The direct selling model of electric vehicle manufacturers such as Tesla, lucid And Rivian has always presented a threat to agencybut now we can assign a dollar value to the lurking threat of selling cars directly to consumers in California. According to the report, in 2022, direct sales from electric vehicle manufacturers cost Golden State franchisees $910 million in gross profit. auto news. And that lost profit opportunity only takes into account direct sales by EV newcomers, because legacy car manufacturer Haven’t switched to direct selling yet.
Can you imagine that when Ford, Honda’s motobike, GM And Volvo Moving to mass direct selling, the profit loss for the Golden State dealers (and beyond) would be greater. So it turns out that dealers’ fear of direct sales is indeed well-founded. The sky is really falling; or, at least, the profit ceiling has been reduced to hundreds of thousands per dealer, like car news report:
Electric vehicle manufacturers that sell directly to consumers may have cost California franchisees $910 million in gross profit opportunities last year.
That averaged out to nearly $700,000 across 1,303 state franchisees based on one auto news analysis, with missed profits hitting luxury stores the most due to the high transaction prices of EV brands.
Dealers’ gross profit per new vehicle has increased steadily since 2019 due to the global pandemic. According to JD Power, gross profit averages $4,700 for each thoroughly new vehicle sold United States, including financial income and insurance. But in California, major dealers with franchise agreements make $5,300 to $6,700 more than the national average per vehicle sold.
Tesla, Rivian, and Lucid had combined sales of 193,707 vehicles statewide, and even using a lower national average of $4,700 in gross profit per sale, the money goes to direct sellers. Next to the dealer is 910 million dollars.
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It’s going to be a rude awakening for franchised dealers in California who were expecting to coast on the crest of the profits wave, and who were likely expecting the profits to last even longer. But the wave had to crash sometime, and EVs are one of the major reasons behind this. EV makers have always been on board with direct sales; now, legacy automakers are slowly moving towards the direct sales model as new EVs come to their lineups.
In California, EVs sit at 36 percent of marketshare on the new car market. That’s the highest in the U.S., which explains why profit losses per dealer were so high. But in other states where EVs haven’t captured the same marketshare, direct sales of fully-electric cars is also knocking down the average gross profit potential. Auto News cites Washington State, where Tesla sold just 16,000 vehicles in 2022, and yet that makes for a missed profit potential of $244,000 per dealer in the state. The direct sales model isn’t going to wipe out dealerships just yet, but it’s already affecting their bottom line throughout the U.S.
