 50 per cent of new vehicles sold in Canada are financed on contracts of 84 months or more. These customers are effectively out of the market for most of a decade.
Consider how the pending wave of electrified vehicles will exacerbate this situation. EVs are coming with all of the same advanced vehicle technology, as well as an entirely new “vehicle ecosystem” that customers need to understand and embrace, including batteries, home and public charging, connected apps, and subscription services and cost of ownership models.
Source: Diffusion of Innovations Theory, Professor Everett Rogers, 1962
For early adopters, advanced technology is a significant part of the EV appeal. But this group only represents the first 16 per cent or so of buyers, according to the Diffusion of Innovations Theory, published by Everett Rogers at Ohio State University in 1962.
With EV adoption in Canada exceeding five per cent of annual sales (more than 10 per cent in British Columbia and Quebec), we are likely to reach the Early Majority phase in the next few years.
This group of customers will come with a different set of expectations than the Innovators and Early Adopters. It is probable these buyers will be less motivated by vehicle tech, less concerned about “making a statement,” and care more about how an EV can fit into their lives easily and affordably. This pending shift in customer profile has implications for dealers.
As we begin to serve Canadians in the heart of the market, the role of the dealer needs to shift from the current emphasis on “selling” and “closing” to that of “facilitator” (to make easy), helping the customer acquire their new electrified vehicle, including education on advanced vehicle technologies.
Customers in the majority will need support to make the transition from the known and predictable world of combustion vehicles, to the less certain world of e-mobility. Dealers that invest in the levels of education, test drives, and EV ecosystem support needed to convince the market majority to “come on board” will enjoy significant success.
There may come a time when the emphasis will need to shift back to selling, but during this once-in-a-lifetime technology transition to EVs, successful dealers will be expert facilitators.
A recent study of more than 4,300 EV owners and intenders by Plug In America sheds light on two areas of opportunity for OEMs and dealers:
First, the preferred source of EV information and education is neither the manufacturer (third most frequently listed) nor the dealerships (ninth) from eleven possible sources. The most valuable source—by a wide margin—is third-party EV-specific websites, cited more than twice as often as automaker websites and more than nine times as frequently as dealers.
This result should be a red flag for the industry, if prospective owners don’t have the confidence in the brand and its retail network to provide the answers and support they are seeking. Dealers need to be the EV trusted advisor to their customers. Otherwise, the dealer’s role in the value chain will be marginalized, and the likelihood of being disrupted will be increased.
Second, sales consultants are not yet meeting customer expectations for EV-specific knowledge and expertise; only 40 per cent of EV buyers rate their salesperson as knowledgeable or very knowledgeable on this critical measure.
The good news is that we are still in the early innings of the EV transition. For many brands, sales consultants are only now seeing EV models in their showrooms. Confidence and competence in the marketing, sale, education and servicing of EVs is now—or must become—an urgent priority for every dealer.
The Plug In America analysis suggests promising returns for dealers who invest in EV training for their sales teams, in the form of higher volumes and customer experience and referral scores.
As dealers have consistently proven through the decades, adaptation is part of their DNA. What a great opportunity for our industry to accelerate investments in our people and processes and infrastructure to get ahead of the EV adoption curve. The EV wave is coming, let’s be ready.
Innovate to prosper.
Darren Slind is Co-Founder and Managing Director, Clarify Group Inc. and a respected auto industry analyst. You can reach him at dslind@clarify.group
