Capitalize on increasing hybrid population and win more overall customers
When a customer comes into your shop and asks for your advice about their hybrid or electric vehicle, can you answer their questions or solve their problems, or do you have to send them to the dealership?
Every day, more and more shops are having to ask themselves those questions as the hybrid, plug-in electric vehicle and electric vehicle (HEV, PHEV, EV) market grows. Sixteen years ago, the Honda Prius and Toyota Insight were the only two hybrid vehicles available. Now there are more than 80 models from almost every vehicle manufacturer, and there are over five million hybrids on U.S. roads today.
In the last two years alone, there’s been a 34-percent increase in HEV/PEV/EV, representing more than 1.2 million vehicles. A recently released SEMA study reports that by 2020, HEV/PHEV/EV will represent about 8.3 percent of the vehicles sold in the U.S. and will grow to 18 percent by 2025.
If you were to ask a random sampling of shop owners if they service hybrids, the majority would likely answer yes. That would be misleading.
Most shops only provide the traditional tires, alignments, brakes, oil-changes, suspensions, etc., for the hybrid segment. What they are missing is the additional revenue stream derived from having their technicians trained and capable of servicing the entire hybrid drive system (hybrid battery packs, power inverters, DC to DC converters, hybrid controllers and electric components).
Hybrid and electric vehicles can be a profitable segment of the business, as their AROs are typically higher because of the added cost and complexity when working on their drive systems. That’s a market-driven reality created by hybrid car manufacturers.
Every dollar you generate from being able to service the full hybrid-drive system is purely incremental. It simply did not exist before.
The government is driving much of this growth through the CAFE standards (Corporate Average Fuel Economy). Developed in 1975, the standards mandate that OEM fleets improve gas mileage and reduce emissions. At the end of 2017, the average mandate was 34.1 MPG, and by 2025 it will cap out at 54.1 MPG (currently under review with the federal government and may be revised).
Experts predict that the internal combustion engine will eventually be supplanted by hybrid and battery-powered electric cars.
Differentiate with HEV/PHEV/EV service
Customers today are more savvy and their expectations have risen. They expect us to provide what their vehicle needs, and if your employees are not knowledgeable in the newest industry technologies, customers may view you as being behind the times and take their vehicles elsewhere. The average family owns 2.3 vehicles, and if they take one of their vehicles to your competitor, research shows they most likely will take all of them.
There are very few avenues within your business that provide this type of new revenue opportunity.
Conversely, you risk providing your competitor the opportunity to take your existing business if they position themselves as the HEV/PHEV/EV experts. There’s an old saying, “The first in wins,” meaning that the first shop in the market that embraces new technology, trains their people, and promotes the services will position themselves as the expert and win loyal customers.
For shops that also sell tires, your employees need to be aware that low-rolling-resistant tires are essential on a HEV/PHEV/EV to maintain gas mileage. HEV/PHEV/EV owners purchase their vehicle for better gas mileage and to help protect the environment. This means that they watch their miles-per-gallon on a regular basis and installing the wrong tire will likely raise a red flag very quickly. That positions your store in a negative light and is a lost opportunity to sell a higher gross profit tire. Tires also provide an opportunity for nitrogen sales, a chance to bring the customer back for rotations, air-pressure checks and alignments, synthetic oil-changes, flushes, etc.
Shops today need to differentiate themselves from the competition, and if they don’t, then they settle into the commodity arena and are forced to deal on price to gain customers.
Dave Crawford is the president and COO of The Hybrid Shop (THS) and has more than 40 years experience in the retail tire and service business. Before THS, Crawford was a business consultant and trainer specializing in the evaluation of retail tire businesses for operational effectiveness. He was also vice president of Tire Pros operations for ATD’s franchise program, the largest network of dealers in the U.S. with more than 600 locations.