16.4 C
New York
Monday, April 15, 2024

The Amazonification of Buying a New Car

In 2019, Tampa resident Nick Augeri, a self-described electric vehicle enthusiast, bought his first, a Tesla Model 3. He loved the process—it was all online. He placed his order with a few clicks, and it showed up a day or two later. Augeri even arranged for the electric carmaker to collect his gas guzzler, a Ford F-150 truck.

Tesla was the leader in moving car purchases away from the franchised dealership and onto the internet. In 2019, it said it would no longer sell cars any other way. The decision, which CEO Elon Musk cast as a cost-saving measure, was met with skepticism by the auto industry. But Augeri was untroubled. “Buying from Tesla was really easy,” he says. “They were innovators.”

A few things have changed since 2019. For one, there are more EV enthusiasts: Americans bought more than 800,000 fully electric vehicles last year, a record 7 percent of all new US vehicle purchases and part of a global surge in which automakers sold 7.8 million EVs.

Tesla is no longer the only automaker that’s all-in on the internet. Car companies eyeing the electric giant’s high profit margins see online sales as a path to cut costs and to form deeper and more direct relationships with their customers. The pandemic’s shift to ecommerce prompted them to pour money into bringing vehicle sales online, especially for EVs. That could curtail what some consumers see as the most painful parts of buying a car: the upselling, haggling, and confusing financing provisions. But it has also left some new car dealers wondering how they’ll fit into a digitized and electrified future, where customers buy an EV online as they would a TV or couch.

So when Augeri, inspired by a new round of federal subsidies, decided to buy a new electric vehicle from General Motors this year, he also started online. The company offers a website to help car buyers hunt down new inventory, because new and especially electric cars are still in short supply due to pandemic-era chip shortages. This time, Augeri almost enjoyed his week of texting back and forth with local dealers who were about to receive delivery of his electric of choice, a Chevrolet Bolt EUV. By early February, he had put down a deposit and was happily waiting for his car to come in. His wife preferred the quick, all-online purchase Tesla offered, but the American consumer is a variegated beast. “I like the haggling back and forth,” Augeri says.

For years, automakers resisted the Amazonification that has swept the rest of the global economy. There was a feeling buyers wouldn't feel comfortable making that major, expensive purchase online. But US auto ecommerce sales grew by 25 percent in 2021, the biggest jump in the past decade, according to a report from the investment banking firm Cowen, which judges the sector to still be “early” in its digital transformation. Recent data from the auto services firm Cox Automotive shows that while satisfaction among US car buyers went down overall last year, those who completed at least half of the steps online were more likely to be happier about the process. Most vehicle buyers will interact with at least one digital tool while buying a car this year, Cox estimates.

Most PopularBusinessThe End of Airbnb in New York

Amanda Hoover

BusinessThis Is the True Scale of New York’s Airbnb Apocalypse

Amanda Hoover

CultureStarfield Will Be the Meme Game for Decades to Come

Will Bedingfield

GearThe 15 Best Electric Bikes for Every Kind of Ride

Adrienne So

The jump in online car sales came in part from consumers doing more of everything online during the pandemic. Automakers responded to the moment by accelerating their existing plans for digital sales.

General Motors had launched a website years ago allowing customers to find, customize, and order a vehicle, but it saw a 50 percent spike in traffic by late spring 2020. Since then, the carmaker has said it will make it possible for customers to shop for, purchase, and finance their vehicles wholly online, and even take delivery of a car at home, although the transaction would always involve a dealer. Electric vehicles fit this strategy better than those that gulp gas, says Hoss Hassani, GM’s vice president of EV Ecosystem. Battery-powered cars have fewer parts, and the company’s EV’s have modular designs, which cuts down on the number of options offered. That makes it more straightforward for a customer to customize a car and preorder it online, he says.

Honda, which aims to sell only EVs by 2040, has said that its entire electric Acura line will be sold online in the US. “We see it as a convenience tool, basically meeting customers’ expectations in terms of how they purchase their vehicle,” Mamadou Diallo, senior vice president of sales at American Honda, said at a media event last month.

Ford is also driving toward a more streamlined, internet-based buying experience, CEO Jim Farley said last summer. “We got to go to non-negotiated price; we got to go 100 percent online,” he said, envisioning a future in which factories don’t send out vehicles to wait around on lots anymore, an arrangement more common in Europe. “It goes directly to the customer—100 percent remote pickup and delivery.” Ford is also rolling out an ambitious program for dealerships interested in selling electrics, which will require those who sign up to spend $500,000 to $1.2 million on site upgrades, including installing and operating onsite fast chargers.

Talk like Farley’s understandably makes dealers a little nervous. It raises the specter of dealerships being relegated to operating sales processing and delivery facilities, which also do car repair. Some worry the ultimate goal of the changes automakers are ushering in around their electric vehicles could be to become more like Tesla—an end run around the dealership model altogether.

The changes coming to car selling could deliver shocks to some dealerships, which have during the pandemic made record profits at a time of high demand for a limited supply of vehicles. “Dealers are still in this mindset of ‘come in and shake the hand of my handsome salesman,’” says Mike Anderson, the president of the Rikess Group, an automotive dealership consultancy. Selling online, at a fixed price, demands a whole new skill set: facilitating digital transactions, explaining new features online or over the phone, and finding a way to create relationships with customers without meeting in person.

Most PopularBusinessThe End of Airbnb in New York

Amanda Hoover

BusinessThis Is the True Scale of New York’s Airbnb Apocalypse

Amanda Hoover

CultureStarfield Will Be the Meme Game for Decades to Come

Will Bedingfield

GearThe 15 Best Electric Bikes for Every Kind of Ride

Adrienne So

Many dealers are protected, to some degree, from the chilling winds of digitization. In most US states, dealerships’ business models are shielded by the force of law—and also well-resourced state and federal dealership lobbies. Seventeen states prohibit direct-to-consumer sales by automakers, and nine others limit them, according to the Electrification Coalition, an advocacy group. Tesla and newer electric entrants Rivian and Lucid have pushed state lawmakers to reconsider these laws, which date back to the 1950s, but with little success.

Dealerships are resisting automakers’ plans in other ways. General Motors has offered to buy out Buick dealers who don’t want to transition to EVs or make the investments the carmaker requires; some have taken the company up on it. The Ford plan to require those selling electrics to make upgrades has been met by lawsuits from state dealership associations, which said they violated state franchise laws.

Ford said last month that it would make changes to its program, which is set to begin in 2024 and has already signed up nearly two-thirds of the brand’s dealers. “We do feel that dealers are a competitive advantage,” says Heidi Shaffer, the director of North American sales at Ford Model e, the carmaker’s electric division. “When individuals think of Ford, they're not thinking of Ford corporate, they're thinking of their hometown dealer and what they do for the community, like sponsoring Little League.”

Other dealers see the push to sell online as a new twist in an old pattern. “This is just another cycle in efforts by [manufacturers] to try to exert more control over dealers retailing cars,” says Brian Maas, the president of the California New Car Dealers Association. “They generally don’t work.”

Just as ordering smaller items online can sometimes lead to frustration, buying a car with a click can go off the rails too. Augeri, the Tampa EV buyer, decided to cancel his Chevy Bolt order for a refund once he realized the car would take longer than promised to arrive. He opted for a new Tesla instead. But the electric automaker wouldn’t finalize its trade-in offer for his old car until he’d put down a $250 reservation fee, he says, and then offered thousands of dollars less than it had originally suggested. He went back to a conventional GM dealership and is now waiting on his white Bolt EUV. Tesla did not respond to a request for comment.

For customers, buying a car could become a chance to choose your own adventure, with options for those who want to buy online, or for a fixed price, or visit a showroom, or haggle with a wily car dealer on a real forecourt. “Digital retailing is here to stay, and I think that the future is brick and mortar,” says Jeff Aloisa, the owner of Mercedes-Benz of New London, in Connecticut.

Hassani, the GM executive, says the all-of-the-above approach is necessary because electric cars are so new, and some customers want to learn about them from other people. To accommodate everyone, the automaker launched last summer a service that allows anyone—not just GM customers—to chat online with experts about electric vehicles. But for others, if there aren’t flesh-and-blood salespeople to quiz, they’re disappointed. “My dad is in that camp,” Hassani says. “If he doesn't negotiate, he feels like he's done something wrong.”

Related Articles

Latest Articles