The advent of Electric Vehicle engines (EVs) and the growth in the connectivity of vehicles has implications for the profitability of franchised motor dealerships. In the conventional business model, dealerships are reliant on routine and relatively predictable aftersales and part sales activity for optimising dealership net profits. However, a fully electric car does not need service and maintenance like a car with an internal combustion engine does, as there is no oil to change and there are far fewer moving parts.
In this article, Garry Keane from RWA Automotive will discuss how automotive dealer groups can protect their aftersales revenue, in an industry facing an increasing demand for electric vehicles
Impact of EV on the after sales revenues
Compared to petrol engines, electric vehicles experience less wear and tear, have fewer servicing requirements, and typically require less warrantable repairs. Although these can be a valuable selling point of EVs from a customer perspective, EVs represent a reduced opportunity for aftersales revenue. The challenge for motor dealers will be to find alternative revenue streams to replace those lost by the increased market share of EVs.
However, dealers shouldn’t be fearful of these changes in the industry. The reduced traditional service revenue opportunities may be offset by improved customer retention rates, which would have a positive impact on aftersales revenue and net profits. Improvements in customer retention is proven to improve dealership profitability, and the growing popularity of EVs also offers opportunities for your salespeople to capitalise on this new market trend.
How will EVs affect automotive after sales revenues?
Advances in engine technology, changes to mileage service intervals, refinements to fuels and lubricants, a technologically evolving hybrid engine market and the connectivity of vehicles have already led franchised dealerships to develop new strategies for optimising aftersales business. The increase in consumer demand for full EVs has accelerated this even further, and maximising service customer retention is more important than ever before. Thus, seasonal health checks, menu price servicing and special offers, once textbook examples of innovative marketing strategy, are now giving way to targeted, smart upselling of personalised products and services. This will become the routine aftersales activity of the future.
Targeting products and services to a particular vehicle and owner increases the likelihood of success with upselling. In addition, personalisation of communications (emails, SMS) helps to ensure customers feel special and valued by the business. It is much easier and more cost-effective to sell more to existing customers than to increase the number of new customers. Dealerships should be doing both, but the former approach is widely regarded as an effective means to retain customers and promote repeat sales of product and service.
If it is operating correctly, an increasing number of customers will return to the dealership to replace their cars and will return to ‘service’ them there too. This core principle will remain unchanged in the new product frontier, which comprises EVs and connected vehicles. It is therefore vital that dealerships measure and analyse customer retention, a complex task in the absence of data analytics. The RWA Service Retention dashboard illustrated in Figure 1.0 below is one of the key Business Intelligence (BI) tools which provide customer retention information in real time. These BI reports provide insights into vehicle throughput, vehicle fall-off and customer retention rates across all brands, and on new and used vehicle sales.
Figure 1.0 Real World Analytics Customer Retention Report
To learn more about our BI solutions, designed specifically for the changing auto industry, feel free to visit our BI Solutions page.
Protecting after sales revenues from EV
The ability to upsell is an important skill when dealing with vehicle service requirements, and more so now, with EVs and connected vehicles and a focus on personalisation of the customer journey. The identification of upsell opportunity and the analysis of data around this is critical for success.
Aftersales services for EVs
Existing dealerships who may be struggling with the offset in service activity should ensure that they are future-proofing their business by creating windows of opportunity. Such upsell opportunities will include:
- Battery testing and recharging
- High voltage electric cabling checks and works
- Tyre replacement
- Windscreen wiper replacement
- Suspension checks
- Brake checks
- Steering checks
- Wheels, lights, and all associated works
- Manufacturer-led campaigns
The personalisation of offerings will be an important component of the success of this strategy.
The RWA Vehicle Health Check (VHC) Summary dashboard illustrated in Figure 1.1 below is a BI tool which assists dealership aftersales personnel with the identification and analyses of upselling opportunities. It provides key insights on workshop throughput analyses, the conversion of sales opportunities across the amber and red categories of identified works and a dynamic pipeline view of deferred opportunities.
Figure 1.1 Real World Analytics VHC Summary Dashboard
BI tools based on data analytics provide dealerships with insights about what motorists need and when they need it, and it will direct how dealerships adapt their operations to respond accordingly. These tools are key to matching the right consumer to the right experience, and so, presents dealerships with genuine opportunities to meet customer preferences.
The insights provided by RWA Automotive’s BI tools help dealers make their service offerings cost-effective and efficient, while optimising parts stock levels to meet customers’ needs in a timely manner. Furthermore, dealerships which also incorporate personalisation of targeted offerings will protect customer retention, after sales revenues and ultimately the profitability of the dealership.
To learn more about how RWA Automotive’s BI solutions can support your dealership, even in the changing landscape and with the rising popularity of EV, feel free to request a callback via our Contact page. A member of the team will be in touch within one working day, to chat about how our industry-specific solution can help you to make data-driven decisions that will benefit your business and most importantly, your bottom line.
For more automotive industry insights, you can also visit the RWA Automotive blog for more news and advice for auto dealers.
About Real World Analytics
Real World Analytics provides a cloud-based Business Intelligence (BI) solution that helps you become a complete data-driven dealer group. By bringing all your data into one place and delivering actionable insights to different levels in the business, everyone has the right information at the right time to do their job efficiently. The management will be presented with executive dashboards where they can drill down to the details for further investigation. Your managers in the outlets get reports such as DOCs delivered to them automatically so that they can action issues on the spot. The solution is designed to help you stay on top of your business with all the information you need at your fingertips.
- Motortrader.com - Getting the most out of servicing for your workshop business - John Kirwan, 26 July 2018.