Expected impact of BEVs on aftersales: did we tick all the boxes?

Last year, ICDP conducted a piece of research examining the potential impact of Battery Electric Vehicles (BEV) on a typical dealer’s repair and maintenance (R&M) activity at the 2025 horizon.

This was the logical follow-on step to the analysis we made to assess general BEV aftersales needs compared to internal combustion engine cars (ICE).  Our analysis concluded that one BEV would generate 33% less R&M revenue compared to its ICE counterpart.

To assess the impact of BEVs on a dealer’s aftersales business, we created a simulation model and considered a highly disruptive scenario where:

• The dealer is representing a BEV-focused brand with no current or planned alternative powertrains (such as hybrids, plug-in hybrids, etc.) in its model line-up.

• The dealer manages to grow BEV sales far ahead of the total market forecast, giving him – in 2025 – a 15% share of BEVs in the local car parc of the brand, of which 82% are less than 5 years old.

Our model outputs suggested that, at the 2025 horizon, the impact of the BEV parc on the dealer’s R&M business volumes would remain marginal.  The number of R&M operations for ‘client paying’ work would decline by only 1.1% only, and revenues would drop by 5.4%, giving an approximate 1% fall in the contribution of aftersales to EBIDTA for the overall dealer business.

In order to isolate the variables, this forecast assumed that there would be no change to BEV owner retention rates, and that it would remain the same as for ICEs across the whole vehicle lifecycle.  However, in our research we also found that OEM-franchised networks have an opportunity to leverage customer perceptions of BEV technical complexity in order to boost workshop retention, and so factored this into the forecast to provide a small cushion to the BEV impact on the dealer’s R&M activity.

Our research was therefore a lot less pessimistic than many of the comments that circulate around BEV aftermarket impact; we concluded that, by 2025 horizon, the BEV impact will definitely be more noticeable than it is today, but it still won’t be critical to a dealer’s business.  We concluded that, even when using an optimistic take-up rate for BEVs in our model, the 2025 aftersales impact will remain fairly limited, and would have been even more negligible if we had used some of the more pessimistic market forecasts.

However, we still cautioned that the industry should not ignore the ‘elephant in the room’ when considering the BEV aftermarket.  We urged car manufacturers to improve customer retention by offering service plans focused on BEVs, and suggested that dealers should look to compensate for the expected drop in R&M volumes by pushing for revenue and profits in other activities (such as crash repairs, used cars, etc.), and also that all franchised workshops would need to step up BEV related training, and investment in the necessary workshop equipment.

Recent car manufacturer statements in the press would seem to support our analysis and recommendations in a number of areas:

• OEMs confirm that, for an individual customer, owning a BEV can save them up to 30% in R&M costs.  At first glance, this would negatively affect workshop revenues

• OEMs confirm that BEV owners tend to be more loyal to the franchised network for R&M, largely due to the fact that the BEV owner – often concerned by the complexity of his car – is looking for the ‘peace of mind’ that remaining at the OEM-franchised network should give

• They confirm that this retention rate can be further improved by offering dedicated services (inclusive R&M plans and/ or warranty extensions, home charging point installation, etc.)

• They confirm that – when considering the BEV parc in isolation – that the drop in R&M revenues that BEVs will bring could be compensated by an increased number of workshop entries derived from higher retention, and/ or by an increase in the revenue of crash repair activity.  A number of industry players (insurers, OEMs, dealers) are currently saying that BEVs are suffering more accidents than ICE cars, maybe due to their different torque characteristics, or to driver unfamiliarity with the cars’ controls and features

• They confirm that handling R&M on BEVs requires specific training and investment in dedicated equipment.

‘In other words, they appear to have ticked the boxes on all the issues we raised!’

However, reading these articles does leave us with the feeling that some OEMs might be being a little too self-confident, and might be underplaying the impact that BEVs will have.  As time passes and BEVs enter the mainstream, driver behaviour and preferences will evolve, and might return closer to the ‘normal’ market behaviour of an ICE car owner.  On the other hand, drivers might also adopt more radical and unpredictable behaviour when it comes to the aftermarket needs of their BEV.

What would happen at franchised workshops if the BEV R&M retention rate were to fall, or if the independent aftermarket developed a strong competing R&M offer for BEVs, or if the number of BEV accidents falls because drivers have grown used to their car’s features?  And last but not least, what would happen if BEV customers concluded that their car did not actually need any regular maintenance at all?