The impact of EVs on retail
Ready or not electric vehicles (EVs) are coming and will undoubtedly change the automotive industry. But what impact can we expect on retailers as we head down the Road to 2035? It's this question and more we answered, along with experts from OC&C strategy and financial consultants from MHA, at our recent The Road Ahead for Automotive Retail Conference. Read on to find out what was discussed below.
Volume of EVs set to grow and overtake number of ICE cars on the road
The path for electric vehicles has been laid out with the ZEV mandate all but setting out the volumes of new EVs we’ll be seeing hitting the market in the run-up to the current deadline for ban on the sale of new ICE vehicles, 2035.
This ramping up of new EV sales over the next decade will impact the used market at a slower rate, with 29% of 1–3-year-old used car stock expected to be EV by 2027 and 52% of the car parc set to be AFV by 2033.
New Entrants: The great disruptors?
The drive to electric is seeing a shake-up of the established order of brands, as new, primarily Chinese brands, hit the market.
New EV registrations by brand. New entrants are outperforming, most notably Tesla but also MG, Polestar
This influx of new entrants does mean that we will likely see legacy brands losing market share to more established EV players such as Tesla and MG as well as entrants from China such as BYD. However, it is worth noting that awareness of Chinese brands is low among UK consumers, with only 4% aware of Chinese OEMs vs over 70% of consumers being aware of major manufacturer brands.
But, whilst established OEMs may see these new entrants as a threat, for retailers they present an opportunity with many of these Chinese entrants looking to integrate with established retail networks in the UK. By getting in on the ground floor with these brands, retailers may set themselves up for a lucrative partnership in the years to come.
The impact on aftersales
Beyond sales, electrification is set to impact aftersales with EVs requiring far less maintenance than petrol and diesel cars.
Looking at more mature EV markets such as Norway, which sees 82% of its new car sales being electric, we can see a stark impact on after-sales revenue. Retailers in the Nordic country have reported repair hours down by up to 50%, with aftersales revenue down by up to 35%.
However, these retailers have been able to mitigate this decline in after-sales revenue. By focussing on retention and expanding their product offer, many retailers have seen revenue grow with one senior OEM executive from Norway stating that “Our brand’s workshops saw falls in revenue, but with action we were getting back to where we were before and growing”.
Retailers should therefore follow the Norwegian example when looking to mitigate the impact of EVs on aftersales. The focus should move to target driving higher margin consumer (not fleet or warranty) mix and retention of older vehicles, enabled by customer marketing, mining the database and digital marketing.
Retailers should also look to diversify their income by moving back to services that have historically been left to independents such as tyres, glass, and accident repair.
By making these shifts now retailers should see their aftersales revenue futureproofed.
How can retailers prepare for the electric revolution?
Those retailers preparing for EVs now are set to benefit in the near future as the volume of EVs hitting the marketplace rises year on year. But, without action, retailers can expect to see their revenue take a hit between now and 2030.
A retailer selling 500 new cars per annum and with 10k labour hours can expect to see sales revenue decline by approximately £300k per annum without action.
But by preparing now, retailers can secure their business for the future. Some key steps retailers need to take that were highlighted at the event are:
Review your OEM mix and adjust footprint
Invest in keeping your customers: Update aftersales CRM and marketing to retain older cars and drive consumer mix
Focus on driving up EV conversion: Train your team & update your online journey to educate and convert EV buyers
Diversify aftersales work mix: tyres, body repair
Invest in EV & ADAS servicing facilities and technician training, ensure electricity supplies are sufficient