Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

Electric Cars a Tough Sell to Car Dealers

The biggest obstacle to a widespread adoption of electric cars in the United States could be auto dealers. Many dealers are refusing to sell electric vehicles, even ones from their brands, The New York Times reported.

Strangely enough, some sales professionals were reluctant to push electrics even when motivated buyers showed up with checkbooks. A number of EV owners even told The Times that salespeople went out of their way to try to push gasoline or diesel cars they did not want on them.

The dealers’ reluctance can be explained by several factors. A big one is the association of electrics with Elon Musk’s Tesla Motors (NASDAQ: TSLA). Musk has angered dealers by selling his vehicles through a network of branded stores rather than dealerships. That effectively cuts out the middleman and their profits.

The next big electric car, Porsche's Mission E.
The next big electric car, Porsche’s Mission E.

Why Auto Dealers Don’t Like Electric Vehicles

Adopting a new technology is also very expensive. Salespeople who are often far from the brightest and best educated members of the workforce have to be schooled in the new technology. Service facilities could have to be retrofitted to cope with electric vehicles. Service personnel may have to be retrained to work on the new vehicles.

Adding to the skepticism is the existence of a rival automotive power-source hydrogen fuel cells. At least two major carmakers, Honda (NYSE: HM) and Toyota (NYSE: TMC), seem to be determined to go with fuel cells rather than electric vehicles. If fuel cells and not electrics become the wave of the future, dealers could be stuck with unsold inventory and expensive maintenance equipment not being used.


There are also the teething pains associated with a new technology. Consumer Reports, which was initially enthusiastic about Tesla’s S Series, changed its recommendation after complaints about the vehicle. Dealers who are on the front lines will be the main ones to hear the complaints.

The recent diesel scandal at Volkswagen certainly hurt dealers and fuels their skepticism of all new technologies. The dealers’ refusal to sell electrics could hurt other next generation auto technologies, such as self-driving vehicles.

Auto companies could be forced to take such steps as paying dealers extra bonuses to sell electrics, financing retrofitting of dealerships to service electrics, or developing their own sales channels. All of these moves would be very expensive and create the risk of disputes with both customers in dealers.

It looks as if the road to an all-electric automobile fleet could be a far rockier one than we thought. The performance and popularity of electrics may have to grow dramatically to get them into your local dealership.