Car Dealers Turning Away From Electric Vehicles After Learning Harsh Economics Lesson
Car dealerships are telling auto manufacturing companies that they have more than enough electric vehicles in stock and don’t want more on their lots until the current inventory sells.
Nonetheless, those same manufacturing companies are producing more electric vehicles than ever before, according to Insider.
Manufacturers are “asking us to make a large investment,” Scott Kunes, the chief operating officer of Kunes Auto and RV Group, told Insider, “and we’re just wanting to see some return on that investment.”
Kunes’ company was founded in 1996 and sells foreign and domestic cars and recreational vehicles at “over 40” locations in Illinois, Iowa, Minnesota and Wisconsin, according to the company’s website.
“We have turned away EV inventory,” Kunes said. “We need to ensure that we have a good turn on it.”
An inventory “turn” is a measure of how quickly a retailer call sell product equal in value to everything in its stock; automotive digital marketing company Max Digital says the typical retailer is looking to turn his inventory 12 times annually.
Insider said that dealerships already had 54 days’ of inventory on hand a couple of months ago, but that EV inventory was more than twice that — almost four months’ worth.
It wasn’t all that long ago, before manufacturers ramped up EV production, that it could be difficult to find one even for a test drive, never mind one available for purchase.
That’s changed. Other dealers told Insider that they, too, were turning additional inventory away until they could sell what was already on their lots or that they planned to soon.
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The pool of consumers wealthy enough to afford an EV and risk-tolerant enough to be willing to be an early adopter of EV technology has largely bought what it’s going to buy, Insider reported.
“It’s not just that these vehicles are expensive — which they are,” Sam Fiorani, the vice president of global vehicle forecasting at AutoForecast Solutions, told the outlet. “We’re talking about a much more nuanced lifestyle change.”
Fiorani explained that EV’s offer a significantly different “ownership experience,” because of the typically lower range a vehicle gets from a single charge and unavailability of charging locations relative to gas stations.
“It’s hard for the average customer to make that leap while spending an extra $10,000,” he said.
Demand, therefore, is falling even as automakers are increasing supply.
“The only Toyotas I have that aren’t presold are the electric ones, the bZ4X, and that’s a little bit of a challenge,” Adam Lee, the chairman of the board at Lee Auto Malls in Maine, told Insider.
According to the numbers, EV sales made up about 6 percent of auto sales in 2022 and were projected to be significantly higher than that in 2023, Insider said in an earlier report.
That rate of increase, however, was not considered sustainable.
“The spectacular growth we’ve seen over the last few years cannot be sustained. It’s just not possible,” Fiorini told Insider earlier this month. “The further up this growth curve we go, the harder it’s going to be to get to the next level.”
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