The next evolution in the automotive industry will fundamentally transform dealership service departments… and this one will be big: service departments that could be empty.
If you look at current trends, you can see the writing is on the wall; ride-sharing being the biggest current shift.
And that’s not all. Consider the fact that someday consumers may be able to simply speak to Google assistant on their smartphone and the vehicle will wake up and drive itself to the dealership, get serviced and then return to the customer on its own.
Automotive News just released a very enlightening article about this titled, “How EVs could create the biggest disruption since the iPhone.” The article states, “Electric cars, with a little help from ride-hailing and self-driving technology, could be about to change the auto industry in a similar way to Apple’s upending of the mobile phone industry 10 years ago. The rise of Tesla and its rivals could be boosted by complementary services from Uber and Alphabet’s Waymo unit, just as the iPhone rode the app economy and fast mobile internet to decimate mobile phone giants like Nokia.”
Consider this. A normal internal combustion engine vehicle can have upwards of 10,000 parts all working together. This presents a huge amount of potential service opportunities as the vehicle ages. In stark contrast, an electric vehicle has as few as 150 moving parts, which obviously greatly decreases potential service opportunities.
In fact, according to the Automotive News article, “After disassembling GM’s Chevrolet Bolt, UBS Group concluded it required almost no maintenance, with the electric motor having just three moving parts compared with 133 in a four-cylinder internal combustion engine.”
Decreased service opportunities from electric car ownership will bring lower repair orders and increased time between service visits. This will severely impact service department profitability.
And, with over-the-air software and hardware updates that require no dealership visit whatsoever, as electric vehicles increasingly populate our roads traffic in service departments will further decline.
Take for example an associate of mine who owns a Tesla. When they took it in for it’s very first service at 7,500 miles the total repair bill was a whopping $25. Think this is an aberration? It’s not.
Tesla is so confident about its vehicle quality that it has issued an infinite mile warranty. CEO Elon Musk states in a blog, “The Tesla Model S drive unit warranty has been increased to match that of the battery pack. That means the 85 kWh Model S, our most popular model by far, now has an 8 year, infinite mile warranty on both the battery pack and drive unit. There is also no limit on the number of owners during the warranty period.”
Wow, infinite mile warranties! While currently this confidence is only publicly stated by Tesla, every major car manufacturer is feverishly racing to compete in the electric car market.
Additionally, a comparison done by Tesloop, a rideshare service which runs a fleet of Teslas, states that their total costs were $10K for 300K miles!
“During the first 300,000 miles, the total combined maintenance and fuel costs of the Tesla Model S were $10,492, with a total of 12 days in the shop. Of these costs, $6,900 was scheduled maintenance and $3500 was headlight damage due to driving through deep water. Had this been an Mercedes S class, the scheduled routine maintenance and fuel would have been $86,000 ($52,000 maintenance and $36,000 fuel) with 112 days of servicing, or for a Lincoln Town Car $70k,000 ($28,000 maintenance and $42,000 fuel) with around 100 days of servicing.”
What does all of this mean?
Up until now, your dealership has connected with service customers anywhere from 2-3 or more times per year, depending on how much the customer drives. Aside from regular maintenance, you’ve had first crack at recommended services and replacements for wear and tear items such as brake pads and tires. Well, electric vehicles will change all that.
It is now vital to make the most of every opportunity. Good news is that there are still 300 million light vehicles on US roads and these cars are lasting longer. Have you done a histogram to see what percentage of the service dollars come from cars that are more than 5 years old? If not, you should. In the future, the only way to keep your dealership’s service revenue from staying flat will be to start capturing market share back from the independents and to start servicing older cars.
It makes sense to get ahead of the game. Stand out from your competition now in order to keep the customers you do have and attract new ones. Prepare to offer your customers the convenience and ease they wish for now and will increasingly demand.
Author: Ujj Nath
Ujj Nath is the Founder and CEO of myKaarma (www.mykaarma.com), the cloud-based conversational commerce software that’s revolutionizing the auto service industry. He has 25 years of experience as an entrepreneur and automotive industry executive. In 1990, prior to myKaarma, Ujj founded Syncata, a major provider of business consulting and systems integration services. In 2004 he successfully negotiated the sale of the company to ProQuest Business Solutions (NYSE: PQE), which was subsequently acquired by Snap-On Tools (NYSE:SNA). At Snap-On, Ujj was Vice President of Global Accounts and headed the Professional Services Organization for Snap-on Business Solutions. He can be reached at email@example.com.