COLONIAL WILLIAMSBURG, Va.—As with many industries and retailers, independent tire dealers and automotive aftermarket shops keep knocking their prices down to stay competitive.
With other independents, big box stores and car dealers now in the automotive service game, what else can an owner do?
Enter into an untapped market—that's the recommendation of Dave Crawford, CEO of The Hybrid Shop.
The opening keynote speaker at the recent Virginia Automotive Association's (VAA) 50th anniversary convention and trade expo held in Colonial Williamsburg, Mr. Crawford spoke about the hybrid and electric car (EV) maintenance market and what dealers are missing by not entering the segment.
“This is a wide-open field that nobody else is in,” he said.
Everyone is fighting in the same arena now to be cheaper than the other guy, he said, but in the hybrid/electric sector, there is a better and more profitable sales mix. “The reality is that our guys in our shop are afraid of it,” he said.
“What happens when you open the hood and you see one of these (hybrid wiring system)?”
Does the shop turn away the business? he asked, pointing out that in doing so a service shop could lose that customer for life.
People in the industry from across the country think hybrids are not in their geographic area because they never see them, Mr. Crawford said, noting that those vehicles are there but most owners are taking those vehicles back to a car dealer to get work done.
There continues to be a big gap of knowledge about this segment in the industry, Mr. Crawford said, adding that as a mechanic in college, if he had a question, he asked a senior technician. With hybrid vehicles, there may be no one in a shop to answer a question if no one has been trained.
If that is the case, what happens? Shops send customers away.
Technicians who are not trained can be afraid to work on hybrids or electric vehicles. However, it's simple to safely work on the vehicles, Mr. Crawford said, noting that there is a safety disconnect switch allowing the battery to then be able to be removed. This signifies to everyone that it's OK to now work on the vehicle because the power pack is pulled away from the engine. But if you aren't trained, he said, you don't know where the switch is and how to safely do this.
“That's the lack of knowledge that we are trying to get to in the industry—to get people trained in all the pieces,” Mr. Crawford said.
There continues to be a push by the federal and state-level governments for environmentally friendly vehicles.
In 2013, eight states came together to create the Zero Emission Vehicle (ZEV) program with a primary objective to have 3.3 million ZEVs by 2025 in these states alone—California, Oregon, Massachusetts, Rhode Island, Vermont, Connecticut, New York and Maryland—which make up 28 percent of the U.S. vehicle market and have 640,000 ZEVs on the road.
While the falling price of gas can have a slight affect on this trend, Mr. Crawford said, it would be in the short term. In the long term, the greater impact will be, in part, from government incentives.
President Barack Obama, in his 2015 budget presented to Congress for approval, included a $10,000 incentive for consumers to buy an electric vehicle, and the House and Senate approved the move.
“All this is playing behind the scenes of everything we're doing,” Mr. Crawford said.
This environmental trend is not a new one. In 1990, California enacted a program—which later become the ZEV program—that focused on low emission vehicles, he said, and was modified in 1996.
The California Air Resources Board (CARB), which administrates the program, was challenged by auto makers claiming the standards originally set by the state agency were unrealistic. What resulted was a resetting of those standards to add “low emission vehicles” to the mix, creating a system of credits for vehicles including hybrids, EVs and low-emission vehicles. Mandates were set for vehicle manufacturers in California that for every 1,000 internal combustion engine (ICE) vehicles, they needed to sell one low-emission vehicle. Experts are estimating that by 2017, conventional gas-powered cars will be in the minority, according to Mr. Crawford.
For more information, he suggested researching these websites: http://www.ucsusa.org/; and www.arb.ca.gov/.
Mr. Crawford said while some look at the hybrid/EV automotive business as a new sector, that's not true. EVs date back to the early 1900s but lost out to traditional gas-powered autos that traditionally were more durable and had more range.
The combustible engine has been around for more than 100 years and isn't going away any time soon. However, the hybrid/EV market continues to grow, Mr. Crawford said, and kicked into gear more than a decade ago.
In 2002, there were two hybrid models available: The Toyota Prius and the Honda Insight. Today, there are more than 70 models available, with more than 3 million hybrids on the road. This trend represents about 5 percent of U.S. vehicles sold today. It is projected this segment will grow to 7 percent of the market by the end of 2016, Mr. Crawford said. Additionally, the U.S. Department of Energy estimates it will be 10 percent of the U.S. vehicle market by 2020.
Consumers who gravitate to this market segment typically are environmentally-friendly and want to save money.
Mr. Crawford said while hybrid owners skew a bit older, EV owners tend to be a bit younger and, in general, are tech-savvy and have higher education degrees. They also tend to be more liberal, like the outdoors and have a higher household income. Fifty-three percent of these consumers are women. Additionally, 53 percent are willing to pay premium prices for “green” products.
Mr. Crawford asked the VAA audience what they planned to do when they got back to their offices on Monday and a customer called asking if their shops service hybrids. He stressed that if the independent shop doesn't offer this service, there's a good chance that customer is going back to a car dealership—which, by the way, also sells tires, oil changes, etc. So where is that customer more likely to go? To one shop for all its services, rather than multiple places, he said.
What this means is that shops not servicing hybrids are missing a revenue stream, Mr. Crawford said. “If you get your tech beyond the fear of doing it, it's just basic mechanics, but you have to get them beyond the fear.”
Once that hybrid is unplugged, it has various maintenance needs that can provide a continuing revenue stream, he added, and after a shop's technicians are properly trained, there are many opportunities for a return on investment (ROI).
And don't forget to then promote that the shop can now service hybrid vehicles, he said, targeting ads at those customers who don't really want to go back to a car dealer for service needs.
“You start getting those customers to come into your store to get the general services they're not getting on a normal basis,” Mr. Crawford said. Once they're in the door, you've got a chance to make them repeat customers.
Ongoing hybrid maintenance is an area in which many car dealers do not compete, he said, so if technicians with an independent shop are capable of doing some hybrid-specific maintenance—such as hybrid brake systems, control system testing and repair, battery conditioning and rebuilding, etc.—that piece of the market doesn't currently have a lot of competition.
An additional opportunity with these customers is selling them premium tires. If the wrong tires are put on a hybrid vehicle, its gas mileage can be affected, Mr. Crawford said, noting that if a shop's personnel aren't properly trained and then recommend the wrong tires, that could affect the shop's reputation.
The hybrid market is growing, he reiterated, and it's important to think about what the cost will be to ignore it. Mr. Crawford compared it to tire pressure monitoring system (TPMS) technology and how revenue is being left on the table because some technicians are afraid to tell a customer that a TPMS sensor needs to be replaced.
The key is to get a shop's staff educated because, he added, the cost of ignoring emerging technologies could be millions of dollars.
To reach this reporter: jkarpus@ crain.com; 330-865-6143; Twitter: @jenniferkarpus