More and more brands are moving towards complete electrification. Volkswagen, Ford Europe, Jaguar, Volvo, General Motors, and soon other carmakers will soon likely switch to electricity. Jaguar will be the first to do so by 2025, and most of the others will do so by 2030, with General Motors coming in last by 2035. However, with the change of propulsion, the business model will also change. What will this change mean for dealerships?
Say goodbye to internal combustion engines
Volkswagen will no longer develop new internal combustion engines, and the existing ones will ride out the era. At the beginning of March, this news unsettled the share price of the 2nd largest carmaker, but in a positive direction. During March, the share price jumped by an incredible 34.3%. By 2030, 70% of VW brand cars sold in Europe will be electric. In China and the US, it will be half that. By 2025, the carmaker will invest 16 billion Euros in e-mobility, hybridization, and the digitization of its cars. Autonomous driving should arrive by 2030.
Volkswagen is far from the only manufacturer to follow this trend. In January this year, General Motors announced the full electrification of all passenger cars, trucks, and SUVs. They came with his announcement just a day after the new American president returned to the fight against climate change. However, car manufacturers have other motivations for electricity. Jaguar Land Rover, which will convert its Jaguar brand by 2025 and the Land Rover brand by 2030, is looking for additional reliability that comes with electric power. The carmaker has been battling with reliability for a long time, and with electricity, it might finally have a way to get rid of the “unreliable” label.
Volvo will switch to a new sales model, and they’re not alone
Volvo, which in parallel has already launched its fully electric brand Polestar, that deals with certain childhood illnesses, has also opted for electricity from 2030. However, the propulsion system is not the only thing that will change. The carmaker plans to start selling all of its cars directly and online, similar to Tesla. From 2030, it will “sell” its cars in the form of a fixed monthly fee, including all service, insurance, and assistance services. This business model has long been used by Toyota worldwide for its Mirai hydrogen vehicles. However, Volvo and Toyota are not the only carmakers to toy with this business model. Many car manufacturers, most notably Volkswagen, play a key role in the area of finance, specifically of course, operational leasing. A car in the form of a service is popular in more and more countries around the world.
Direct sales from car companies will also radically change the dealer’s business model. They will continue to earn money from the service of these cars, perhaps much more than before because this business model will de facto end non-branded services. But then again, they will lose some of the commission from car sales. However, they may be able to sell different “things,” and we do not mean only accessories.
What does “digitization” mean?
As we said above, part of the 16 billion EUR that Volkswagen will invest over the next four years will go to digitization. This trend is also being followed by other car manufacturers such as Daimler (Mercedes-Benz) and BMW. But what does digitization mean? The idea is simple and again it is partly inspired by Tesla. As early as 2019, Mercedes-Benz stated that it wanted to earn from the sale of additional services and functionalities through its new MBUX on-board system platform. Initially, it started selling features such as Digital Radio, Apple CarPlay/Android Auto, and on-board navigation. In the future there should be many more features on offer. The car comes with all the features, which makes it cheaper to manufacturer at scale, and then they are only activated remotely.
A major breakthrough in distance-selling digital services will be autonomous control, which VW for example, has promised from 2030. There will be many more digital services, perhaps those we cannot imagine at the moment, and which will be location dependent. Today, we can mention for example, an overview of free parking spaces, or even automatic payments for parking, which are features that carmakers are currently testing in some German and American cities.
Of course, all these services will be sold directly by the carmakers. The transition to on-board systems with over-the-air updates will allow them to do so without any problems. But what carmakers cannot always do directly is sell the SIM cards that the cars need for connectivity. In addition, some customers will need help with the installation of some services, and that is something the carmaker will not be able to help with directly. It can easily happen that dealers will also perform the role of “user support” and training, as was once the case with computers, and later with mobile phones. Additionally, there may be potential for the sale of telecommunications services.
Will dealers also sell electricity?
Electrification brings another key element that not only automakers will have to tackle, and that is recharging. At the beginning Tesla incorporated a dumping policy, offering electricity at its own network of Tesla Supercharger stations to its car owners free of charge. Later, however, they started selling Supercharger access. Other carmakers are also building their own charging networks, usually in consortiums. The most important of these is IONITY, which currently brings together BMW, Ford, Hyundai, Mercedes-Benz, Volkswagen, Audi a Porsche. But most charging takes place locally, at a customer’s home or work, where the car is parked for many hours at a time and can be recharged in a slower and more battery-friendly way. However, customers then need to purchase the electricity from someone. In the European Union from an energy trader as European regulation has unbundled the electricity business into separate services of production, distribution, and sales to end customers.
At the same time, the electric car will need much more electricity and thus possibly a different supplier or tariff from the home or business. And within the sale of electricity are similarly high commission as in the sales of loans or insurance. This is a great opportunity for dealers, because the concept of local electricity sales and distribution are infeasible for car manufacturers. In addition, some owners of electric cars are of course interested in solar panels. It is no coincidence that Tesla bought the company SolarCity, which produces photovoltaic panels. So even this could be a very interesting new opportunity for dealers.
Say goodbye to your current business model
Thus, by 2030, a large part of car dealers will have to say goodbye to the existing business model and reorient themselves to the completely new operating conditions of the market. At the very least those selling Volvos. Most do not have the appropriate know-how or equipment to sell services, consulting, training, or especially electricity and photovoltaic panels. But a flexible and professional CRM system can easily help with this. For example, the cloud-based automotive CRM tool can perfectly cover existing sales, service, marketing, and customer car processes of the car dealer. However, thanks to its flexibility and cloud platform, it can quickly learn any other processes. Extending the existing CRM to the sale of services or other products is a breeze, especially when the company behind this system, Konica Minolta, has been supplying CRM systems in the fields of energy, including electricity distribution and sales, or service companies for years. And how are you prepared for Odessey 2030?