April 29, 2021

Staying Current Part IV - F&I Product Impacts

NAC Blog
NAC Blog

Staying Current Part IV - F&I Product Impacts

F&I Products in the Electric Age

As EVs become more ubiquitous, it’s not just dealers who will have to adapt: product providers will also have to reevaluate some aspects of their strategy in the age of electrification. While this presents some definite challenges, there is also ample opportunity. The greatest challenge of all is likely to be for service contracts, which are typically the most profitable product in an administrator’s lineup.

The challenge is twofold. First, investing the resources in developing EV-specific products and programs today—whether to sell today or simply be prepared for tomorrow—may not make much sense given the low share of vehicle sales EVs represent (approximately 2.4% last year[1])and the widely-held expectations that EVs will remain a small niche for the better part of the next decade. Second, EVs typically carry generous factory warranty terms on their batteries and experience fewer mechanical breakdowns, leaving little consumer benefit to a traditional VSA—even if it covers the battery. New vehicles pose the greatest puzzle, but even on a used EV the lower breakdown frequency raises serious questions about the viability of service contract sales in the decades to come.

On the bright side, there are real opportunities for product providers, including some that require no or minimal additional effort. Chief among these are ancillary products such as GAP, Theft Deterrent, or Appearance Protection products: these products are essentially EV-ready today, since EV scan be totaled or stolen or fall victim to dings, paint scratches, and interior stains just like any other vehicle. Even Tire & Wheel and Windshield programs are ready for the dawn of the EV era, albeit likely in need of some language and/or premium updates to truly be primed for success. Some products or programs may need more significant updates to cover EVs effectively but are still worth exploring: a Used VSA that includes coverage for battery packs—which are more likely to be out of warranty—or home charging stations could prove popular, as could VSAs that focus on comfort and convenience systems without battery coverage. Maintenance programs could also be revamped to be better aligned with the needs of an electric model and still provide value to the consumer and drive loyalty to the selling dealer.

To summarize, despite near-constant headlines about the next electric vehicles or technological breakthroughs, the reality is that EV domination—at least in the US—is decades away. While battery costs are coming down to a more manageable figure, the lack of widespread infrastructure to combat range anxiety and inconsistent national policy on emissions and efficiency still pose significant challenges to large-scale EV proliferation. But EVs will eventually become the rule rather than the exception, and when they do the existing automotive industry is bound to experience upheaval as a result. Repair facilities—even franchise service drives—can expect less work on almost every front, with collision repair and tires being notable exceptions. Product providers will be affected too, as mechanical failures become less common and other products may well surpass the service contract in importance to the bottom line. However, through more than a century of advancements in technology the auto industry has proven itself to be adaptable and innovative; the EV era is likely to further demonstrate the industry’s spirit of ingenuity and success.

 


[1] Canalys,“Electric vehicle outlook: 2021 and beyond.”

Other Blogs

How to Present the Multi-Point Inspection - A Fixed Ops 5 Blog

By presenting the fact-based results of their multi-point inspection, you can build trust by showing customers that you respect their time.

NAC Blog
NAC Blog
May 10, 2021

Staying Current Part III - Automotive Impacts

While there are few official estimates as yet, it is widely expected that the rise of EVs will have massive implications for repair facilities—particularly the 160,000+ independent shops across the US

NAC Blog
NAC Blog
April 22, 2021