Will BEVs kill the aftersales cash cow?
According to Greek legend, Damocles was a courtier in the court of Dionysius, the ruler of Syracuse in the 4th century BC. As a demonstration of his absolute power and ability to end the life of Damocles in an instant, Dionysius hung a sword above the head of the poor courtier by a single horsehair. It has since been used as a metaphor for the imminent threat from something out of your control, particularly where this stems from those in authority. Although the precise timescale is now up for debate in the EU, UK and US, the push towards BEVs has undoubtedly come from those in authority rather than natural demand, with the role of poor Damocles being taken by the motor industry, particularly those involved in sales and service.
Whilst the public perception of our industry may be that manufacturers and dealers make their money from building and selling new cars, insiders know that the real cash cow is aftersales – parts for the manufacturers and parts and labour for repairers, especially from oil. With an expectation that a lower parts count, fewer wearing parts and over-the-air diagnostics would improve reliability and reduce repair and maintenance times, there has been a widespread (and justified) expectation that the contribution of aftersales to industry profitability would be dramatically reduced. This would jeopardise the viability of franchised dealer networks, putting pressure on manufacturers who have relied on the cross-subsidy to support marginally profitable new car sales activities, and on independent repairers for whom this is their only profit source.
The reality has been somewhat different, although there is a sting in the tail, illustrated by the Norwegian market where the pace of BEV take-up has been much faster. As we all know, in other Western markets, the take-up of BEVs has lagged well behind forecasts and the regulatory targets have been relaxed to a lesser or greater extent. Even if there was a sudden pick-up in sales now, it would take some years for this to work through and change the parc mix as a whole, particularly for the independent repairers whose work is more focused on the parc of 4 years old and more. Even for dealer workshops, the proportion of BEVs entering their workshops is still below 10% of the total in most markets.
I may come back to crash repair in a future blog, as the situation there is more complex – instant torque in the hands of the average driver seems to be causing more incidents, with higher repair costs and write-offs due to parts cost, occasional battery damage and longer repair times. However, in the case of routine servicing and repair in authorised repairers, warranty work is up due to relatively new unfamiliar technology, paid customer work is steady but with a combination of fewer jobs per car offset by a higher loyalty to the dealer because customers remain wary of trusting independents to handle these more technically complex BEVs. Due to the much lower penetration in the parc than expected, overall profitability is only marginally affected – under 10% in our simulations. The cash cow might be slightly less healthy than before, but it is still very useful. For independent repairers, who don’t get the warranty benefit, but also have a lower BEV mix currently, the impact is even less.
Given the gloomy forecasts of a few years ago, that may make investors breathe a sigh of relief, and think we’re back to business as usual – despite the general hype around BEVs, and them becoming a more common site in showrooms and on the road, the aftersales business is largely unaffected. However, if we look at the Norwegian market, a different picture emerges. Backed by a range of policies that have made BEVs an attractive choice for both business and retail customers, the penetration of BEVs in the new car market has been rising steadily and reached 95% in 2025, having breached the 50% mark in 2020, and only 1% in 2010. As a result, BEVs now represent almost 30% of the total parc with significant numbers of BEVs now with their second or third owners. Within the zero to 4 year old parc, 79% of the total are BEVs, so make up the majority of workshop entries in franchised dealers.
As the industry advances up the technology curve, warranty operations and recall campaigns are reducing. For routine maintenance, Norwegian dealers report 30% fewer hours sold and 50% lower parts revenue (including the very profitable oil change). They are seeing more repair work on suspension, drivetrains, rusting friction brakes and tyre replacement, but the overall result is now meaningfully negative in terms of the overall returns. Customer behaviour is also changing as they become more used to their BEVs – the initial higher loyalty to franchised dealers has gone with customers reported to be behaving more like traditional ICE customers – shopping around, comparing prices and considering independent repairers. The greater concern is that they start to consider their BEVs like washing machines – unless there is something obviously wrong, they will skip regular services.
Norwegian dealers are now being forced into corrective actions – improving their capabilities and competitiveness in areas where the trends are more positive like crash repair and tyre replacement and putting more effort into customer retention with service plans and specific actions on the remaining ICE park. There will inevitably be a competitive response back from the independents, and this will not alter the fact that the overall size of the cake is reducing, and it is made to a different recipe from that which drove past investment in facilities and people.
The sword of Damocles may not have fallen, but the cord seems to be stretching, so finding ways to avoid the final impact being fatal seems like a sensible strategy now.
This topic was covered in an ICDP webinar in December, and a Management Briefing published last week. Both are available to ICDP members only.
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