Effects of electrification in the car trade
What effects can be derived from the conversion of vehicles from combustion engines to electric cars for the “workshop business” business model in car dealerships?
In terms of new registrations, the past year saw the largest ever increase in electric and hybrid vehicles on the German market. According to the KBA, three out of ten new registrations in September 2020 were in this vehicle group, compared to just 1 in 10 in the same period last year.
For the sake of completeness, it should be mentioned that the environmental bonuses currently awarded by the government have certainly increased the incentives in this sector, but there are numerous other facts and figures that prove the trend towards change. One is the change in manufacturers’ product ranges. Volkswagen, the industry leader in Germany, expects electric vehicles to account for 25 percent of the market by 2025, while Volvo has not been developing any classic models since 2020.
So the manufacturers’ strategy seems transparent – but what impact will this have on the retailer’s workshop business?
According to the transformation model developed by Panoff Consulting, there are five organizational building blocks to consider, which are briefly and concisely explained below:
Structure
The structure of a classic car dealership will undergo a major conversion. The large number of lifts and repair bays will no longer be needed in the future, as the need for repairs as a whole will be significantly reduced. According to the DAT Report 2018, the proportion of repair and accident work is around 45%, while maintenance work accounts for the lion’s share of around 55%.
This means that more than half of the current business is on the brink of collapse, as electrically powered vehicles no longer require a large proportion of this work. In addition, car dealerships have to deal with the purchase of charging stations, which has so far been associated with high costs. How does the charging infrastructure pay for itself?
Employees
In 10 years’ time, the skills of employees in car dealerships will have to look significantly different than they do today. For the reasons mentioned above, it can be deduced that the classic mechanic and mechatronics technician will no longer be needed in large numbers.
Rather, digital skills will also be needed in the workshop, as the challenges of the vehicle user will migrate to the area of connectivity between vehicle and user. Issues such as software updates via over-the-air technology or app control of the vehicle must be just as much a part of a service employee’s repertoire as knowledge of the new drives and batteries.
Processes
In times of digitalization, workshop processes have been undergoing radical change for some time now. The switch to electrically powered vehicles is just a drop in the ocean. In concrete terms, it means that in future there may no longer be any need to differentiate between service advisors and workshop employees in the workshop process in front of the customer.
According to our forecast, the above-mentioned questions will no longer necessarily be answered by a worker in overalls, but by a digital-savvy service advisor. This revolutionizes the process for the customer to the extent that an issue is resolved in a much shorter time than with traditional maintenance.
In this context, new revenue concepts must be identified for the dealer (today, so-called “app enrollments”, i.e. activating the connection between the vehicle and smartphone, are free of charge for many manufacturers, for example).
Information technology
Artificial intelligence and vehicle connectivity are central to the strategic shift away from combustion engines towards electric vehicles. Problems in the vehicle are automatically forwarded to the dealer after approval, meaning that the systems at dealerships (and manufacturers) are becoming increasingly important.
Dealers must be prepared to receive customer appointments booked online (via the vehicles). A necessary prerequisite is the standardization of services in the workshop so that appointment slots can be set up and allocated at all.
Furthermore, a standardized customer master database between manufacturer and dealer is required, especially in connection with the introduction of the agency model for e-vehicles, in order to provide the best possible customer service.
Leadership
In order to optimally guide the four organizational building blocks of a successful workshop business through the coming change, a management team is needed that initiates this change proactively and, above all, at an early stage. It is therefore particularly important now to act as a leader and not as a classic manager. The best possible management of the current situation is no longer enough to meet the changing demands of the market.
Lambert Görsdorf
Consultant
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