An ethical conundrum could put a pothole in China’s NEV development plans

I got the latest Sales Satisfaction Index study for China from J.D. Power and Associates a few days ago. It measures how happy a car buyer was with the purchase process. http://businesscenter.jdpower.com/news/pressrelease.aspx?ID=2010172

“For automakers and dealerships, it is of the utmost importance to design and implement effective (sales) processes, as well as to have properly trained sales staff to perform them, says the press release.

That got me thinking about the Chinese government’s plan for new energy vehicle production to reach 500,000 units annually within three years, and for NEV sales to be 5% of the total market. (NEVs include plug-in electric, electric, and hydrogen fuel cell vehicles. Hybrids are considered “energy conservation” vehicles.) http://www.sasac.gov.cn/n1180/n1566/n258237/n258854/7500833.html

Selling these cars is going to test dealerships–and auto manufacturers themselves–not just in China, but around the world. Car salesmen will need to develop a new skill not generally associated with their job—restraint. If NEVs are foisted on the wrong owners, it could create a big pothole on China’s road to world dominance in the NEV sector.

Toyota started educating its dealers about selling hybrids more than a year before the launch of the Prius, says Greg Marchand, president of Automotive Aftermarket Training.  http://www.intelligentmechanic.com/

Marchand worked as a field technical specialist at Toyota when the Prius was launched. Now, he has a company that trains independent mechanic shops how to service electric vehicles.

The Toyota salespeople had to fully understand the technology so they could clearly explain it to customers because “if you get somebody to purchase that technology and they don’t understand it, they won’t like it,” says Marchand.

Now this was for hybrids, mind you.  They work more or less like a traditional car, except they are a lot quieter at stop lights and get better mileage. Not so electric vehicles.  The current technology has limited range capabilities, recharging takes hours, and the recharging infrastructure is nascent in China and the U.S.

Bottom line—a pure electric vehicle is not for everyone, at least not right now.

Bill Jones is general manager at Tonkin Wilsonville Nissan http://www.tonkinwilsonvillenissan.com/ in Oregon, where, as at all Nissan dealerships, his staff is preparing to sell the Nissan Leaf pure electric car.  http://nissan-leaf.net/

Managers and sales people are getting on-site training and online certification, says Jones.  But selling the Leaf will also require some judgment on the part of the sales staff, he points out.  

Says Jones:  “We need to be cognizant of the fact that the EV is not going to be for everyone. It may not be the right car if someone has to drive long distances. We have to be responsible enough to know by interviewing the client if the Leaf is the right car for them.”  

Let’s face it, a pure electric car is not currently suitable to be the only car most people own.  And in China, 70 percent of car purchases are by first time buyers. That won’t change much for a long time, though second-car purchases in China’s wealthier cities are on the rise.

Which brings me to the task of selling all those NEVs in China. I haven’t read anything that indicates much thought is being put into the salesperson education issue among the automakers in China.

Anecdotally, however, the issue seems to be at least on the foreign automakers’ minds. Sewells Group of Australia http://www.sewellsgroup.com/ offers dealer management and skills training.  In China, Sewells counts most of the foreign automakers among its clients, says Kyle Dickie, managing partner in China. Sewells is not currently working with any local auto makers, he adds.

Kyle Dickie, managing director, China, Sewells Group points out that a dissatisfied customer doesn't just get mad at the dealership where the car was purchased, he or she gets made at the brand itself.

Dickie says conversations with the foreign automakers regarding training on how to sell NEVs are  “ramping up exponentially.”  However, dealerships in China are no closer to being prepared than those in any other country, he says.  

It is not that a new sales process needs to be learned, says Dickie. The basic steps are the same, be it a car with a traditional drivetrain or an alternative fuel drivetrain.

“The biggest issue is how an electric vehicle fits into your lifestyle,” he says. Which is the same issue that Nissan dealer Jones talked about.  

Because of the need to recharge, and the paucity of recharge stations, a pure electric vehicle  “doesn’t augment your lifestyle, you have to adapt to it,”  says Dickie. (Can you say “range anxiety”?  Well, maybe not without paying GM a fee, if GM has its way… http://wheels.blogs.nytimes.com/2010/09/02/g-m-is-trying-to-corner-the-market-on-range-anxiety/?src=mv )

The first buyers will likely be early adopters who understand the recharging issues, says Dickie. But when the average Zhou (he said Joe, but I’ve sinocized it) comes into the dealership, the salesperson will need to make that judgment call.

That presents what Dickie calls the “ethical conundrum.”  Do you sell an electric vehicle to someone you know it is not suitable for, or advise against the purchase?

Alas, I don’t have a lot of faith in the ethics of car salespeople in China or anywhere else. As Dickie points out, sales people will take the shortest path to success.

But if you think this is the just the dealer’s problem,  think again. It’s the automaker’s problem, too.

If a customer is dissatisfied with the car, he or she likely won’t  return to that dealership to buy another car. But they aren’t just mad at the dealership for selling them an unsuitable car. They are mad at the brand.

“The impact of the first purchase experience reflects on how the brand is viewed,” says Dickie.  “The customer isn’t going to blame the dealer, they are going to blame the OE.”

Damned straight, J.D. Power would say. Okay, Dave Power probably wouldn’t say that, and McGraw Hill owns the company now anyway. But J.D. Power studies do show that dealerships with good SSI scores will have more repeat purchase customers. And customers will be more likely to return to that dealership to have their car serviced. And to recommend the brand to a friend.

So how do automakers ensure their dealers don’t sell electric vehicles to customers for whom the car is simply not suitable?  (That’s a rhetorical question, though the answer might be education/training plus a different pay structure….)

There are additional potholes in that NEV domination road.

For example, the nature of dealership footprints in China.  In Texas, where I grew up, car dealership lots were the size of football fields, with hundreds of cars in stock. In China, in contrast, even the dealerships in the suburbs have small lots. Dealerships in the center of major metropolitan areas such as Beijing and Shanghai often have no lot at all. Instead, they have multiple floors.  So on-site inventory is very limited. And that inventory will include traditional and NEV models.

With only a handful of electric demo models, how can a dealership make sure all the vehicles are fully charged all the time for test drives, points out Dickie?  Getting to test drive a car greatly boosts satisfaction with the sales process, according to J.D. Power, but running out of “fuel” while taking an EV on a test drive isn’t likely to add much in the satisfaction column.   

Even with a larger inventory, China has a lot of walk-in customers, he says. “How do you manage the stock behind the store to make sure the models are always charged?”

Okay, I’ve just about whipped the NEV sales horse to death, so let’s start hitting the service pony.  Where will China get all the service technicians to maintain and repair those NEVs?

Audi won’t launch its electric sports car until 2012, and the German car maker is already planning a technician training program. “Electric cars bring with them new service and maintenance requirements, so we have already started preparing our dealer and service networks,” Bernd Hoffman, head of sales for aftermarket and genuine parts for Audi told Automotive News Europe.

http://www.autonews.com/apps/pbcs.dll/article?AID=/20100901/ANE/309019998

Nissan in June opened a 23,000 square feet center in Livermore, CA to train EV technicians.

 http://nissan-leaf.net/2010/06/23/leaf-training-center-for-technicians-opens/

Those are just a few examples of the lengths automakers are going to so their models can be serviced appropriately.

To be sure, there could be a lot of training activity going on in China, but somehow I doubt it. The State Council should perhaps mandate the establishment of some training centers. China will need them if it plans to become the global number one in NEVs.