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Why Dealerships Aren’t Incentivized to Sell EVs (and How to Change That)

Why dealerships aren't excited about EVs

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If electric cars truly are the wave of the future, the future sure seems to be quickly approaching. This should not come as a surprise considering how many electric vehicle options car manufacturers have already introduced.

A lot of people are very excited about this increase in EV options as the results of a Consumer Reports survey make clear. 71% of American adults report at least some interest in purchasing an electric vehicle at some point. That is a lot of people thinking about electric cars. 

Unfortunately, though, not everyone is as excited about the shift towards EVs. Among those who are not lining up for these new electric vehicles are many car dealerships. Why is this?

We wanted to create this article to address this very topic. Below, we will discuss how dealerships make money, why EVs aren’t important to them, and how we can change this. 

How Do Dealerships Make Money?

A lot of the reason that car dealerships are not too keen on advertising and selling electric vehicles comes down to profit. The fact of the matter is that these types of vehicles do not bring the dealership as much profit as traditional motor vehicles do.

To determine why this is the case, we need to look a little deeper into where car dealerships are making their money. In general, there are three different ways that car dealerships make their money: 

  1. New and used car sales 
  2. Finance and insurance sales
  3. Maintenance and repairs. 

Let’s take a closer look at each of these three categories and their relative importance to a dealership’s overall income.

New and Used Car Sales

The first thing that people think of when they think about how dealerships make money is car sales. In reality, though, car dealerships don’t actually make that much money off of selling new (or even used) cars. In fact, it is not uncommon for dealerships to lose money on car sales. 

So, if car dealerships aren’t making money on selling cars, where are they making money?

Finance and Insurance

Finance and insurance sales are a very important part of the income that car dealerships make.

Through finance, they can mark up the amount of money that a loan or a lease for the vehicle is. Banks then give car dealerships a better interest rate than they will give other customers. This is because dealerships do more business with the bank and the banks want to incentivize and encourage this.

Armed with this better interest rate, car dealerships can mark up the rate their customers have to pay for the car and collect the difference. This represents a large portion of their income as a 5-year loan will greatly increase the total price of the car for the customer. Yet, for the dealership, the initial price remains true throughout. 

While a considerable amount of the profit dealerships make is with finance and insurance sales, it still isn’t the largest source of revenue.

Maintenance and Repairs

This is the department that is the proverbial “breadwinner” for most car dealerships. The Parts and Service Department handles a lot of a car dealership’s gross profit. Forbes reports this department is responsible for 13% of annual revenues but 44% of the dealership’s gross profit. 

Parts and services handle all repairs, general maintenance, and other services like accessorizing. 

Dealerships often make most of their money during a car’s warranty period. During a car’s warranty, the dealership can charge the manufacturer full price for any replacement parts.

So, how does all this affects their desire (or lack thereof) to sell electric vehicles?

So What About Electric Vehicles?

In comparison to conventional motor vehicles, electric vehicles need much less routine maintenance. There are often fewer fluids to regularly maintain. Not to mention the battery, motor, and other electrical components often require little to no maintenance. 

This is a heavy blow to car dealerships. As we learned above, for most dealerships, the majority of their income comes from parts and service work on vehicles. 

That’s not to say that EVs will never require maintenance or repairs. In comparison to vehicles that use conventional engines, however, they certainly need less. Meaning EVs offer dealerships much less opportunity for profit. 

Thus unintentionally incentivizing the sale of Internal Combustion Engine (ICE) vehicles over EVs.

How Can We Incentivize Dealerships to Sell Electric Vehicles?

For the improvement of a variety of aspects of everyday life, electric vehicles are going to continue becoming more and more popular. This will be the case whether car dealerships want them to or not.

According to Forbes Wheels, 65% of the respondents believe that electric cars are going to be the future of the automotive industry. The survey also found that about 23% of respondents would want to purchase an EV (either new or used) as their next vehicle.

So, how can we help car dealerships get on board with this growing desire for electric vehicles?

We need to offer incentives for selling these vehicles.

That is exactly what we are trying to accomplish at Narya. We have come up with a referral program that will help your dealership prepare for the oncoming future of cars needing less overall maintenance and repairs. With our referral program, you can start to earn a new stream of revenue that will only get more and more popular as electric vehicles do. 

And the best part? It’s super easy!

We are looking to partner with vehicle dealerships across the United States to help them make revenue from our service — installing home charging stations for EV customers. All we ask you to do is refer your EV customers to us and then you get paid when they schedule an installation through us. That’s right, you can earn affiliate income completely for free!

So, are you ready to start a new, and future-proof stream of income? Just contact us to join our referral program and get started!

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