EV? Are you IN or Out?

In conversations with various dealers regarding the preparation for the big push on Electric Vehicles is alarming. While all dealers are accustomed to working with expensive regulations and requirements, the Electric Vehicle push is likely to be the most tenuous and expensive adventure ever. As always, it comes down to the question, “Are you in or out?” Regardless, of your personal beliefs on Electric Vehicles, it becomes a business decision we are faced with. A Simple Yes or No.
Most dealers will say Yes. The next question is, “How much?”, “Will this program pay for itself?” and if not, “How am I going to pay for this?”
How Much?

According to the Detroit Free Press, Ford dealers who have signed up for the “Model e Program” can expect to pay between $500,000 and $1.2M. While other OEM programs may be less, it is doubtful that any of these programs or requirements will come at an insignificant expense.

Will this program pay for itself?
Big or small store, the cost is likely to be substantial, and at least initially, you will incur the cost with little or no return on your investment. Long-term returns are more promising, but that is conjecture at this point.

How am I going to pay for this?
There are no silver bullets, but this much is absolutely true. All of your processes and margins need to be top-notch to make it work. Used car operations are not as Cost Up as they once were, thanks to internet pricing being more market-driven, and as a result, Margins are smaller than they once were. So, we have to sell more and increase F&I penetrations.
New vehicle sales, while the supply has been significantly lower than demand in the last several years, this won’t last forever, and soon enough, we will be back in the battle of competing for every dollar on every new car deal.
Of the three major profit centers in the dealership, used car operations, and new vehicle sales that leaves the fixed operations to make up as much ground as possible.

If your labor margins are not 75-80%, or higher, for repair operations, and/or the parts used on these operations do not provide you with a 42% or higher margin. Then your pricing is too low, and your processes might not be strong enough to support the increases you need.
The good news is this can be fixed on the customer pay side, and once you get it right on the CP side, you can legally ask for increases from the factory for our warranty operations for parts and labor. Big store or small, all dealers should focus on this profit center and make certain the fixed operations are providing all the gross profit possible to help offset the cost of the EV adventure.
The question again is “Are you In or Out?”

If you are “IN” give us a call or shoot us an email, and we can help you achieve your goals.

Doug Thompson, President
Fixed Performance Inc.
Cell: (440) 552-4657
Web: fixedperformance.com