Page 41 - Summer 2024

Introduction
As the automotive industry evolves, auto dealers are concerned about the impact electric vehicles will have
on their service departments and fixed operations gross profits. There has been widespread concern that
traditional service revenue will decline when EVs are more widely adopted.

However, EV demand hasn’t been nearly as high as projected, even to the point of causing OEMs to pull back
on plans to change franchise service departments. We also know that while EVs have significantly less parts
that will require service, the cost to repair is much higher, so the overall risk profile for service for an EV is about
the same as an internal combustion engine vehicle.

Even though slower than anticipated, as more EVs will be drifting into service departments, requiring different
infrastructure, trained technicians and different pricing structure. If dealers are looking to hedge and look for
ways to stay competitive, warranty rate reimbursement services can significantly increase gross profit, ensuring
your service department remains profitable and competitive even in the face of changes to the market.

The Current State of the EV Market

Despite the projections, EVs are simply not flying off the lots the way they were projected to. Recent reports
from J.D. Power indicate a “low tide moment” for EVs, with purchase rates falling far short of expectations.
Sales have not reached the predicted levels, and many consumers are still hesitant to switch to electric due to
concerns about range, charging infrastructure, and cost.

In addition, major manufacturers are re-evaluating their strategies. Ford, for instance, has asked its dealers
to pause further investments in EV infrastructure due to market uncertainties and anticipated changes. This
pause highlights the ongoing volatility and unpredictability in the EV market, suggesting that the immediate
impact on service departments may not be as severe as initially feared.

The Importance of Warranty
Rate Reimbursement

Warranty rate reimbursement involves optimizing the rates at
which manufacturers reimburse dealers for warranty repairs
based on what each state legally requires of OEMs. Hiring an
expert who specializes in optimizing these rates can significantly
boost dealers’ fixed operations gross profits.

Effective warranty rate reimbursement strategies can turn what 41
might seem like minimal gains into significant revenue streams.
This additional income can then be reinvested into your service
department, creating a virtuous cycle of growth and improvement

Continue on page 42.

On The Move 2024