With the automotive industry rapidly recovering while simultaneously evolving to changing consumer buying habits, a once-niche segment has become more top-of-mind for OEMs: electric vehicles
Growing commitment from the federal government to tackle climate change has led to EVs dominating the headlines in recent months. At the same time, electric vehicle sales reached record levels in 2020 according to IHS Markit, more than tripling the segment’s retail share in three years.
But with electric vehicle registrations only representing about 1.8% market share in 2020, some auto dealerships are still hesitant to embrace an all-electric future, with their hesitance perpetuated by past negative experiences or long-held misconceptions about the future of electric vehicles.
In this blog post, we’ll examine the facts surrounding future dealership opportunities related to electric vehicle sales to debunk three common myths, including:
- A fully electric future is far off
- Electric vehicles aren’t popular enough with consumers
- Dealerships can’t sell electric vehicles
Myth #1: A Fully Electric Future is Far Off
While previous forecasts related to future electric vehicle sales failed to meet expectations, improved infrastructure, new government mandates and a continued increase in consumer demand has reaccelerated OEM investment in EVs. According to forecasts from IHS Markit, nearly 25% of all light passenger vehicles produced will be plug-in capable by 2030.
IHS Markit also finds: “The automotive industry is on the verge of a ‘step change’; a personal transportation evolution the likes of which has not been seen since internal combustion engines replaced the horse and buggy.”
Between now and 2025, more than 100 new EV options are expected to be introduced, coinciding with recent OEM investment in electrification to reach carbon neutrality.
In January 2021, automotive giant General Motors announced their intention to go all electric by 2035. Volvo unveiled plans to produce and sell only electric vehicles by 2030, following Jaguar’s commitment to go all-electric by 2025. These announcements come as pressure from politicians mounts against President Joe Biden to set a firm date to phase out internal combustion engines by 2035.
Myth #2: Electric Vehicles Aren’t Popular Enough With Consumers
The success of electric vehicles isn’t purely tied to government mandates – consumer adoption of EVs also reached new heights in 2020.
But not every dealership saw a surge in electric vehicle sales last year. According to data from IHS Markit, EV adoption in 2020 was largely led by DMAs on the west and northeast coast. San Francisco for example, saw EVs grow to 11% market share in 2020, while Chicago led the Midwest region at 1.5%.
Overall, U.S. sales of EVs are set to exceed a 3.5% overall market share in 2021 and climb to a more than 10% share in 2025, according to IHS Markit. Globally, IHS Markit forecasts EV sales to grow by 70% in 2021. Repeat buyers will be critical to this growth.
While historically most industry conversations have focused on market share, OEMs are paying closer attention to automotive loyalty to provide insight on consumer behavior. In 2020, EVs achieved record high loyalty rates, with IHS Markit loyalty data finding more than half of EV households that return to the new vehicle market acquire another. These record high loyalty rates demonstrate both substantial segment growth and increasing consumer acceptance.
Myth #3: Dealerships Can’t and Won’t Sell Electric Vehicles
There was once a time that electric vehicles were somewhat of a novelty. They were slow to charge, had a ridiculously short range and worst of all, they were nearly impossible to sell – used or new. Since then, a number of major changes have taken place, including expanding EV infrastructure.
Some complaints still persist from dealers and consumers alike. On the buyer front, research from Daimler finds most negative EV opinions stem from a lack of information. Unsurprisingly, the less people knew about electric cars, the more they disliked them.
Not only can dealerships sell electric vehicles – they want to. In a recent blog post, the President and CEO of NADA, Mike Stanton, challenges the myth that franchised dealers are unwilling to sell EVs, citing Cadillac as a real-world example of changes implemented by automakers to shift dealers’ perception of EV sales.
In 2020, Cadillac announced new requirements for dealers who plan to sell vehicles beyond 2022, requiring dealerships to go all-in on the brand’s electric future and invest $200,000 on needed equipment, training and tooling – or take a buyout.
In the end, 80% of Cadillac dealers agreed to work toward selling EVs exclusively, while the 20% who accepted buyouts did so widely due to years of negatively trending sales in their market or other economic considerations – not the electric mandate.
“And so, in one fell swoop, America’s Cadillac dealers completely debunked the myth that franchised dealers don’t want to sell and service electric vehicles,” writes Stanton. “Because if this myth were even remotely true, virtually every Cadillac dealer out there would have gladly taken the buyout, and done so in a heartbeat.”
Following years of infrastructure updates, technological advancements and consumer education campaigns by OEMs, car buyers are increasingly embracing the future of electric vehicles, offering invaluable opportunities to dealers who can attract and retain their business long into the future.
Interested in exploring how Market EyeQ can help your dealership embrace future EV sales opportunities? Contact us for a free demo.