Challenges ahead as local car dealerships adapt to the rise of electric vehicles
Mpho Dipela, Chairman and shareholder of the Legacy Motor Group (LMG)

The world is rapidly transitioning towards electric vehicles (EVs) as a way to combat climate change and reduce carbon emissions. The International Energy Agency has set the goal for EVs of 60% of total automotive sales by 2030 to achieve net zero CO2 emissions by 2050.

As of the end of 2021, there were already more than 16.5 million electric cars on the road worldwide, and this number is expected to reach almost 350 million by 2030.

“In South Africa, however, the evolution to EVs has been slow. Despite government's efforts to incentivise the adoption of EVs, local dealerships in South Africa are still facing significant challenges as they adapt and help to drive the transition to EVs,” notes industry expert Mpho Dipela, Chairman and shareholder of Legacy Motor Group.

“For example, the higher costs of EV manufacturing combined with the need to keep prices competitive for consumers mean that average dealership sales margins for EVs are often much lower than for ICE vehicles. Manufacturing and particularly battery prices need to improve to overcome this obstacle and drive profitability.”

Dealerships are also facing limitations in their ability to set and negotiate end prices with customers due to pricing controls and online channels increasingly being controlled by original equipment manufacturers (OEMs). With more traditional OEMs committing to increasing EV production, there is also a growing desire to shift to online sales channels or even sell exclusively online, which could further limit the role of dealerships – an issue that requires industry engagement to safeguard small businesses and jobs.

“The high cost of EVs is also a concern for consumers and dealerships. Many South Africans who purchase vehicles outside of the premium segment simply cannot afford to purchase an EV and dealerships must find ways to make EVs more affordable for these aspirant customers. EVs are still regarded as for the elite,” says Dipela.

“This does mean greater opportunities for dealership finance departments to help consumers bridge the gap between the price of EVs and traditional vehicles. Additionally, while the profitability of used EVs remains uncertain, their longer lifespans and slower depreciation suggests that they could ultimately hold greater value for the second-hand market, which could mean an opportunity for dealerships specialising in preowned vehicles,” he notes.

Dealerships must also update their operational models and financial planning to accommodate the EV transition, understanding that EVs could result in a 40% decrease in aftermarket spending due to having fewer mechanical parts that break down and service intervals being longer.

The requirements for servicing an EV is very different from traditional combustion engine vehicles. As a result, dealerships will also have to invest in upskilling their staff to ensure that they have the skills and knowledge needed to sell and service EVs. This includes training staff in the technology behind EVs – such as handling high voltage batteries, as well as how to diagnose and repair common issues.

The benefit of this, however, is that while servicing EVs requires specialised capabilities, each maintenance visit may generate increased revenue per hour, says Dipela.

“Ultimately, the transition to electric vehicles is not just about selling cars. It is about creating a whole new ecosystem of products and services that support cleaner, greener transportation. This includes everything from charging infrastructure to battery recycling. Dealerships must adapt to this new reality if they want to remain competitive in the market.”

Infrastructure pressures

As one example of creating a supporting ecosystem for EVs, dealerships need to invest in infrastructure to support EVs such as installing charging stations at their dealerships for consumer convenience – especially as loadshedding heightens range anxiety.

“Without the adequate presence of charging stations, EVs will not be a practical option for many South Africans. This means that dealerships must take a proactive approach to promoting the adoption of EVs by investing in the necessary infrastructure like solar car port charging,” says Edward Makwana, LMG General Manager of Public Relations, Marketing and Customer Experience.

“The development of a comprehensive charging network will not only benefit EV owners but drive economic growth, job creation, and reduce South Africa's carbon footprint. However, to ensure that all communities have access to charging stations, support through regulations, fiscal policies, and fiscal support is also necessary.”

Partnerships between the public and private sector, including OEMs will further enable the sharing of costs, expertise, and resources, ultimately leading to the development of a more comprehensive network.

Given the pressures facing the national grid, South Africa has taken steps to incentivise the use of renewable energy, including the installation of solar panels, through tax deductions. Such measures will likely encourage private sector investment in solar-powered EV-charging infrastructure, further supporting a sustainable future.

“Considering the country’s severe energy constraints, it is critical to look at alternatives means of power. Dealerships must collaborate with local and national government to create a supportive policy environment like these incentives. Public-private partnerships represent a key strategy for accelerating the adoption of EVs and developing reliable infrastructure.”