How to Make Up For Lost Profits in Your Service Department as Consumers Shift to EVs – Steve Finlay, WardsAuto

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When electric vehicles become more popular and mainstream, dealers worry that their fixed-ops departments will be the ones to suffer. With simpler propulsion systems and 40 percent fewer parts, EVs are on track to disrupt the service drive in a big way. On today’s show, we welcome back Steve Finlay, editor at Ward’s Auto Magazine. Steve discusses the pressure EVs will put on the service drive, and what dealers can do about it.

EVsVIDEO TRANSCRIPT:

Jim Fitzpatrick: On today’s show, we welcome back Steve Finlay, Editor of WardsAuto Magazine. Steve discusses the pressure EVs will put on the service drive, and what dealers can do about it.

Jim Fitzpatrick: Steve Finlay, welcome back to CBT News. So glad you could join us today.

Steve Finlay: Thank you, Jim.

Jim Fitzpatrick: Great. You wrote an article in WardsAuto Magazine that talked about EVs. In fact, it was “EVs Require Less Service Work; What’s a Dealership to Do?” Talk to us about that article, and where that stands, the EV industry.

Steve Finlay: Well, Frederiek Toney, who is a Ford executive, is involved in that sort of thing, he was pointing out that EVs will require less work because there’s fewer moving parts, you’re not working on an engine, there’s not a torque converter, stuff like that. So what does a dealership do to make up for that potential lost revenue?

What he was suggesting was that you really up your customer experience game. Develop trust and create transparency, which is true throughout the entire dealership, but when it comes specifically to the Service Department. The idea is to get people coming in more often, not delaying going into the Service Department because it’s a hassle sometimes. Make it more customer friendly, and therefore you make the customer more likely to come back.

Jim Fitzpatrick: Yeah. Today, it’s what? About 1% of the overall market are EVs, right? Is that about what it makes up?

Steve Finlay: Yeah. It’s interesting because they certainly are dominating the market. But there is so much talk about them, and the automakers are coming up with so many electrified vehicles, not necessarily pure electric, but electrification, mild hybrid things.

Steve Finlay: Look at what they’re doing, product wise and product development wise, and you got to believe that EVs are going to catch on at some point. The automotive world is preparing for EVs to really have a significant role.

Jim Fitzpatrick: Sure, and I think the infrastructure in many municipalities as well. There’s not a shopping center that I pull into here in Atlanta where there isn’t a series of charging stations to accommodate those EVs and those drivers, right?

Steve Finlay: Yeah. And if it’s a parking deck, usually you get primo parking spots.

Jim Fitzpatrick: Yeah, that’s true.

Steve Finlay: Today, that is an advantage. As more people come in, it will be an issue. Just, like an aside, if everybody plugs in their car at the end of the day, what strain is it going to have on the electrical system [crosstalk 00:03:15]?

Jim Fitzpatrick: That’s a very good point. Imagine that, that everyone plugs in at 6:30 and the lights kind of dimmer, right?

Steve Finlay: Yeah. Wes Lutz, who is the 2018 Chairman of NADA, he was rebutting some of the talk that EVs will mean less service work. Because he said his main service work now are tires, brakes, alignments, the electrical systems. And so what is required, what will be required on EVs? Tires, brakes, suspension system, alignments, the same work.

Steve Finlay: He says he hasn’t made that much money, if any, on oil changes certainly, and not transmission work. Some of that stuff that used to be major work, and often … I can’t remember ever having a car in the old days where there wasn’t a transmission problem. I don’t think twice about that today.

Steve Finlay: His point was that the same work he’s essentially doing now, the bread and butter work in his Service Department, is going to be done on EVs.

Jim Fitzpatrick: I think the combustion engines got so much runway, in that, even if tomorrow every vehicle that was sold was an EV, you’ve got some 300 million combustion engines currently on the road. They’re not going away anytime soon, even though the entire industry may shift to EVs at some point in time, and I think that is way, way down the road, right?

Steve Finlay: Well, you’re absolutely right. And as you say, internal combustion engines are going to be around for a while. Let’s put it this way, there’s been about 120 years of research and development into them, and I don’t know how many billions and billions of dollars, they’re pretty sophisticated and pretty reliable engines.

Steve Finlay: What you’re saying about EV traction, when that will happen or how it will happen, I’m still trying to get my head around that. Because on one hand, I’m looking at all the pros about EVs, and then you look at the market and it’s like, where are the customers?

Jim Fitzpatrick: Then when you think about the cost of EVs, they’re typically a lot more money than the typical car out there, and a gasoline engine, and that’s a big factor as well. Families in a lot of cases, just can’t afford to be driving around in a Tesla, or some of the other EVs that are available in the marketplace, right? So I don’t know that it’s-

Steve Finaly: That’s for luxury customers. But there are some pretty decently priced EVs out there, the Chevy Bolt is one of them. It’s going to require some further development, but the EVs that are out there now, are pretty impressive. Believe it or not, they’re really fast.

Because there’s this torque converter so that power goes directly to the wheels, and a lot of people have the impression that EVs are kind of sluggish and dull vehicles, but they’re pocket rockets.

Jim Fitzpatrick: They really are. If somebody is complaining about that, they just haven’t been in an EV lately. I mean, it’s very, very impressive for sure.

Jeff Dyke, President of Sonic, was in a discussion recently. I think it was an investor call that he was on, and he said that his Honda and BMW sales in his California stores were off. He pointed actually to Tesla, and said that those guys are making some huge inroads in the luxury car business in the State of California, and he felt as though it was eroding away his BMW sales. Have you heard-

Steve Finlay: Yeah, that makes sense. The people that buy EVs, they like them, although not everybody because there have been statistics showing that EV people trade their vehicles in for internal combustion engines, I don’t know, sometimes it’s like once around in the merry-go-round. Other times, it’s people that are committed to the environment and stuff like that, and they remain loyal customers.

Steve Finlay: But I think that dealers will really have the advantage with EVs, because if they become the experts in a vehicle that people are not necessarily accustomed to, they’re going to be the go-to people for the service work. If I owned an EV, I wouldn’t take it to anybody else but a dealership. I’m sorry I don’t want the local mechanic [crosstalk 00:07:34] EV.

Jim Fitzpatrick: No, that’s for sure. Yeah, yeah.

Jim Fitzpatrick: I think that would work well for the dealer, in the dealers favor. That, instead of realizing a 30% or 35% retention back to the showroom after the customer buys a car, they’re probably going to get 100% rate of retention in the service lane on an EV, right?

Steve Finlay: Yeah, you’re absolutely right. And you know what? That’s the brass ring, that’s what everybody wants. [inaudible 00:08:02] a way to potentially make that happen, or certainly come close to it.

Steve Finlay: I think there’s good news in the EV world, as far as service work for dealers, it’s just going to be different. But dealers know how to spot and seize opportunity.

Hey, let’s talk a little bit about the industry as a whole. How are we looking, do you think we’re going to shape up pretty good for the year, and coming out of the first two months?

Steve Finlay: Yeah, I think so. It’s going to have its highs and lows, as always, and it does. I read that, well, bad weather that’s up ahead is going to affect vehicle sales. Well, not for long, because that’s short-term measuring, right? Somebody, because there’s a snow storm out, decides, “Well, I’m not going to get that after all, I’m going to wait until the snow storm’s over.”

Steve Finlay: We’re looking, Wards is predicting, and against our other organizations, 16.8 million new vehicle sales this year. But there is going to be kind of the batement of the pent up demand that dates all the way back to like nine years ago.

Steve Finlay: But you’re going to see sales go down a little. It’s not going to probably be another 17 million year, but what the heck? Yeah, I remember after the recession, they sold 10 million, and people were talking about it. Like God, if only we can hit that sweet 16 million vehicles. Now, they’re really good. It’s a really healthy 16 million, and if you’re hitting 16.8 million, then that’s really nice for the industry. Nobody’s complaining about that.

Jim Fitzpatrick: It is. No, it’s a party at every dealership in the last five or six years in the industry, maybe longer, and that a good thing, right, for our industry?

Steve Finlay: Oh, absolutely. Yeah, nobody’s complaining that they’re not making enough money. Well, they’re complaining they’re not making enough, but they’re not complaining that they’re not making money, let’s [crosstalk 00:10:02].

Jim Fitzpatrick: No, I know. I know. It’s been a good run.

Jim Fitzpatrick: Well, Mr. Steve Finlay with WardsAuto, thank you so much for joining us on CBT News. It’s always a pleasure, and your insights are priceless, so thanks again for joining us.

Steve Finlay: Yeah, thank you Jim. I always enjoy talking to you, you’re a great guy.

Jim Fitzpatrick: Alright, thank you so much.

Thank you for watching the official news source of the retail automotive industry. This has been a JBF Business Media production.

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