Here’s the burning question at auto dealerships everywhere:

Will the sale of electric vehicles (EVs) hurt auto dealerships?

If your auto dealership depends on the profits made from servicing vehicles, then the answer could very well be yes. The National Automobile Dealership Association reports all new-vehicle dealerships made an aggregate of $58.40 billion in service and parts sales from January to June of 2018. The average dealership made $3,477,529 in sales in that department. This is in contrast to the aggregate $30 million made in the New Light-Vehicle department.

A dealership’s propensity to rely on the need for their products to be frequently maintained may no longer be operable in the near future.

Electric vehicle manufacturers have made radical improvements to the traditional internal combustion engine model that result in a product that wears down at a much slower rate.

Evaluating just how serious the EV revolution is, along with the effect it will have on revenue, is an essential consideration for any auto dealer. While electric cars will still require service, the diminished need for repair is worth understanding.

How Serious is the Electric Revolution?

To determine whether EVs will hurt the average auto dealer, we must first evaluate just how serious anticipation of the upcoming EV revolution is.

The International Energy Agency (IEA) estimates 125 – 220 million EVs will be on the road by 2030.

Globally, the total number of EVs on the road is over 3 million in 2018, a 50 percent increase over 2016.

This November, Tesla’s Model 3 alone was the highest selling small/midsize luxury sedan in the U.S.

Additionally, most large auto makers are putting their horses behind the electric vehicle, such as General Motors changing their official slogan to, “Zero Crashes, Zero Emissions, Zero Congestion.” and Volvo’s plan to phase out the traditional combustion engine in all new models beginning in 2019.

How Electric Vehicles will Affect Auto Dealers

If it is reasonable to expect EVs to dominate the market in the near-to-medium future, then it would also be reasonable to brace for the effect the change will have on the auto dealer industry.

Relying on sales in parts and services may no longer be advisable given the significant changes EVs will undoubtedly bring.

Electric engines don’t require oil changes, fuel filters, spark plug replacements, or emission checks. They also generally have fewer moving parts and break down less often. In many cases there aren’t any timing belts, or differential or transmission fluids that need to be changed. This eliminates many of the repair needs of customers that service centers rely on.

In addition, many problems with EVs can be serviced with parts bought online or with updates downloaded for free directly from the manufacturer.

Brake pad replacement also occurs considerably less frequently with EVs. EVs use regenerative braking, which returns energy to the vehicle’s battery and reduces the use (and therefore wear) on mechanical brakes.

Take, for instance, Elon Musk’s recent tweet about Tesla’s brakes on December 26: “Vast majority of vehicle motion is returned to the battery, as the electric motors act like a generator in reverse. Brake pads on a Tesla literally never need to be replaced for lifetime of the car.”

These improvements on the customer end could easily spell trouble for dealerships relying on service money. One example cites, “Chevy Bolt EV needs basically zero maintenance for first 150K miles”.

With less maintenance required on EVs, what is next for auto dealerships?

The Future

The incentive EVs provide to consumers will simply be too much to ignore in the long term. Less money spent on gasoline, less money spent on repair, along with the added bonus of not contributing to climate-changing vehicle emissions.

The future of EVs and auto dealerships is an interesting one. Tesla notoriously doesn’t use dealerships to sell their cars. Some states have actually banned the sale of the car for that very reason.

The newly anticipated Rivian all-electric pick-up truck plans to sell directly to consumers as well.

From the perspective of the auto dealership, there are already a few recent alternatives that have developed.

One example is a Naperville used car dealer that is resolved to “never carry a gas vehicle” and conduct their customer’s buying experience with a philosophy of “radical transparency”.

Even Electric’s founder Gisli Gislason set up electric vehicle showrooms with EVs from multiple brands that can be bought on the spot.

It is possible for auto dealers to evolve to face this next challenge, but first, awareness is key.

To learn more about how auto dealers can save time and money in the here and now, check out CrossCheck’s Blog.

On Monday September 17, Audi unveiled the e-tron, a $75,000 all-electric SUV.

Audi has begun to accept reservations for the e-tron and expects to be able to begin shipping the new model by the second quarter of 2019.

The e-tron

The e-tron is designed to appeal to mainstream consumers who are interested in an electric vehicle (EV), but prefer the familiar design of a standard gasoline car.

Executive Publisher Karl Brauer of Cox Automotive says, “The (e-tron) features standard-issue Audi design cues, meaning a beautiful interior and exterior execution. … For electric vehicle doubters, plenty of which remain, the e-tron will mark an important threshold on the path to widespread EV adoption.”

For now, the EV market remains a modest one percent of new-car sales.

Audi created the car with the intent of participating in what they expect will be an ever-growing segment of the car market.

Audi of America President Scott Keogh says, “This is a full-stop Audi, backed by a network of hundreds of dealerships and a company with more than 100 years in the business,” and “Tesla deserves massive credit from moving electric vehicles away from just being cars for a quirky market, they went luxury. … Our message for anyone considering an electric car is simply, we want our day in court.”

The e-tron SUV seats five and the interior is styled as a standard-issue luxurious German sport-ute. The car features all-wheel-drive, a 4,000-pound towing capacity and similar to Tesla’s design, contains twin-electric motors in the front and rear of the car with the lithium-ion battery along the car floor.

Audi has yet to disclose the range of the vehicle, but has announced an uncharged e-tron can hit 80 percent of battery capacity in 30 minutes using a fast charger.

Amazon will be providing “Audi Home Charging” with up front pricing and installation for charging units. Audi also announced Alexa will be a part of the Audi car.

Notably, U.S. buyers won’t receive the latest side-mirror, or rather, lack-of-side-mirror technology that is legal in Europe. The Euro model contains small rear facing, door mounted cameras that project an image of what’s behind the car onto small screens on both the driver and passenger doors.

More Audi Electric Car Designs

Audi announced the SUV e-tron a mere weeks after the reveal of the ambitious sports car PB e-tron, a car that can go 0-60 miles per hour in two seconds with a driver’s seat that can shift to the middle for a racecar-like experience.

Audi also intends to reveal the e-tron GT concept, which looks to be a direct competitor to the Model S, at the Los Angeles auto show in November.

Additional Competition

Next year, Porsche is scheduled to unveil its first electric sedan, the Teycon. Audi and Porsche, both part of the VW Group, are expected to collaborate on a series of platforms to electrify a large range of models in both companies by 2025.

Jaguar’s I-PACE has been considered the first serious challenger to Tesla in the EV Market.

The I-PACE tilts slightly towards Tesla’s futuristic design while Audi’s e-tron SUV remains squarely in today’s luxury SUV market.

Both Audi and Jaguar abstained from taking Tesla on directly with a sedan design, and instead went straight for the SUV market, as 53 percent of U.S. car sales are accounted for by SUVs.

“The premium EV race is about to get interesting,” says Brauer, noting 10 new players are expected to enter the electric car market over the next two years.

To learn more about changes in the car market, visit CrossCheck’s blog.

On October 5, Mercedes Benz held a groundbreaking ceremony to celebrate the beginning of construction on a new $1 billion battery factory in Tuscaloosa, Ala. The factory is being built to provide batteries for a future all-electric SUV designed by Mercedes.

President and CEO Jason Hoff of Mercedes-Benz U.S. International was present for the celebration as was Alabama Governor Kay Ivey, who said, "Just as Mercedes helped put our state on the cutting-edge of automotive manufacturing, Alabama will help put Mercedes on the cutting-edge of electric vehicle development." Mercedes expects the factory to be operational in 2019.

Since 1995, Mercedes had invested $6 billion dollars into the plant; most of the added $1 billion is slated for the electric initiative. Once completed, Mercedes expects the aforementioned investment to produce over 600 additional jobs in Alabama.

To mark the occasion, Markus Schäfer, member of the Divisional Board of Mercedes-Benz Cars, Production and Supply Chain said, "One year ago, we have announced $1 billion investment in Tuscaloosa mostly for the production of electric SUVs and a battery plant. We are bringing electric mobility for Mercedes-Benz to the United States. Around the globe, we are preparing six sites for production of EQ models and our battery network will consist of eight factories."

This new battery facility in is a part of a network of eight factories in Germany, China, Thailand, and the US. The international network of battery factories is intended to help Mercedes-Benz efficiently meet the demands and requirements of the market.

Mercedes has promised to offer at least one electric vehicle in each model series by 2022, totaling more than 130 models.

The first electric model Mercedes will debut is the EQC electric SUV, expected to begin production early next year in Europe.

Mercedes hasn’t announced a date the model will become available in the US, but it’s expected shortly after that.

US production of Mercedes electric cars and batteries is expected by “the beginning of the next decade.”

There is no official word on the overall planned output of the new Tuscaloosa factory, but Mercedes has made its intention clear to export battery packs to outside electric car production around the world.

This news is followed by reports of Tesla outselling Mercedes in this year’s third quarter. Forbes estimates Tesla as selling 69,925 Model 3, S and X cars in the U.S. this quarter with Mercedes selling 66,542 vehicles (excluding commercial vans).

Which company do you think will reign supreme in tomorrow’s electric auto market?

To learn more about the ins and outs of the auto market check out CrossCheck's blog.

Tesla has been gradually releasing new security features to make it more difficult for thieves to steal vehicles.

In the last week, Tesla invited more comparisons to the iPhone by offering a new “‘PIN to Drive’ feature along with improved cryptography” for its key fobs (i.e. keyless passive control).

This is a new optional feature that places the now age-old four-digit pin code as a barrier to starting a Tesla car.

To activate the feature, owners go to “Controls > Safety and Security > PIN to Drive.”

“We additionally added support for improved cryptography in our key fobs for Model S to guard against other attacks,” stated Tesla in the release notes.

The updates and added security feature follow reports of several Tesla vehicle thefts through relay attacks in Europe.

Nevertheless, Tesla vehicles are rarely stolen due to their never-off advanced GPS tracking system. In fact, stolen Tesla vehicles in the U.S. have been reported as recovered 112 out of 115 times. More tech-savvy thieves in Europe, however, can still get away with it due to those relay attacks on key fobs.

This weakness is not unique to Tesla vehicles, but rather any vehicle with a key fob or keyless/passive entry. Tesla’s update is intended to increase the difficulty of the effectiveness of this attack.

The company has also recently shared tips to help increase security, including disabling Passive Entry (Controls > Settings > Doors & Locks > Passive Entry > OFF).

Tesla plans to bring the latest security update to all models, including the new Model 3.

The company points out that the Model X key fobs aren’t as vulnerable to attacks since they already have “robust cryptography” while Model S vehicles have been produced with same secure key fobs since June 2018.

Tesla also states that customers with the older Model S key fobs can contact Tesla’s service department to upgrade their key fob.

Oftentimes Tesla is affectionately referred to as the “iPhone-on-wheels.” With Tesla continuing to release updates to support this view, what do you think the company’s long term affect will be on the auto industry?

Elon Musk Apologizes for Bad Manners on Previous Call.

Each quarter, Tesla CEO Elon Musk and his executive team hold a webcast call with investors and journalists. Last quarter’s installment generated plenty of headlines and controversy when Musk made polarizing remarks such as, “Boring bonehead questions are not cool,” and “We have no interest in satisfying the desires of day traders. I couldn't care less. Please sell our stock and don't buy it."

During this quarter’s call, August 1, Musk offered humble repentance to those he wronged on the previous call.

“First of all, I'd like to apologize for being impolite on the prior call. Honestly, I think there's really no excuse for bad manners and I was violating my own rule in that regard. There are reasons for it in that I'd gotten no sleep and been working sort of 110-hour, 120-hour weeks. But, nonetheless, there's still no excuse.”

After expressing his contrition, Musk jumped right back into sharing valuable information on Tesla’s progress.

Production

In the last week of June, the Tesla team was able to produce 5,000 of the new Model 3s per week, and a total of 7,000 of the Model 3, Model S and Model X vehicles combined. Musk congratulates his team by saying, “That's an amazing jump from only a year ago. We were producing 2,000 vehicles a week.”

Tesla continued to achieve those same numbers in the following weeks of July, and expects them to be fully sustainable barring a major world economic event occurring.

Musk attributes Tesla’s ability to ramp up production to the limitation of the use of automation on the assembly line to where it’s most productive. This is in contrast to their original attempt to implement wide-scale automation. Of problems they faced on the assembly line Musk said, “There (was) a lot of hurry up and wait, where some parts of the production line move well. Then, one part doesn't and you have associates waiting around with nothing to do.”

Tesla is aiming at one million vehicles produced by 2020 and Musk predicts a minimum of 750,000.

Test Drives

Model 3s aren’t yet available to test drive in most North American stores. Tesla plans to make both versions of the Model 3s — “performance” and “rear-wheel drive” — available for test driving in all North American stores in the near future.

Tesla reports over 60,000 test drive requests for the Model 3 in the U.S. alone since early July. Tesla expects this number to increase as publicity and word of mouth for the new model does.

Sales and Finances

On this webcast, Musk and the rest of the Tesla team announced they expect to become sustainably profitable from quarter three forward. He attributes this anticipated increase in profitability to improved production times: “As we address those slow parts and as we improve efficiency, then gross margin and so the profitability per car just improves dramatically.”

Musk also said Tesla will be trying to get improve production to 10,000 cars per week as quickly as possible.

Tesla also has good news to share with their investors. The Model 3 market share has surpassed all competitor premium midsized sedans combined. This means Model 3’s market share is now a majority of all premium midsized sedan sales. Musk boldly predicts this trend will continue.

Furthermore, Tesla reports the top five non-Tesla traded-ins for a Model 3 January through July 2018 were the Toyota Prius, BMW 3 Series, Honda Accord, Honda Civic and Nissan Leaf.

It is interesting that these customers are trading up and choosing to spend more money on a Tesla than their current car.

Musk, the self-described engineer, took some time to politely reassure dollar-minded investors: “Are we running low on money? … The answer is no.”

Technology Advances

Not one to take his eye off the future, Musk was excited to share the progress made by his engineering team: “I think we're making pretty radical advances in the core software technology and the division beyond that.”

He also announced, “And then very importantly the Tesla self-driving chip technology that we've been working on for three years is finally coming to fruition.”

Musk proudly shares the software update his team created and will soon be available to all Tesla owners. Tesla owners will have a plug-in replacement available to them for the existing computer which “costs the same as our current hardware and … we made it easy to switch out the computer … take out one computer and plug in the next. That's it. All the connectors are compatible and you get an order of magnitude more processing.”

Musk also relates improvement made on auto pilot, noting the team’s focus has been on existing safety features, “There’s an advanced dev role that can do things like recognize traffic lights and stop signs and make hard right turns … but, it's not at the safety level that's considered okay for release.”

Musk believes the technology to be extremely powerful for the growth of the company once customers grow comfortable and see the utility in it: “I think we will really start to see some of the breakthrough stuff in about a month or so.”

Future Designs

No matter what Musk creates, there always seems to be more on the horizon.

He gives the world hints of what to expect from Tesla in the medium and long term future, including the infamous Tesla pickup truck that will be able to carry a normal-sized puck up truck: “My personal favorite for the next product is pickup truck, and we are going to just do an amazing pickup truck.”

Musk clues listeners in to the long term designs of the company, “we're going to do the Model Y and compact SUV … the Semi, the next generation bus.” He adds, “We got lots of awesome ideas, and probably the biggest limiter on our growth is how fast can we grow battery production.”

As a discreet brag about Tesla’s growth, Musk explains Tesla will have to train new electricians, “because otherwise there's not enough electrician capacity in the United States and most places in the world to install Powerwalls.”

“Obviously can't grow faster than the number of electricians who can physically install a Powerwall. That's one of the limitations.”

The Future

Elon Musk is confident in Tesla’s future: “Long-term we would expect the energy business to catch up to the auto business in size.”

To learn more about the ins and outs of the auto industry and its future, be sure to check out CrossCheck’s Blog.

Companies all around the world are picking up on the car vending machine trend.

In recent news, Ford joining with tech giant Alibaba to create a cat-themed car vending machine in Guangzhou, China.

Buyers spend 10 minutes to verify their identity and receive their car from the multi-level structure. Customers are permitted to test drive vehicles up to three days.

Earlier Versions of the Car Vending Machine 

Before the Ford-Alibaba effort, impressive iterations of the car vending machine have been made by the likes of Carvana and Autobahn Motors.

Carvana is a domestic service that consumers use to shop for and purchase cars online. Instead of standard shipping, customers pick up their car by inserting high-tech tokens into glass vending machines located in cities such as Atlanta, Nashville, Houston, Austin and Jacksonville.

Autobahn Motors went big instead of going home by opening a 15-story facility in Singapore that holds up to 60 cars. Passersby can purchase a car on the spot using the touchscreen on the ground floor of the building. Purchases arrive in a matter of minutes and Autobahn Motors staff are there to “supervise the full experience” for car buyers.

The New Main Attraction in the Car Vending Machine Sector 

Onto the latest, China’s tech giant Alibaba.

Alibaba used its Tmall ecommerce platform to create a car vending machine that is fully focused on the customer’s test drive experience.

Marketed as “the ultimate try-before-you-buy experience for car shoppers,” Alibaba outlines the following steps involved in partaking the splendid innovation:

1. Use the Mobile Taobao to scan any car on the street that appeals to buyers.
2. Find the car model in the app and schedule a test drive with it.
3. Enter basic user information.
4. Take a selfie (Alibaba Super Members are not require to place a deposit).
5. Schedule a test drive.
6. Visit a Tmall Auto Vending Machine and use facial-recognition technology to pick up the car.
7. Begin the test drive.
8. Spend up to three full days test driving car with free reign to go anywhere.
9. Schedule another test drive, or purchase the car through the Mobile Toabao app.

What are your thoughts? Do you think “vending style” car purchasing is the future of the auto dealership industry? Share your take below.

For more automotive industry news check out our CrossCheck Blog.

“Anyone can make a pan gravy, but can anyone replace their power steering pump?” said one chef in the article, “What I Wish I’d Known Before Starting My Food Truck.”

He and his peers provide insight into the efforts needed to obtain the necessary permits, prep the food, maintain the trucks, and promote the businesses. In another part of cyberspace, RoamingHunger.com outlined the three most common price points of food trucks:

• Used food trucks ($50,000 – $100,000) — The risk of hidden repairs to the engine and kitchen will be high for lower quality trucks in the $50,000 range.
• New kitchens on used truck chassis ($75,000 – $100,000) — Building a new kitchen may help in the long run, but a used truck can spell mechanical problems early on.
• New food trucks with new kitchens ($100,000 – $175,000) — This approach translates to fewer hidden costs over time.

Food truck dealers can’t do much about permits, food prep or promotion, but they can place purchasing, repairs and maintenance within the financial means of most food truck owners. Enter CrossCheck with its 35 years of payment guarantee solutions to help facilitate the sale and servicing of light trucks, even ones that cook.

Affordable Food Truck Purchases

Given the high cost of buying a food truck, dealers rely on CrossCheck’s Multiple Check service to give buyers extra time to make down payments. Unlike pre-approved or spot financing options, Multiple Check does not require good FICO scores or credit apps. On the contrary, food truck dealers can offer Multiple Check to any buyer with a checkbook and the means to pay off their down payment within 30 days.

Using 12 percent as the average amount of down payments, a $100,000 used truck would entail the buyer coming up with $12,000 on the spot. Not so at a dealership offering Multiple Check.

With Multiple Check in place, buyers write three checks for $4,000 each, all bearing the same date of sale. Then they designate the specific dates over the next 30 days for dealers to deposit each check. The remaining steps may appear magical, but they are absolutely real.

CrossCheck guarantees each of those checks as they are deposited, and even handles the banking for dealers using CrossCheck’s electronic check processing option — no more worries, no more bank trips to deposit checks, and no more collection calls when things go bad.

Affordable Food Truck Repairs

Food trucks present a one-two punch of potential repair issues for their owners — the mechanical componentscommon to any motor vehicle (e.g. engines, transmissions and brakes) and the kitchen components found in brick-and-mortar restaurants (e.g. refrigeration, grills and hot water heaters).

Some food truck dealers do both types of repairs, others offer none, and there are independent garages specializing in both types of repairs or just one. Multiple Check has food truck repairs covered no matter how they are sliced.

For example, a $5,000 transmission job could be paid for using Multiple Check just as easily as a $875 invoice from an HVAC contractor who drove 100 miles to fix a broken freezer at a summer outdoor festival. It happens.

The payment process mimics the one described above: buyers write 2 – 4 checks to cover the cost of repairs, and the repair company deposits them on dates designated by the buyer without hassle or loss of funding.

Affordable Food Truck Maintenance and Parts

Similar payment processes are implemented for expensive routine service invoices (30,000-mile maintenance check), and CrossCheck even makes a product (Check on Delivery) for dealers selling parts to wholesalers such as independent repair shops.

Check on Delivery (COD) simplifies parts sales to wholesale customers because checks are approved before delivery:

Food truck dealers receive an approval number after entering the estimated amount of the sale and the owner’s phone number at CrossCheck’s online Merchant Check Center. Then the delivery driver picks up a check payment for the sale after dropping off the order. Finally, checks are scanned by dealers with desktop imagers and the data is sent to CrossCheck via its online Merchant Check Center where dealers enter the final amount and the check numberto complete the transaction.

CrossCheck provides payment services that mitigate risks, increase sales and simplify transactions for food truck dealers. CrossCheck never charges for account setup and training, loaner equipment, or around-the-clock customer service and tech support (even on major holidays).

Download our free guide, “Choosing a Check Service for Your Business,” to learn how CrossCheck can deliver peace of mind to your place of business. 

Here at Crosscheck we’ve been working closely with the automotive industry for 35 years and are proud to announce the release of our free guide called - How to Increase Parts Sales at Auto Dealerships. Below, find a brief overview of key points. Click through for the full guide.

Dealer Management Systems (DRM)

Dealer management systems provide a framework for controlling the functionality behind parts sales and the means to analyze every manner in which parts sales influence dealership revenue.

More specifically, DMS platforms include suites where changes affecting parts sales can be implemented: accounting, service, sales, F & I, CRM (customer relationship manager), marketing, advertising, social media, ecommerce and web content management. For example, the accounting suite can provide the reports and key performance indicators (KPIs) enabling informed decisions about parts purchasing, pricing and inventory; CRMs can identify potential parts buyers among hundreds of existing service department customers; and web content management can reach thousands of new parts customers worldwide.

DMS platforms also include suites that don’t directly impact parts revenue: human resources and payroll, contracts and forms, auditing and tax returns, vehicle inventory and registration, lender management, warranty claims, reference sources such as Kelly Blue Book and much more.

Customer Relationship Managers (CRM)

Customer relationship management programs (aka CRM or customer relationship managers) organize and optimize contact lists and interactions with business-to-consumer (B2C) and business-to-business (B2B) customers. Salesforce and Zoho are among the leading stand-alone programs, but CRM suites are major components in most DMS platforms.

At the hands of creative individuals, CRMs offer unlimited potential for in-creasing parts sales at auto dealerships. Consider this scenario: a dealership receives a memo from the manufacturer that it will be producing a new accessory to augment existing luggage racks on luxury SUVs. Knowing that his/her dealership has customers owning those same luggage racks, a parts department manager searches the CRM for individuals who purchased the racks in the past 24 months. Those customers are now the target market for this focused marketing campaign.

In a perfect world, someone who understands direct marketing pens a short pitch to introduce the item — and depending on the capabilities and automation of the DMS’ communications suite — a postcard, text message, or email containing an image of the accessory, or an automated voice mail message, is sent to each person in the target market. Some dealerships may send all four!

Merchandising and Key Performance Indicators (KPI)

CRM are also loaded with financial and inventory management capabilities that can be used to boost parts sales at auto dealerships.

Whether they are stock or customized calculations, a variety of reports and key performance indicators (KPI) can be generated to provide insight into parts department profitability: slow-moving inventory, obsolete parts, turnover rates, supply days, fill rate, fixed expenses as a percentage of total gross profit, purchase performance, gross profit margins (by department or individual), sales mix, monthly sales

(by department or individual), sales per salary, internal versus external sales, sales revenue per square foot of retail space, and so on. They can also be tracked by time period (day, month, quarter, year), period to period (month-to-month, etc) or by industry standards.

Parts department managers can expect help from the executive team, business office or accounting department in this instance. Those individuals can explain the significance of KPIs in terms of stocking strategies, pricing and promotions.

Get our full guide below:

Our full guide covers not only DRM, CRM, and KPI's in-depth, but also online sales, framework, merchandising, customer service, and CrossCheck’s Multiple Check and Remote Deposit Capture (RDC) services.

Click on the graphic below for the full guide!