In 2019, Tampa resident Nick Augeri, a self-described EV enthusiast, bought his first, a Tesla Model 3. He loved the process — it was all online. He placed his order in a few clicks and it showed up a day or two later. Augeri even arranged for the electric car maker to pick up his gas station, a Ford F-150 truck.
Tesla was the leader in moving car shopping out of the franchised dealership and onto the Internet. In 2019, he said he would no longer sell cars any other way. The decision, which CEO Elon Musk issued as a cost-saving measure, was met with skepticism by the auto industry. But Augeri was calm. “Buying Tesla was very easy,” he says. “They were innovative.”
Some things have changed since 2019. For one thing, there are more electric vehicle enthusiasts: Americans bought more than 800,000 all-electric vehicles last year, a record 7 percent of all vehicle purchases new in the United States and part of a global surge in which automakers sold 7.8 million. EVs.
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Tesla is no longer the only automaker that has everything on the Internet. Auto companies eyeing the electric giant’s high profit margins see online sales as a way to cut costs and build deeper, more direct relationships with their customers. The shift from the pandemic to e-commerce prompted them to invest money to bring vehicle sales online, especially for electric vehicles. This could reduce what some consumers see as the most painful parts of buying a car: upselling, haggling and confusing financing arrangements. But it has also left some new car dealers wondering how they will fit into a digitized and electrified future, where customers buy an electric vehicle online like they would a TV or sofa.
So when Augeri, inspired by a new round of federal grants, decided to buy a new electric vehicle from General Motors this year, he also started online. The company offers a website to help car buyers search for new inventory, because new cars and especially electric cars are still in short supply due to a pandemic-era chip shortage. This time, Augeri almost enjoyed his week of texting local dealers who were about to take delivery of his electric of choice, a Chevrolet Bolt EUV. At the beginning of February, he had paid a deposit and was happily waiting for his car to arrive. His wife preferred the fast, fully online shopping that Tesla offered, but the American consumer is a varied beast. “I like the back-and-forth haggling,” says Augeri.
For years, automakers resisted the Amazonization that has swept the rest of the global economy. There was a sense that shoppers would not feel comfortable making this important and expensive purchase online. But U.S. auto e-commerce sales are set to grow 25 percent in 2021, the biggest jump in a decade, according to a report from investment banking firm Cowen, which sees the industry still is “first” in its digital transformation. Recent data from auto services company Cox Automotive shows that while satisfaction among U.S. car buyers fell overall last year, those who completed at least half of the steps online had more odds of being happier with the process. Most vehicle shoppers will interact with at least one digital tool while shopping for a car this year, Cox estimates.
The jump in online car sales came in part from consumers doing more of everything online during the pandemic. Automakers responded immediately by accelerating their existing digital sales plans.
General Motors had launched a website years ago that allowed customers to find, customize and order a vehicle, but saw a 50 percent increase in traffic in late spring 2020. Since then, the automaker has said it will allow customers to shop. to buy and finance your vehicles completely online, and even have a car delivered to your home. Electric vehicles fit this strategy better than gas-guzzling vehicles, says Hoss Hassani, GM’s EV Ecosystem vice president. Battery-powered cars have fewer parts, and the company’s electric vehicles have modular designs, reducing the number of options on offer. This makes it simpler for a customer to customize a car and pre-order it online, he says.
Honda, which aims to sell only electric vehicles by 2040, has said its entire electric Acura lineup will be sold online in the US. “We see it as a convenience tool, basically meeting the expectations of customers in terms of how they buy their vehicle,” said Mamadou Diallo, American Honda’s senior vice president of sales, at a media event last month.
Ford is also driving toward a more streamlined, Internet-based shopping experience, CEO Jim Farley said last summer. “We have to go to a non-negotiated price; We have to go 100 percent online,” he said, envisioning a future where factories no longer send vehicles to wait on lots, an arrangement more common in Europe. “It goes straight to the customer — 100 percent remote pickup and delivery.” Ford is also launching an ambitious program for dealers interested in selling electric, which will require those who sign up to spend between $500,000 and $1.2 million on site upgrades, including installing and operating chargers fast on site.
“Dealers are still in that ‘walk in and shake my beautiful salesman’s hand’ mentality.”
Mike Anderson, Rikess Group
Talk like Farley’s understandably makes traders a little nervous. It raises the specter of dealers being relegated to sales processing and delivery facilities, which also do auto repair. Some worry that the ultimate goal of the changes automakers are introducing around their electric vehicles could be to become more Tesla-esque, a final execution around the dealership model.
The changes coming to the sale of cars could generate impacts for some dealers, who during the pandemic have achieved record profits at a time of high demand for a limited supply of vehicles. “Dealers still have that ‘walk in and shake my handsome salesman’s hand’ mentality,” says Mike Anderson, president of the Rikess Group, an auto dealership consultancy. Selling online, at a fixed price, requires a whole new skill set: facilitating digital transactions, explaining new features online or over the phone, and finding a way to build relationships with customers without meeting in person.
Many retailers are protected, to some extent, from the cold winds of digitization. In most US states, dealership business models are protected by the force of law, as well as by well-resourced state and federal dealership lobbies. Seventeen states ban direct-to-consumer sales by automakers, and nine others limit them, according to the Electrification Coalition, an advocacy group. Tesla and electric new entrants Rivian and Lucid have pushed state lawmakers to reconsider those laws, which date back to the 1950s, but with little success.
Dealers are resisting automakers’ plans in other ways. General Motors has offered to buy Buick dealerships that don’t want to make the transition to electric vehicles or make the investments the automaker requires; some have taken over the company. Ford’s plan to require electrical dealers to perform upgrades has been met with demands from state dealer associations, which said it violated state franchise laws.
Ford said last month it would make changes to its program, which will begin in 2024 and has already signed up nearly two-thirds of the brand’s dealerships. “We feel that dealerships are a competitive advantage,” says Heidi Shaffer, director of North American sales for Ford Model e, the automaker’s electric division. “When individuals think of Ford, they don’t think of the Ford company, they think of their hometown dealership and what they do for the community, like sponsoring Little League.”
Other retailers see the push to sell online as a new twist on an old pattern. “This is just another cycle of effort [manufacturers] to try to exert more control over the dealers who sell cars,” says Brian Maas, president of the California New Car Dealers Association. “Generally, they don’t work.”
Just as ordering smaller items online can sometimes be frustrating, buying a car with a click can also be confusing. Tampa EV buyer Augeri decided to cancel his Chevy Bolt order for a refund after he realized the car was taking longer than promised to arrive. He opted for a new Tesla. But the electric car maker wouldn’t finalize its trade-in offer for its old car until it paid a $250 reservation fee, he says, and then offered thousands of dollars less than it had originally suggested. Went back to a regular GM dealer and is now waiting for his white Bolt EUV. Tesla did not respond to a request for comment.
For customers, buying a car could become an opportunity to choose their own adventure, with options for those who want to buy online, or for a fixed price, or visit a showroom, or haggle with a crafty car dealer in a real backyard. “Digital retail is here to stay, i I think the future is brick and mortar,” says Jeff Aloisa, the owner of Mercedes-Benz of New London, Connecticut.
Hassani, the GM executive, says the all-of-the-above approach is necessary because electric cars are so new and some customers want to learn about them from other people. To accommodate everyone, the automaker launched a service last summer that lets anyone, not just GM customers, chat with electric vehicle experts online. But for others, if there are no flesh-and-blood sellers to question, they’re disappointed. “My father is in this field,” says Hassani. “If he doesn’t negotiate, he feels he’s done something wrong.”
