Strategies to keep BEVs from zapping your service lane revenue

Ed Roberts, fixed ops director at Bozard Ford-Lincoln in St. Augustine, Fla., has been thinking a lot lately about how Ford's first three battery-electric vehicles — the Mustang Mach-E arriving this month, the E-Transit van coming late next year and the battery-powered F-150 planned for 2022 — will start to upend his store's fixed operations business model.

Roberts expects visits to his service department by owners of those battery-electric vehicles and the ones that come after will drop by 50 percent over those customers who drive traditional gasoline- or diesel-engine vehicles. Not only that, but the dollar per repair order for EVs also is going to plunge.

A recent study by consulting firm McKinsey & Co. estimates repair tickets for BEVs will shrink between 40 and 50 percent. Some of the reasons for the lower revenue per ticket include: BEV brake pads could last 100,000 miles or more; BEVs don't require oil changes; and over-the-air software upgrades will keep customers out of the service lane.

Roberts figures his technicians might service the average BEV just once a year. Figuring out how to continue building revenue in this new reality has been top of mind for him.

"We do think about it. We have to prepare ourselves for it," he told Fixed Ops Journal.

At LaFontaine Automotive Group, which operates nearly two dozen stores in Michigan, service directors say they are not worried — yet — about BEVs lowering fixed ops revenues. But that doesn't mean LaFontaine is sitting idly by.
Company spokesman Max Muncey said LaFontaine has recently inked several fleet maintenance deals with rental car companies. Also, one of its body shops is an official Tesla certified repair center, and the company will sell and service Bollinger's line of off-road electric vehicles in the Midwest region.

At Bozard Ford-Lincoln, Roberts estimates he needs an 80 percent retention rate just to hold the line on service department revenue in the BEV era. Currently, about 70 percent of Bozard's customers return to the store for service after their vehicle's warranty expires, Roberts says.

"We are going to have tire rotations. We are going to have some level of brake work, which is going to be less than it is today," Roberts says. "We'll have cabin air filters. That kind of stuff is not going to change. And not everything is going to be able to be updated over the air."

Roberts and others in fixed operations are certainly justified in gearing up for what could be one of the biggest service department disruptions since World War II.

According to consulting firm AutoPacific, the 15 BEV nameplates on sale in the United States in 2018 will grow to 86 by 2024. By thefollowing year, BEV sales are projected to reach 800,000 or about 4.9 percent of the U.S. new-vehicle market. Looking out to the end of the decade, that percentage could grow to as much as 25 percent of new-vehicle sales in the U.S., according to a McKinsey study.

BEVs, with their infrequent and low-dollar repair tickets, are coming in high volumes at a time when purchase consideration is growing. If fixed ops directors don't adjust, their service and parts revenue is very likely going to shrink as sales of traditional vehicles fade. Just boosting retention is not a permanent fix as internal combustion engine vehicles are replaced with BEVs.

Here are seven strategies from fixed ops experts for offsetting the revenue declines brought about by higher sales of low-maintenance BEVs. Service directors can start rolling them out now.

Because BEVs require special tools and training, franchised new-vehicle dealers have the advantage over independent shops, says David Foutz, vice president of sales for Cox Automotive's Xtime. They need to parlay that advantage into making BEV drivers service customers for life.

Fixed ops directors, Foutz says, "need systems that improve the customer experience and drive efficiency in the shop. If they adapt to the new customer behavior in digital ways, then by default they will be more adaptive to the new demands EVs present. The average RO will decrease for EVs versus combustion engine vehicles, so dealers must offset that in retention and the number of repair orders.

"If independent shops lag readiness to service EVs, then dealers could grow their retention during this transition, and if the dealer gets great at customer service, they can keep those customers beyond the warranty period and redefine the trust and transparency consumers want," he says.

Russell Hensley, who co-leads the mobility practice at McKinsey & Co., advises fixed ops directors to look beyond COVID-19 and begin targeting the new generation of fleet vehicles that are in high daily use from ride-share services, parcel delivery companies and from independent drivers working for such outfits as food delivery services. "That will be a fleet of vehicles that will be relatively high in volume, certainly in urban settings," Hensley said.

Lea Malloy, head of R&D at Cox Automotive Mobility, says she believes fixed ops directors who are aggressive in investing in the tools and techs to diagnose and service battery packs from all brands of BEVs will prosper in several ways. It starts, she says, with the service department treating the battery pack the same way it does a gasoline engine.

"Every time a vehicle comes in for service, an inspection should include a battery diagnostic," she says. "It should include a perspective on how that battery is degrading. It could include a perspective on the value of the vehicle and when might be a good time to trade it in."

Battery pack diagnostic expertise also has implications for a store's used-car department. Stores that certify the battery pack in a secondhand BEV to be in good condition could offer that car with a warranty and eliminate the chief concern used-car buyers have with secondhand BEVs. "Based on the research we have done, we know 83 percent of consumers are skeptical of the batteries in used BEVs, and the residual values show that skepticism," Malloy says.

Manufacturers such as Rivian and Lordstown Motors, like Tesla, will not have dealership networks. Instead, they plan to open their own service centers. But franchised dealers still might have a shot at servicing at least some of these vehicles for wheel services and collision repairs.

"These new OEMs need a distribution and service network," Malloy says. "I think that is a role certain dealers and traditional OEMs could step into. They have the assets that the new EV OEMs need."

Dealers faced with excess fixed ops capacity in the BEV era could offer collision repair services. And that's something under consideration by Roberts, the fixed ops director at Bozard Ford-Lincoln.

"I would like to have a body shop. Will it come to a point when we convert? It's certainly a possibility," he says. "About 40 percent of the tow-ins that come into a body shop end up being totaled. When a customer comes to clean out his vehicle after it's been totaled, you want him to come and shop with you instantly."

Lithium ion batteries are loaded with valuable precious metals that can be recycled. Malloy recommends fixed ops directors stay informed on how the battery pack recycling industry emerges as BEVs take a bigger share of the market.

Less frequent service visits will make it more critical to keep in contact with customers. Malloy recommends using text messages and mobile phone applications to keep in touch.

"Loyalty and service retention digital platforms will go a long way, I think, to maintain relationships with customers when you may not see them all the time," she says. "The forward thinking fixed ops departments that can demonstrate to EV drivers that they are prepared to support their vehicles will be the ones that will win out."