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EVs boost dealership profits: A new era for auto service

As electric vehicles (EVs) gain traction in the automotive market, dealerships are experiencing a notable impact on their fixed operations revenue. EV repairs are proving more lucrative per repair order than those for internal combustion engine (ICE) vehicles. Notably, publicly traded automotive retailers have reported robust parts and service revenue growth for the third quarter (Q3), highlighting the financial advantages of servicing EVs.

In Q3, the six largest publicly traded new-vehicle retailers achieved a combined parts and service revenue of $4.2 billion, a 4.3% increase from last year. Year-to-date fixed operations revenue for these companies totaled $12.2 billion, an increase of 2.7%. This upward trend underscores the significant role that EV repairs play in dealership profitability. The increasing complexity of EVs—driven by advanced technology and intricate components—has resulted in higher repair costs and greater revenue potential for service departments.

According to Penske Automotive Group, based in Bloomfield Hills, MI, it reported the highest percentage increase in parts and service revenue among major dealerships, with a 7.2% rise that brought its total to $730.9 million. Conversely, Asbury Automotive Group posted the smallest increase at 1.1%, generating $524.7 million in parts and service revenue. Despite these variations, the overall trend reflects a clear financial advantage from EVs in the realm of fixed operations.

In addition, Asbury’s CEO, David Hult, noted that battery-electric vehicles (BEVs) offer significant benefits for service departments. In Q3, the average repair order for BEVs was $865, compared to $629 for plug-in hybrids and $517 for ICE vehicles. Hult stated that the technology in BEVs, combined with challenging conditions like weather, adds complexity to repairs, requiring more time and expertise, which increases service costs.

The advanced electronics and software systems in EVs necessitate more intricate repairs than traditional vehicles typically require, resulting in longer service times—especially in areas like software programming. Roger Penske, chairman and CEO of Penske Automotive Group, highlighted that BEVs demand significantly more shop time due to the complexities involved in their programming. On average, a repair order for a BEV runs about $1,300, compared to $700 for ICE vehicles. As vehicle technology continues to evolve, dealerships are well-positioned to capitalize on the growing need for specialized repairs, making it increasingly difficult for independent service shops to compete.

Overall, dealerships are optimistic about their future prospects. Industry leaders predict that EVs will maintain their trajectory of generating substantial fixed operations revenue as this technology becomes more entrenched in the market. This positive trend bodes well for dealerships as they adapt to the rising demand for electric vehicle maintenance and repair services.

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