Dealerships across Canada are gearing up for increasing sales of electric vehicles, but the changes they face are coming on many fronts and sometimes at significant cost that could burden their franchises.
“I don’t think the average dealership is ready at all,” said Daron Gifford, a partner in the Detroit-based accounting and consulting firm Plante Moran, which tracks automaker-dealer relationships. “That applies to both Canada and the [United States]. People aren’t trained enough.”
An anticipated decline in service needs for EVs compared with vehicles powered by internal-combustion engines puts dealerships’ profit margins at risk, he said.
“How do they make their margin?” Gifford said. “Some dealerships can’t afford to put $1 million into a dealership and then not have a profit model.”
Ford Canada has taken a hard line with its dealers, following a similar position in the United States. Canadian dealers have until Dec. 16 to choose whether to enroll in the Model e Certified or Certified Elite program, which will begin in 2024. A Ford spokesman said it is estimated that Model e dealers in Canada will have to spend about $560,000 to enroll as a Certified dealer and about $1.3 million to enroll as a Certified Elite dealer. About 90 per cent of the investment is charging infrastructure, including DC fast chargers, Ford said.
Certified Elite dealers will focus on ownership, charging and full sales capability through a digital shopping experience at ford.ca. Certified dealers will have limited built-to-order sales. Dealers who refuse to enroll in either program will be limited to selling internal combustion engine and hybrid vehicles, as of June 1, 2024. However, those dealers will have the opportunity to join the programs in 2027.
RIVALS WAIT, WATCH
The other two Detroit-based automakers, General Motors and Stellantis, are taking a “kinder, gentler approach” with dealers who are hesitant about making the investment, Gifford said. They are also watching Ford for lessons on how to motivate dealers to get ready for EVs.
“There is a lot of denial happening out there [with dealers],” he said. “But interest is growing.”
The EV investment is not the only issue for dealers, Gifford said. Automakers are also shifting toward a made-to-order or even an agency model — dealers receive a commission for selling vehicles owned by the automaker — and are backing away from the typical practice of providing incentives for dealerships to have vehicles in stock.
Dealers can learn from Tesla’s creation of mini-malls located alongside their charging stations. There, customers can browse and buy products while they wait for their vehicles to charge, Gifford said.
In the future, dealerships could become diversified retailers, selling nonautomotive products, he said. Such strategies could help close the revenue gap.