EV carmakers work to fit auto dealers into their future plans

DETROIT — As automakers chase Tesla-like profits on new electric vehicles, they face an existential question: how best to bring franchised auto dealers along with them as they transition to EVs.

Some, such as General Motors, are asking luxury dealers to go all-in on EVs or get out of the business. Others like Ford Motor are offering dealers different “EV-certification” levels, while most other carmakers, or OEMs, know they need to change the sales process to fit the evolving industry, but are still try to figure out how to do it.

“I think we’re all building this airplane as we fly,” Michael Alford, president of the National Auto Dealers Association, a trade association that represents more than 16,000 U.S. new franchised dealers, told CNBC. “Depending on the OEM, the level of engagement or the intensity of the engagement varies.”

Automakers and franchised dealers have a complex relationship that is backed, in many states, by laws that make it difficult, if not illegal, to bypass franchised dealers and sell new vehicles directly to consumers. (Tesla and other newer EV startups have worked around such regulations to cut costs.)

Both automakers and franchised dealers want to maximize profits, but they’re separate businesses that heavily rely on one another to succeed. Dealers rely on automakers for product to fill and move off lots, and the carmakers in turn rely on dealers to sell and service vehicles as well as serve as concierges for customers. 

How that historical relationship fits into an all-electric future is expected to be at the forefront of discussions between automakers and dealers at the National Auto Dealers Association Show occurring through Sunday in Dallas. The event attracts thousands of franchise dealers annually to hear from their respective automotive brands.

For dealers — from mom-and-pop shops to large publicly traded chains — EVs will mean new employee training, infrastructure and substantial investments in their stores to be able to service, sell and charge the vehicles. Depending on the size of the dealer, those upgrades could easily cost hundreds of thousands, or millions, of dollars. Of course, they want to make sure their investments will pay off.

“The tone and tenor of this subject matter has evolved, and I think it’s very, very clear this year that our legacy OEMs absolutely realize that we are essential going forward,” said Alford, who runs Chevrolet and Cadillac dealerships in North Carolina.

As more automakers introduce EVs, they’re rethinking the sales process, including selling new vehicles largely, if not fully, online. Tesla was among the first automakers to embrace online sales for a large portion of its business, though it still has physical dealerships, information sites and service shops.

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