TMC is an independent, primarily volunteer organization that relies on ad revenue to cover its operating costs. Please consider whitelisting TMC on your ad blocker or making a Paypal contribution here: paypal.me/SupportTMC

Service profit argument EV vs ICE

Discussion in 'Electric Vehicles' started by Olle, Oct 29, 2014.

  1. Olle

    Olle Member

    Joined:
    Jul 17, 2013
    Messages:
    333
    Location:
    Orlando, FL
    #1 Olle, Oct 29, 2014
    Last edited: Oct 30, 2014
    I admit that I despise car dealers. Mostly because the majority of the ones I met knew almost nothing cars, didn't listen and talked to me as if I was 6 years old even though I'm 40.
    It was a huge relief to buy the Model S online from a real company instead of dealing with people who add no value and waste time.

    Nevertheless, I think the Tesla vs dealer debate is a bit sidetracked in regards to service profit.

    In the discussion about the dealer model and Tesla's direct sales model we often see the argument that the dealers are afraid of EVs because they would be service free. I don't fully understand this idea.
    My Tesla has been in for service more often than my Volvo even though they have been driven similarly. My Volvo generated no dealer profit from its drive train during 60k miles aside form oil service and filters. Some non ICE related parts broke and needed service.
    My Tesla during 20k miles had broken door handles, warped rims, replaced 12 V battery, replaced HV battery, broken and replaced louvres, the list goes on. It seems there would have been plenty of money to make for a dealer if they were in charge of these repairs.

    The more advanced a car becomes, which they all do, the more parts will break. That goes for EVs and ICEs alike. Okay the engine and transmission in an ICE is complicated, but it is only part of the car. For an EV like the
    Model S even if nothing breaks, how about:
    tires,
    brakes,
    brake fluid
    coolant,
    shock absorbers,
    shock mounts
    motor mounts
    gearbox oil,
    wiper blades
    cabin air filters
    12 V batteries
    suspension joints and bushings

    If something breaks:
    gearboxes (two on a D!).
    Hey differentials broke on my old beemers, why wouldn't the gearbox/diff break on Model S, I honestly don't see the difference. Anybody?
    HV batteries
    Air suspension
    coolant pumps
    louvers
    electronics, for example:
    -inverter
    -chargers
    -touch screen
    Aluminum body repairs

    Seems like plenty of opportunity to make service money for a dealer.

    Then we often hear the argument that manufacturers will make less money on EVs because less service. And therefore they supposedly want to stop the EV revolution from happening. Well, the service profit is for the dealer so I don't understand this argument. If ICEs need more repairs, manufacturers could actually be better of with EVs and less warranty cost.

    I think the true and only argument that dealers don't want EVs is because they don't have them in stock so therefore they won't sell them. They want money now, not on a future delivery. Once EVs becomes more common this will change. It is a catch 22. Therefore it is better that all EVs are sold directly, for now.
     
  2. Chickenlittle

    Chickenlittle Active Member

    Joined:
    Sep 10, 2013
    Messages:
    1,665
    Location:
    Virginia
    You forgot to list the model s clutch. They go frequently
     
  3. Doug_G

    Doug_G Lead Moderator

    Joined:
    Apr 2, 2010
    Messages:
    15,853
    Location:
    Ottawa, Canada
    You've got VIN 012XX - a very early car. They have definitely been more trouble prone. My VIN 2006 has had quite a few things fixed... but by now they've fixed all the "early adopter" issues and the car is being pretty darn reliable. I think if you asked VIN 50,000 how his/her car is working, you'd find a more trouble-free experience.

    I gather LEAFs have been pretty trouble-free and have very little done at the annual service.

    Also I think I'll move this over to Electric Vehicles, as it's a more generic question than just about Tesla.
     
  4. Olle

    Olle Member

    Joined:
    Jul 17, 2013
    Messages:
    333
    Location:
    Orlando, FL
    My point is that the ICE-specific service and repair is only part of the service and repair cost of an ICE car. Until I see a statistic showing how large that part is, I don't think the argument that dealers can't make money on EVs is true.

    - - - Updated - - -

    Actually, the statement "EVs need no service" should be changed to "EVs need no annual oil service"
     
  5. swaltner

    swaltner Member

    Joined:
    Oct 13, 2012
    Messages:
    497
    Location:
    Kansas, USA
    #5 swaltner, Oct 30, 2014
    Last edited: Oct 30, 2014
    My 2013 Leaf, purchased in July 2013 has cost $45 for maintenance so far and been in the shop twice (by my choice to eventually save money).

    The $45 was for lifetime balance/rotate on the tires at Sam's Club. This was done to avoid paying $22 for each instance at the dealer.

    The other service instance was a trip to the dealer at 13 months, which was totally free (included in the base purchase price). This included the annual battery report, which is required to maintain the battery warranty. This was listed at 0.3 hours of shop time, which would mean they got about $50 from Nissan for this work. They also did an inspection to look the car over. No other service required. This was at about 13,000 miles.

    This coming year, my maintenance should be totally free, with the dealer pocketing another $50 for the mandatory battery report.
     
  6. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

    Joined:
    Jul 12, 2012
    Messages:
    4,502
    Location:
    Maine
    #6 ItsNotAboutTheMoney, Oct 30, 2014
    Last edited: Oct 30, 2014
    No, EVs (theoretically) need no regular service and need less maintenance.

    The killer for dealers is that they make their profit on servicing and repair, and they're more likely to see newer cars under warranty rather than older cars, which people are more likely to take to an independent.

    If BEVs (and PHEVs) do not need regular servicing or warranty repair, it means fewer visits to the dealer. Every visit eliminated is lost service profit. Every visit is a lost opportunity to sell additional, unnecessary service. Every visit eliminated is also a lost opportunity for cheap sales of new cars, since the customer is not going to wander into the showroom or test drive while they wait. Every visit eliminated loosens the dealer-customer relationship.

    Additionally, you listed tires, wiper blades and batteries. Those are items that are easy to replace and could be done anywhere. While some people make take their car to the dealer for those, I'd suggest that they are more likely to be done at a generic location or self-installed.

    Of course, when Elon Musk says service won't be a profit center, I think he's actually being a bit disingenuous. I do believe that Tesla's model will be to minimize required maintenance and maximize reliability, because that can provide a competitive cost advantage over ICEVs. But, the service centers need to be there for prep and delivery, so they are a cost to Tesla, which Tesla is very happy partially to offset with high hourly service rates for anyone who'll pay.
     
  7. Larry93428

    Larry93428 Member

    Joined:
    Feb 26, 2014
    Messages:
    371
    Location:
    Cambria California, United States
    It was an eye-opener when I learned the dealer service writer gets a commission. The service is actually sold to you.
    Also surprised that the dealer service writer has the ability to negotiate the price of the work, a senior discount or such.
    The dealer service writer may even write off the work if you complain.
    It's just the way it works.
    I am so pleased with my Tesla Model S and to be free of dealer service gouging.
    ~Larry
     
  8. Olle

    Olle Member

    Joined:
    Jul 17, 2013
    Messages:
    333
    Location:
    Orlando, FL
    Is there an EV that in theory needs no regular service? What about wheel alignment and rim replacements? I didn't even write it in my list because it was too generic but I have been to the dealer multiple times for broken rims and tires on my cars. I needed multiple wheel alignments on all of them, twice on the Model S already.
    We just read about the leaf annual battery report. Sounds like a brilliant opportunity for the dealer to sell extra service and repairs.
    And then you have the ball joints and bushings of the suspension. Its thousands of dollars every time in my experience.

    I get it that TM wants to make Teslas maintenance free, but I think this is true for all auto makers. Why wouldn't an auto maker try to make a car as maintenance free as possible and thus get a better quality reputation?
     
  9. ckessel

    ckessel Active Member

    Joined:
    Jan 15, 2011
    Messages:
    4,266
    Every statement I've heard is that there is less service on an EV, not "service free". The only service free items in an EV are drivetrain and even then it's really just far less service.

    As you noted, there are a variety of non-drivetrain items that will require service, but as a whole dealers will have less opportunity for service money on an EV. Particularly past the 60,000 mile point or so where most ICE engines start requiring new timing belts, water pumps, spark plugs/cables, and so forth.
     
  10. Olle

    Olle Member

    Joined:
    Jul 17, 2013
    Messages:
    333
    Location:
    Orlando, FL
    You are right. Now even my early VIN is pretty darn reliable too, knock on wood. But that still wouldn't change these points:
    tires,
    rims
    brakes,
    coolant,
    gearbox oil,
    wiper blades
    cabin air filters
    suspension joints and rubber bushings



    - - - Updated - - -

    Agreed with less service. I have seen a lot of people writing "EVs need no service" For example above in this thread. I am also wondering how many cars above 60k miles that go back to the actual dealer and how many go to independent shops for timing belts and what not.
     
  11. ckessel

    ckessel Active Member

    Joined:
    Jan 15, 2011
    Messages:
    4,266
    Yep, all those things will still require service. I'm not sure what the markup is on those, but I'd guess it has to be low due to the competition from non-dealer sources. You can get tires, wipers, etc from a lot of places. Engine repairs though, those could be hard to get fixed outside of a dealer depending on where you live and the type of car, particularly if it requires the expensive diagnostic machines.
     
  12. Olle

    Olle Member

    Joined:
    Jul 17, 2013
    Messages:
    333
    Location:
    Orlando, FL
    Independent shops repair plenty of ICE engines and most have the diagnostic software for the brands they service. I even have VAG-com for my Audi on my computer even though I am not a shop :) I think it was $150 and it takes care of 100% of all diagnostics and programming that at cerified VW /Audi dealer is capable of
     
  13. ckessel

    ckessel Active Member

    Joined:
    Jan 15, 2011
    Messages:
    4,266
    You live in New York (apparently, since that's your location). Other areas aren't as fortunate. My aunt has a Mini-cooper in a town of about 150,000, but there's no shop in town that does certain types of work on it the engine so they have to take it to another city 2 hours away for that.
     
  14. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

    Joined:
    Jul 12, 2012
    Messages:
    4,502
    Location:
    Maine
    Why go to the dealer to replace wheels and tires when there are plenty of independents who can do the same job for much less?

    Absolutely. That and the annual brake check are, to me, deliberate sops to the dealers.

    It really all boils down to an engine needing more servicing. Since it needs servicing, you can assume the car's going to be in for service anyway and do overpriced diagnostics at that point. But if you have a BEV, which doesn't inherently doesn't need regular servicing to keep it running, you can eliminate the need for visits with remote diagnostics.

    After how many miles would you actually need to _replace_ something? I suspect a number much larger than a typical oil change interval.

    (Long warranties are another thing that's helpful to dealers and because of increased reliability, because they still get the work on old cars. In the change of law that clearly freed Tesla to sell, in exchange NH's dealers got the law changed to say that the manufacturer must pay warranty repairs at retail rates).

    Actually they have and do. Engines are more durable and have better service intervals than ever. But the point is that with an ICE:
    a) The engine needs regular service: there is no regular servicing required in a BEV; PHEVs also increase the maintenance interval - you can drive for up to 2 years in a Volt between oil changes.
    b) The engine has many more parts and many moving parts: there is more to go wrong
    c) The engine operates at higher temperatures, with a lot more physical stress: there is more reason for it to go wrong

    The point isn't that EVs won't need repairs and replacements, it's that they should only need repairs and replacements, should need fewer of them than in an ICEV and that many of the regular replacements are very generic items that don't need a visit to a dealer and that many people will not consider as requiring a visit to a dealer.
     
  15. CliffG

    CliffG Member

    Joined:
    Feb 10, 2014
    Messages:
    245
    Location:
    New Jersey
    Agreed with you up to this point. I don't believe other manufacturers want to make a car as maintenance free as possible. The reason? Money. Advertising can deal with reputation, and that's a business expense and hence a writeoff. Those guys (and gals) are not in the business of making life better for anyone but themselves (and I guess I don't blame them for that), not even as a side-effect. It's their culture; I don't think they can help it and they certainly don't understand why anyone would want to do anything differently. Just my 2¢, and probably not worth more than that.
     
  16. Olle

    Olle Member

    Joined:
    Jul 17, 2013
    Messages:
    333
    Location:
    Orlando, FL
    It seems like the common sentiment in the thread is that EVs will provide dealers with fewer service opportunities then ICE.

    Are dealers thinking long enough into the future to care about this? Maybe.

    How about the argument that manufacturers want to stop the EV adoption because of less service? That should only be valid in the countries where the manufacturers have their own service centers, no?
     
  17. ChadS

    ChadS Petroleum is for sissies

    Joined:
    Jul 16, 2009
    Messages:
    2,401
    No, that is true in the US as well. The manufacturers don't lose service revenue directly; but the manufacturers are legally required to sell through dealers (their real customers) and the dealers are worried about spending more time on a sale just to reduce their largest revenue source in the future. It is easier for the dealers to just sell the same easy, high a maintenance ICE cars they always have.

    That is why it is tough for a manufacturer to introduce a new EV; if it might cannibalize easier and more profitable ICE sales, the dealers will not sell it. That is why companies like Nissan and BMW have been making cars that do not appeal to their existing customers...dealers WILL sell them if it means ADDITIONAL (conquest) customers.

    This will change over time, but it is sure slowing things down now.
     
  18. rcc

    rcc Model S 85KW, VIN #2236

    Joined:
    Aug 1, 2012
    Messages:
    413
    Location:
    San Jose, CA
    +1 to ChadS's post above. Most EVs today are lower cost cars so they're less profit margin. They're low volume. They're a new and different product. Basically, they're very different and therefore a total pain for sales and service alike. And because they're not $80-100K cars, there isn't enough profit to justify the hassle. So they don't try and sell them.

    BUT ... that doesn't mean that EVs won't hurt the dealer service business model. Think about it. The S was Tesla's first "in-house designed from the ground up, mass-produced car" and the first with a liquid-cooled battery pack and engine. Every car that Tesla makes from here on out should be more reliable than the S, not less. Yet the S is already showing "average" reliability according to the Consumer Reports data. What will the *reliable* EVs be like?

    2-3 generations down the line, I think the drivetrains should be pretty much bullet proof. Until the car gets old, all you should have to do is replace battery pack and motor coolant maybe every couple of years, replace brake fluid and cabin filters every couple of years, replace wiper blades once a year and top off washer fluid. That's at least a 50% cut in the number of visits in a standard service schedule and the remaining services are simpler. The rest is warranty repairs and the S and its successors should have fewer of those than an ICE because the drivetrain is simpler.
     
  19. Olle

    Olle Member

    Joined:
    Jul 17, 2013
    Messages:
    333
    Location:
    Orlando, FL
    That sums it up pretty well
     

Share This Page