Summary
- Auto dealerships are currently being squeezed by the adoption of electric vehicles and a price war in Australia
- The EV buying experience has improved, with some new brands offering peace of mind through servicing options
- Dealerships rely on servicing for profit, but EVs require less servicing, leading to potential job losses
- Right-to-Repair laws are empowering third-party repairers, putting pressure on dealership profitability
- Dealerships in Australia are facing challenges due to new vehicle efficiency standards and the shift to agency models, with small business franchisees particularly vulnerable
Article
Auto dealerships are facing challenges in the era of electric vehicles (EVs) due to the decreased need for servicing and a price war in Australia. While improvements have been seen in the EV buying experience, the traditional model of bringing cars back for regular servicing is still prevalent among legacy brands. Dealer principals may be reluctant to promote EVs due to financial incentives, as EV customers generate lower profits compared to internal combustion engine (ICE) customers. The introduction of “Right to Repair” laws allows third-party repairers access to diagnostic tools, potentially affecting dealership profits and customer retention.
Australia’s federal government has implemented efficiency rules for new vehicles, which may impact small business franchisees, especially in rural areas. The Motor Trades Association of Australia (MTAA) warns of the power imbalance between offshore manufacturers and local dealerships, leading to concerns about franchisees losing their dealership due to the shift to agency models for dealerships. The entry of Chinese brands in the Australian market through partnerships with established dealerships may further disrupt the dealership model, especially for European brands facing challenges.
As EVs become more prevalent, the traditional service model for dealerships may face challenges as EVs require less servicing. Dealerships may need to adapt and consider other revenue streams beyond servicing, such as focusing on new car sales. With the ongoing price war in the EV market, forward-thinking dealerships will need to monitor the competition and make strategic decisions to stay competitive. The future of dealerships in the EV industry remains uncertain, as consumer confidence in EVs grows and the need for traditional servicing decreases.
Overall, the dealership model in Australia is facing significant upheaval in the transition to electric vehicles. Dealerships will need to navigate the changing landscape by exploring new revenue streams and adapting to evolving consumer preferences. The future of auto dealerships in the electric vehicle era is uncertain, but those who innovate and adapt may have a better chance of surviving and thriving in the evolving market.
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