The technology of distribution has dramatically changed the way we shop, order, and receive goods and services. Everything from heavy articles like mattresses and refrigerators, to vitamins, toothpaste, and tonight’s fully-prepared dinner can be delivered to the consumer’s door without the consumer needing to set foot inside brick and mortar stores or malls or traveling to the restaurant to pick up the order. Thus, we see the expanding last mile delivery market.
When it comes to personal transportation vehicles (PTVs), however, sales are still predominantly via a walk-in visit to the local dealer, an up close inspection of the dealer’s stock, and a decision to purchase or not. Could this change—in particular undergo a transformation consistent with what is experienced in other markets for other products on a grand scale? Part of the answer lies in the manufacturer/dealer relationship as it now exists, and part of it has to do with consumer habits. The first part of this article looks at the former and the second part the latter.
Role of dealerships: From unit sales showrooms to sales facilitators and service hubs
Dealerships are the sales force and sales face of golf car manufacturers. Vehicle sales are the primary, although not the only, source of revenues for dealers and, obviously for manufacturers. Revenues from sales of personal transportation vehicles and light duty utility vehicles have outdistanced those from sales to golf courses by a wide margin, and thus manufacturers have become increasingly dependent on dealer performance for revenues and growth.
Dealers for their part are dependent on manufacturers for new models and new features, as well as service support and the supply of parts. As vehicles become upgraded and new models introduced, dealers have become increasingly dependent on manufacturers to grow their local businesses. And this does not account for the advertising and promotion which manufacturers carry as overhead expense.
Traditional manufacturer-dealer relationship
Golf car dealers are known for their independence, and very often their business is rooted in family tradition and a generational legacy. In many cases it’s husband and wife team that run the business and kids growing up to take over, when the time comes. A good friend of mine is a dealer in North Carolina. His daughter is periodically active in the business handling front-end paperwork. His son-in-law works the sales floor, repairs vehicles, and makes service calls.
This culture, which pertains to a lot of small business enterprises, has its advantages, such as stability, a built-in incentive to go the extra mile to build customer loyalty, and personal dedication to resolve operational issues as they arise.
There are also disadvantages.
- Historically centered on golfing activities and golfing communities, which are not growing, and, insofar as golf courses are concerned, shrinking;
- Customers are typically walk-ins, keeping the sales team exclusively on location;
- Dealerships tend to be location-bound, which means sales are dependent on a relatively small geographic radius and developments within that radius.
The cultural and geographic restrictions on typical dealer operations also results in loss of dealer leverage in dealings with manufacturers. Thus, manufacturers feel free to impose high quotas on dealers, even if the latter have little chance of selling the inventory buildup.
Tug of war over warranties
New vehicles come with a manufacturer’s warranty, which covers parts and repair services. Warranties, if acted upon, will drive up costs and reduce margins—and Invariably over the course of vehicle usage in the first three years, warranty claims arise. Manufacturers’ reluctance to underwrite repairs and parts replacement often put the dealer in the middle of contention between manufacturer and customer—the former claiming in a particular case that the warranty doesn’t apply, and latter asserting it does (or should). To the degree that these contentions are present, the complementary, mutually supportive relationship between manufacturer and dealer breaks down.
This is not a business model that is primed for growth. This is not the Home Depot mode where returns are accepted without any questions or limitations. Moreover, the tug of war over warranties leads to a dealer reaction of undertaking warranty repairs only on vehicles that he or she has sold. This, in turn, puts a damper on business expansion.
Given the drawbacks of the current manufacturer/dealer relationship and the dominant characteristics of dealerships themselves, sales and distribution, as rooted in the golf car industry, is ill-equipped to take advantages of market opportunities which are rapidly developing.
The following gives you the scope of the changes involved.
Facing the realities of significant changes in market characteristics
In the evolving market for small electric vehicles, two segments stand out: 1) Last mile delivery services; and 2) Versatile, customized personal transportation vehicles. The roots of the latter are in the golf car industry, while the former is seeing widespread participation, ranging from automotive giants Ford and GM to startups such as Ayro and Arcimoto.
Underlying these emerging markets are secular economic trends which started well before the onset of the COVID pandemic, but which have accelerated because of it. These include:
- The virtual workplace;
- Transformation of logistics systems;
- Renewed urban emigration.
Each of these trends has sparked a host of new and growing industries. And, each one of the trends is complemented and enhanced by the other two. For example, urban emigration becomes all the more possible because of the ability to work from home and at a distance from company headquarters. Outlying residences can escape urban concentration of goods and services because of advances in dispersed logistical systems.
It is interesting to note that urban planners are taught in the course of their university training that urban centers emerged as centers for trade and commerce; i.e., a meeting place for buyers and sellers. With the evolution of technology, noted above, a concentration of buyers and sellers is much less needed. Therefore, we can expect the devolution of cities from centers of commerce to quaint historical districts, whose main revenue source is tourism, recreation, and entertainment.
Going forward, growth and expansion will depend more heavily on dealer services
The forces driving the mobility market are dramatically altering the context of what we at Small Vehicle Resource call the small, task-oriented vehicle (STOV) market. The connotation is a series of relatively small niche markets, which added up achieve a good size. This may no longer adequately summarize the market in the context of the secular changes discussed above.
Evolution of the PTV and light duty utility market can be characterized as follows:
PTVs will become more versatile
PTV upgrades will feature…
- Greater connectivity, allowing users to connect with home, places of business, location of charging systems, and connection to other vehicles;
- Autonomous driving technology;
- All weather, integrated enclosures;
- High performing drivetrains offering higher speeds (35-45 mph) and greater vehicle stability; e.g., in-wheel motors on all four wheels;
- Enhanced safety features, including airbags and crash test certified frames and bodies.
Examples of potential vehicle platform upgrades include Baro Vehicles’ CAV-P Autonomous Platform and in-wheel motors manufactured by Elaphe Propulsion Technologies.
Both companies specialize in powertrain electronic and systems integration platforms and other electronic components upon which manufacturers can test, modify, and build vehicles to fit the needs for their particular markets.
Elaphe builds a range of power options in its electric hub motors, including the S400 motor for small vehicles. The 48-volt motor has a peak power rating of 19.5 kW and a continuous power rating of 11.0 kW. For the 100-volt model, the peak and continuous ratings are 40 kW and 23 kw, respectively.
Fitted in the two front-wheel hubs or in all four wheels, this power train component would realize a major performance upgrade for today’s PTV.
The kinds of upgrades envisioned here are both an opportunity and a challenge to dealerships. The opportunity lies in an expanded market as urban/suburban mobility sees a convergence of consumer preferences and vehicle performance.
The challenge for dealers will be to develop their expertise in electronic drivetrains and autonomous driving modalities. The envisioned upgrades will not only bring a range of new features from which consumers can choose, but correspondingly increase the service and educational function of dealers.
Potential for satellite showrooms
Another change is in the offing with regard to the physical character of the dealership. That change is the diminution of showroom space and inventory, transforming it to service operations, and the advent of satellite showrooms in big box stores and outlets. The satellite sales approach has been tried to some extent in Cabela’s and Bass Pro Shops, with mixed results.
Big box stores attract the general public, as opposed to the more narrow segment of hunting and fishing enthusiasts, and therefore are a better venue for a consumer that is reevaluating mobility options. Dealers will be active in attending these satellite showrooms, hosting walk-arounds and providing data to potential customers.
Sales orders will go directly to the factory, where particular vehicle attributes and upgrades will be added or packaged with delivery for the dealer to assemble. This customized ordering process is already well-advanced. All manufacturer sites contain a “build-your-own” feature. The market has also seen a growing number of dealer businesses specializing in upgrades.
Dealer role in the LMDV market
Business expansion will be characterized by a transition from the LDU to the LMD market; that is, from light duty utility to last-mile delivery vehicles. In the service function dealers will become familiar with fleet management systems and perform fleet maintenance. Again, much as with the PTV market, the transition involves a mix of traditional and new skills.
Dealers will also be active in the sales function, particularly in local area communities. Manufacturers at the corporate level, for their part, will break new ground in forming collaborations with supply chain companies and municipal transportation authorities. To be effective in this role, corporate will need the cooperation of dealers and provide the necessary incentives to induce active and willing participation. The friction of the type cited above with regard to warranties has to be avoided.
Conclusions
This article covers a wide range of issues in a short space. While the transition of traditional PTV and LDU markets is complex, it is important to bear in mind that the groundwork has been clearly laid for the changes and many of them are being actively pursued currently. And, at the same time, the changes in consumer preferences and needs are well advanced in embracing upgraded small vehicle technology and versatility.
