EV Makers Moving To Direct Sales
As the global automotive industry evolves from Internal Combustion Engines or ICE-vehicles to electric, so too is the way in which OEMs are approaching vehicle sales. Traditionally, automakers have established sprawling dealerships on massive plots of land. These often act as showcases for potential consumers. Now, with companies like Tesla forcing the hand of legacy automakers, a new paradigm in automotive retail is starting to gain traction. The direct EV sales method for automakers is a breath of fresh air and is a considerable cost savings. These savings are essential to EV startups that are either pre-revenue and not yet profitable.
These same companies are also dealing with the difficulties of scaling a business to a global presence. Rather than building these sprawling dealerships, companies like Tesla and Lucid are changing the game.
They are creating small, efficiently run showrooms in key geographical, trendy areas or in high-traffic centers like shopping malls.
Challenges With Direct Sales
Like all systems, there are certainly challenges for these EV companies that are looking to move towards a showroom and direct sales approach.
The first problem is an odd one. In the United States, certain states have regional restrictions on selling automobiles without local dealership networks.
Luckily, European laws are not as regulated. This means there is much less need for OEMs to benefit both automakers and independent dealerships.
In Europe, OEMs have been faster to adopt the new direct sales method, although growing pains do still exist.
While an OEM may want to move to direct sales, it is a slow transition that cannot happen overnight. A proper supply chain and logistics network needs to be in place for it to work.
Another issue for OEMs: sales of automobiles have traditionally been easier to facilitate in person. Designing a vehicle at home on your tablet is fun, but without test driving it, some consumers may be turned off.
Additionally, the OEM needs to ensure that there is incentive for the consumer to follow through after the design.
Creating a brand-specific login account helps the company establish a CRM system that can capture user data. The challenge remains in incentivizing users to join the ecosystem without any actual benefit.
Finally, in a direct sales model, much of the work after the transaction takes place between the consumer and a contact center or even the company headquarters.
Often direct sales showrooms do not have the means for customer support. They definitely cannot support mechanical or automotive issues either.
This means that a bulk of the problem solving needs to be established in another remote location altogether. This change could mean that the overall structure of the company is altered.
Again, it is a necessary step but one that comes with growing pains and careful planning.
Conclusion: Transition To Direct Sales
In the end, transitioning the automotive industry to a direct sales model is the future.
Europe already has a leg up on the United States where automakers must deal with existing political and business agendas. Companies like Tesla have not only changed the way we think about cars but the business of cars as well.
Like the electrification of the industry itself, the move to direct sales is inevitable, but for now it might be a slower process than we initially thought.