The primary problem with your argument is that dealerships are independently owned (for the most part) and their profit does not directly impact the manufacturer. Now - if dealerships couldn't make money on service, then they would have to sell cars at a higher price or they would go out of business. This would hurt the manufacturers so there is a relationship.

Your Prius calculations for service seem so high as to be unreasonable. I have a HCH-II and I should need 10-12 oil changes in 100k miles for a cost of about $600 at the dealer (I don't do that but if I did). There would probably be another $1000 for the other recommended services.

 

Danatt, I think you're looking at this with blinders on. GM and Toyota dealers are independent businesses. Whatever profit they make on service stays with them. If they lose out on service profit, they will have to make it up on dealer margin on new "maintenance free" cars. From the factory viewpoint, there is no impact.

Also, I think you are not being realistic on the maintenance cost of conventional cars. I would be sorely disappointed if I spent $3200 on maintenance on ANY car in the first 100,000 miles. Oil Changes - Why go to the dealer? Exhaust systems - All my new cars since 1986 have had stainless steel exhaust. I haven't replaced an exhaust component in 30 years. Tune-ups - 100,000 mile intervals on most cars, then just replace the plugs and wires. Coolant - 36k intervals are now going to 100k intervals. Fuel system - generally good for 100k to 200k before repairs. Brakes - with my driving 60k for the fronts, 120k for the rears. Transmission - life of the car.

Don't get me wrong. I'm a big EV fan. I just think the economics will favor PHEV for the forseeable future.

 

Dealers charge what they will for parts and services, just like they sell new and used cars.

A person can visit one dealer and grumble to pay for a $80 front wheel alignment, while the dealer in the next town charges $35. One dealer might sell someone a car $5000 over MSRP while the other sells for less.
Most people just pay.

However the maintenance factor is also true: Dealers would surely fall on hardships if they had relatively no parts or service to sell. I believe that's a big reason we can't buy a battery electric vehicle today. Of course there's other major factors such as lost oil revenues.

I'm not excited about the Volt.
1. It still burns gasoline. Fill up the gas tank, send my money over seas and plug it in.
2. Likely be cost prohibitive. I haven't read any price projections. How much? $60K? 80K? A nice showcase token parked next to their Hummer.

Offer me a battery electric, leave the engine out (Thank you) and let the others continue to support foreign governments.

-Steve

 

The price differences between a volt, a pure ICE car and a conventional hybrid should be governed by the battery cost. Compared to a conventional hybrid, the Volt should have simple engine (small constant speed, directly coupled to the generator) and no transmission or drive train. I haven't seen the details of the Volt drive, but Mitsubishi has done some interesting work with wheel motors that eliminate all drive shafts. If the battery cost can be significantly reduced, this could be a big winner, but that's always been the big if.

On the battery front, Caterpillar (yes the bulldozer people) just announced a battery breakthrough to reduce lead acid battery weight to 1/3 the existing batteries and improve performance. http://www.suntimes.com/business/pin...ncus27.article

 

Quote:

Originally Posted by 300TTto545

The primary problem with your argument is that dealerships are independently owned (for the most part) and their profit does not directly impact the manufacturer. Now - if dealerships couldn't make money on service, then they would have to sell cars at a higher price or they would go out of business. This would hurt the manufacturers so there is a relationship.

Good points by both of you. So I guess the question here is - how much of an incentive is it for the automakers not to potentially threaten their independent dealers’ lucrative service business? The underlying assumption here is that we agree that the onset of EV's would indeed significantly reduce service revenues at the dealership.

Quote:

Originally Posted by KenG

Also, I think you are not being realistic on the maintenance cost of conventional cars. I would be sorely disappointed if I spent $3200 on maintenance on ANY car in the first 100,000 miles. Oil Changes - Why go to the dealer? Exhaust systems - All my new cars since 1986 have had stainless steel exhaust. I haven't replaced an exhaust component in 30 years. Tune-ups - 100,000 mile intervals on most cars, then just replace the plugs and wires. Coolant - 36k intervals are now going to 100k intervals. Fuel system - generally good for 100k to 200k before repairs. Brakes - with my driving 60k for the fronts, 120k for the rears. Transmission - life of the car.

Quote:

Originally Posted by 300TTto545

Your Prius calculations for service seem so high as to be unreasonable. I have a HCH-II and I should need 10-12 oil changes in 100k miles for a cost of about $600 at the dealer (I don't do that but if I did). There would probably be another $1000 for the other recommended services.

I agree with you both that $3200 for regularly scheduled service on a Prius in the first 100k miles does "seem so high as to be unreasonable". But I kid you not. It is what my Toyota dealership "recommends", with whatever upselling is in there. I don't do it. I've been going for more reasonably priced alternatives for oil changes as well. I'm not sure how many people actually follow the recommendation of that dealership, and pay that. But my reason for including those numbers in my original post above was that on a percentage basis the 12-13% figure I got from my dealerships recommended service agreed pretty well with the "12.4%" from the article that I linked above. Here it is again - http://www.asashop.org/autoinc/april98/mech.htm
The key point that article stated was:
"Although service and parts revenue accounted for only 12.4 percent of the average dealership's total revenue in 1996, profits from service and parts departments represented 53 percent of a dealership's total profit."

So put aside the exorbitant $3200 figure which is most likely a result of my particular dealerships upselling, and refer instead to the article. If you believe the article, some people are paying a lot of $$$ for service, and dealerships are making significant profit on that.

Back to the question - Is that an incentive for the automakers not to introduce EV's? KenG seemed to think "no", and 300TTto545 seemed to think "yes". I have no problem accepting that the dealerships are independent franchises. However, I can't accept that the revenue and profit incentives of the dealerships and the automakers are totally decoupled (to echo 300TTto545's position).

To illustrate this, go back to the linked article, and refer to the table about 1 screen up from the end, which breaks out % of total profits for dealerships for new car sales, used car sales, service and parts for 1980-1996. In particular look at 1990 and 1991. For those years parts and service profits actually subsidized disastrous new car sales. If the dealerships were truly independent in terms of revenue and profit, they would cut out that part of the business. Well, of course the automakers can't allow that to happen. So, what exactly is this relationship?

Introduce the onset of EV's. How does it impact that relationship? Or conversely, how does that relationship impact decision making with respect to EV programs?

This is not conspiracy theory. Revenue and profits are what drive decision making. This is about understanding what has been driving decision making by the automakers with respect to EV programs.

 

There are some real disincentives to producing an EV but I don't think it has a lot to do with the existing ICE auto infrastructure. The auto companies each know their costs and capabilities and they also know their customers pretty well. I think it was not true that the US auto companies didn't know there was a market for small cars. They just knew that the capabilityto produce those cars in the US at a profit or to produce a quality small car at the overseas divisions was very limited. Right now the chances of producing an EV that sells in large quantities and makes a profit, is very small with current technology. If this was easy, the Japanese, Koreans, Chinese and everyone else would be rushing to build them. It's just not that easy.

Maybe batteries will get to the point a pure EV will appeal to a lot of people. However, I think it's more likely that a PHEV will emerge with enough battery that the engine will be seldom used and will be a relatively small cost impact to the overall car.