Only 5% Of Dealers Are Prioritizing Electric Vehicle Sales Over Gas Models: Survey

The underlying tension in the American car market is a general belief among automakers/regulators/media that electric cars are going to happen and consumers/dealers asking: Ok, but how? A mid-year survey of dealers shows that most of them will sell you an electric car or hybrid if you ask for it, but few are actually prioritizing the sale of electric vehicles over gas-powered cars.

Does this mean EVs are toast? Nah, the CEO behind the survey has the correct take, which is that “They are simply growing at a normal tech adoption curve, instead of following the absurd expectations from manufacturers and the hype from the media.” Another analysis this week from S&P Global Mobility shows electric vehicle production will also continue to grow, just perhaps a bit delayed in the United States.

Not that electric cars are perfect. Tesla is having to recall 1.8 million cars in the United States for an issue with the car not telling drivers that the hood/frunk isn’t latched. This is a quick fix, thankfully.

And, finally, Fuyao Glass America’s Ohio plant is back in the news after being raided by G-Men.

Why Aren’t Dealers Pushing Electric Cars?

It’s a big question, and the heterogeneous nature of the pool of dealers in the United States makes it impossible to produce one answer, as a Toyota dealer in San Diego has a very different experience from a GMC/Buick dealer in Topeka.

This information comes from a Kaiser Associates (a big consulting company) dealership survey conducted for the Dave Cantin Group (an M&A advisory firm). The survey can be downloaded here if you give them some info and you can make your own judgment about the insights, but the data isn’t surprising to me. The company says they interviewed 180 new car dealers.

As you can see in the chart above, only 5% of dealers are prioritizing BEV (battery electric vehicle) sales over gas-powered/hybrid cars. That number rises a bit to 6% for hybrids. About a third of dealers are happy to sell a hybrid or BEV if that’s what a consumer wants. When it comes to BEVs, 23% of dealers say they’ll only sell them if a consumer has a “strong” preference for such a vehicle and a full 38% don’t sell or rarely sell BEVs.

On its face, these are not great numbers for EV enthusiasts, but also this makes sense. There are many dealers for brands like Buick, GMC, Infiniti, Alfa Romeo, et cetera that simply do not have BEVs to sell. Then there are brands like Honda and Toyota which are, after a long wait, just starting to get electric vehicles in stock. So this will likely shift.

I’m glad that the survey includes the top two reasons why some dealers would prioritize BEV or HEV sales, which are: to diversify offerings or to get access to incentives. This is logical and, if the shift to EVs is going to happen eventually, then it makes sense for dealers to start building up that business. In the interim, some automakers are offering big incentives to move electric cars and why not take advantage of that?

The reasons why some dealers are not pushing EVs I find to be a little more interesting. The number one reason is that these dealers think their customers don’t care about the environment. The second reason is pricing is unattractive. I’d have assumed this would be reversed.

We’re now back to a bit more of a chicken-and-egg argument. Unless you are personally bought in on the idea of owning an electric vehicle, it’s hard to imagine someone buying one without having at least a little experience with an EV. The best place to give people an experience with an EV is probably at a dealer. If your local dealer doesn’t believe you care about electric cars there’s no incentive to push them, which means you never learn about them, which means the adoption curve slows down.

Ford tried to fix this by essentially forcing dealers to spend a ton of money upgrading their stores to support electric cars. Dealers revolted and Ford dramatically walked back these requirements as it saw the EV adoption curve slowing down.

I personally think we’re going to see a second wave of EV adoption as automakers build more battery plants/EV plants in the United States and come up with second/third-generation products that are more affordable and right-sized for the consumer. My guess is this will happen around 2026/2027.

Until then, it’s hard to fault dealers in certain markets for not being enthused about selling a heavily discounted car that won’t move off their lot or investing a ton of effort into selling EVs to a community that’s less familiar with them.  But that’s short-term thinking. Over the longer term, the dealers in tipping point markets (mid-size cities and suburbs) will likely benefit from building up an EV competency and consumer base.

2028 Is Going To Be A Super Weird Year For Car Production

The graphic below, from S&P Global Mobility, is the latest revision from the consulting firm and it shows what everyone already kind of knows: Hybrids of some sort are where it’s at for the interim period.

Just look at the weird 2028-2029 period where xEVs (anything that has an electric motor but isn’t a full EV) overtake both regular ICE vehicles and BEVs. Even as recently as 2022, the sense from car companies and much of the media (but not us — hybrids always seemed an obvious next step) was that BEVs would lead the transition away from pure ICE vehicles.

An important thing to note with this graphic is that it’s global and therefore includes China and Europe, where both BEVs and plug-in hybrids/range-extended EVs are becoming increasingly popular. Government intervention is strong in both places as well, with China massively subsidizing these types of vehicles and the EU making it harder and harder to sell pure-ICE cars and trucks.

As S&P’s Stephanie Brinley points out:

By 2036, we see global BEV production at just 59% of all light-vehicle production. However, we also see the potential for Germany with 97% of its light-vehicle production having shifted to BEVs by then.

In Mainland China, which will continue to be the highest-volume producer of BEVs, only about 64% of light-vehicle production is forecast to be BEVs by 2036. Mainland China’s drive toward new energy vehicles (NEV) as opposed to a laser-focus on BEVs leaves more room for solutions like plug-in hybrid (PHEV) and range-extended electric (REX) vehicle solutions; those are forecast to see, roughly, respective 17% and 7% of mainland China light-vehicle production in 2036.

The US is expected to be the third-highest BEV producer in 2036; we forecast that 75% of light-vehicle production could be BEVs by that year. Indonesia and Thailand are long-standing vehicle-producing countries, with opportunity for both the home market and for exports. Still, a BEV transition is expected to take a little longer there; in 2036, we forecast Thailand BEV production at about 50% of the country’s output. In Indonesia we see BEV output reaching 26% of production.

The next decade is going to be so much fun for analysts, dealers, marketers, and everyone else. This is the most important/uncertain period in automotive history since the end of WWII. Well, it’ll be fun for me at least.

Tesla Has To Recall 1.8 Million Cars For Hood Latching Issues

I feel like we need a better name for a recall that can be fixed with an over-the-air update. If you don’t have to stop driving the car or bring your vehicle to a dealer, it’s just not the same thing.

This is all to say that Tesla has to recall about 1.8 million cars because the hood latch might not work.

Per NBC News:

[T]esla said in March that it began to look into reports from drivers in China about what it called “unintended hood opening events.”

Subsequent company investigations revealed the presence of deformed hood latch switches, an issue that it said “could prevent the customer from being notified of an open hood state.”

Further studies led the company to issue a voluntary recall of affected vehicles “out of an abundance of caution.” No injuries or deaths have been reported as a result of the issue, Tesla said, and only 1% of vehicles are likely to suffer from the defect.

An “unintended hood opening event” is great. I need to remember that one.

If you have an affected vehicle you don’t have to do anything because an OTA update is fixing your car right now.

WTF Is Up With Fuyao Glass America?

Chinese supplier Fuyao Glass opened a plant in Ohio in 2016 with the hopes of expanding its footprint in the United States. For politicians it also seemed like a win, bringing back a factory from China after losing a lot of jobs to the country during the “China shock” period.

The plant was a success, I guess, but the documentary “American Factory” (trailer above) showed how difficult it was to merge the different work cultures of the two groups and the various travails of globalization.

Now, the facility is back in the news after being raided by Homeland Security, the FBI, the IRS, and local authorities. From the AP:

The investigation was focused on money laundering, potential human smuggling, labor exploitation and financial crimes, Homeland Security agent Jared Murphey said Friday.

Fuyao Glass America said it was told by authorities that a third-party employment company was at the center of the criminal investigation, according to a filing with the Shanghai Stock Exchange.

That’s not great.

What I’m Listening To While Writing TMD

I sometimes think that The Sundays are the most slept-on alternative rock band of the 1990s. Please enjoy “Here’s Where The Story Ends” because here’s where TMD ends.

The Big Question

Does your local dealer seem to care about EVs or Hybrids?