Expert Warns Dealers: Adapt to EVs or Risk Obsolescence

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Expert Warns Dealers: Adapt to EVs or Risk Obsolescence

Despite growing concerns over climate change, the U.S. is sharply divided on the adoption of electric vehicles (EVs). A 2023 J.D. Power report indicated that EVs are expected to represent only a minor share of new vehicle sales in many states, contrasting sharply with states like California, Colorado, and New York, where EVs are predicted to dominate new sales by 2035. A significant factor in this divide is resistance from car dealers.

Out of approximately 17,000 U.S. car dealers, around 30% have actively petitioned President Biden to reconsider the rapid transition to EVs. Recently, the administration signaled a potential slowdown in the implementation of strict EPA regulations in response. Dealers have utilized tactics such as sending letters to the president, with thousands backing calls to revise the EPA’s ambitious goal for two-thirds of new light-duty vehicles to be electric by 2032.

While the concerns of range anxiety and the current state of charging infrastructure are valid, the push against accelerating EV adoption stands in conflict with the critical need to address climate change.

The signing of the Bipartisan Infrastructure Law and the Inflation Reduction Act in 2021 and 2022 by President Biden set the stage for the U.S. to advance towards electric vehicles (EVs), earmarking substantial funds to develop a local supply chain and ecosystem for EVs. Yet, experts argue that successful EV integration requires more than policy efforts. A critical shift needed is in the dealership model, with an emphasis on dealers becoming advocates for EVs. This change could diminish the political, socio-economic, and cultural rifts surrounding EV adoption and hasten the transition to a low-carbon future.

Tu Le of Sino Auto Insights highlights the opportunity for dealers to use EV technology as a catalyst to increase showroom visits. He suggests that dealers view EVs not as a threat but as a means to contribute to emissions reduction. Overcoming common barriers such as range anxiety, technical glitches, and charging issues is essential for consumer acceptance. Yet, the industry is actively addressing these challenges.

The benefits of EVs — like lower running costs, reduced emissions, high energy efficiency, and superior performance — are undeniable. Convincing dealers to champion these advantages can create a ripple effect, encouraging consumer confidence and adoption. If dealerships fully embrace and promote EV technology, they can play a crucial role in accelerating the shift towards sustainable transportation.

The transition to electric vehicles (EVs) has ignited discussions about the evolving relationship between dealers and original equipment manufacturers (OEMs). Some dealer groups and sales representatives perceive OEMs’ push for technological adoption as a potential threat to their traditional roles. However, experts argue it’s time for a new dialogue that strengthens the partnership between dealers and OEMs, focusing on reinforcing brand promises and fostering trust and enthusiasm for the products being sold.

Despite these efforts to adapt, there’s a sense of growing tension, with some dealer groups accused of sowing distrust rather than building confidence among consumers. This situation is exacerbated by the National Association of Dealers’ pledge to persuade the Biden administration to adjust its policy on EVs to what they deem more realistic, especially in an election year to attract voter support.

The Alliance For Automotive Innovation, representing major car brands and suppliers, has expressed concerns that the Environmental Protection Agency’s (EPA) ambitious goals for EV adoption are unrealistic within the proposed timeline. Under considerable pressure, the EPA is reviewing over 250,000 public comments on its proposed regulations for vehicle emissions, indicating a broad and engaged public interest in the rule-making process.

While the EPA has not disclosed specifics about the final ruling, reports suggest that the Biden administration may ease regulations leading up to 2030 before implementing stricter standards. This potential regulatory adjustment reflects the complex balancing act of advancing environmental goals while considering industry capabilities and public sentiment.

Environmental organizations are voicing strong opposition to any potential softening of vehicle emissions policies, arguing that such moves would worsen public health issues linked to vehicle emissions. Katherine Garcia of the Sierra Club’s Clean Transportation For All campaign stressed the urgency of acting on climate change and the importance of safeguarding public health, indicating that delaying or diluting policies would be a disservice to Americans.

The Auto Accountability Coalition, encompassing numerous environmental and clean transportation groups, has united in this stance. They’ve issued a sign-on letter to the Alliance For Automotive Innovation (AAI), urging the organization to halt its opposition to climate-friendly lobbying efforts and to support the Environmental Protection Agency’s (EPA) proposed mandates.

While the AAI’s position includes a more nuanced argument than that of some dealers, it is noteworthy that the alliance’s members are actively progressing with the launch of new mass-market EVs and the establishment of domestic battery manufacturing facilities. The current proposal from the EPA suggests that 67% of new light-duty vehicle sales should be electric by 2032. In contrast, the AAI suggests a target of 40% to 50% by 2030, inclusive of Battery Electric Vehicles (BEVs), Plug-in Hybrid Electric Vehicles (PHEVs), and Fuel Cell Electric Vehicles (FCEVs), and recommends that the EPA’s goals be aligned with California’s LEV IV standards for criteria pollutants.

The California Air Resources Board (CARB) has set forth LEV IV standards aimed at significantly reducing hazardous pollutants such as nitrogen oxides, non-methane organic gases, particulate matter, and carbon monoxide from vehicle emissions. These regulations, focusing on specific pollutants rather than a general electric vehicle (EV) mandate, establish strict limits on emissions, with requirements becoming more stringent over time.

As the Environmental Protection Agency (EPA) finalizes its regulations, the role of dealers becomes crucial in the transition towards cleaner vehicles. To mirror the EV adoption successes seen in countries like China and Norway, U.S. dealers must collaborate closely with manufacturers and policymakers. Tu Le, managing director of Sino Auto Insights, highlights the importance of a dual approach combining dealership efforts with a robust online presence to draw customers to legacy OEMs’ products. Those dealerships that manage to integrate these strategies effectively are likely to thrive.

Le also comments on the current state of the U.S. dealership landscape, suggesting that there might be an excess of dealerships and that a consolidation or “right-sizing” could be timely. However, he cautions that resisting the shift towards EVs could jeopardize dealers’ long-term viability. He notes the traditional lack of innovation among dealerships, attributing it to a history of stability that is now being challenged by the shift towards selling EVs—a change met with resistance, as evidenced by appeals to President Biden for policy moderation. This resistance underscores the broader challenges and opportunities facing dealerships as the automotive industry evolves.

Despite concerns of a slowdown, the U.S. saw a record 1.2 million EV sales in 2023, disputing the notion of dwindling consumer interest. Andrew Cornelia, CEO of Mercedes High Power Charging, during a discussion, pointed out the growing variety of EVs and positive consumer demand as signs that the market will continue to expand, criticizing the slowdown narrative as misleading.

Tu Le stressed the importance of dealers aligning with product offerings and policy goals, highlighting that dealerships should focus more on customer needs and utilize technology to streamline their sales approach. He cautioned that resisting these changes could risk the relevance of traditional dealership models in the future. This conversation reflects the dynamic nature of the EV market and the need for adaptation and customer-centric strategies among dealers.

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