What does the future hold for the retail powersports industry?
If you are asking yourself this, you probably already work in the powersport industry and don't need the definition. For the rest of the readers, powersports is a subset of motorsports encompassing motorcycles, ATVs, snowmobiles and personal watercrafts. For the purpose of this article, we'll be focusing mainly on the motorcycle side of things, mainly because they are the closest to becoming a reality when dealing with electrification. While there are electric ATVs, snowmobiles and PWC out there, they are far and few between and will make major strides once electric motorcycles are fully established.
As a side note, this article is purely speculative and documents the personal thoughts of an employee working at an electric motorcycle company, analyzing how our product line may fit into the retail business as we fight to occupy more floorspace at the dealership. The article will cover 3 aspects of the powersport retail business applicable to electric motorcycles, which are the margins, upsells and accessories and finally, repair and maintenance. This article will steer away from a direct comparison between internal combustion engine motorcycles, as the entire preface is to understand how electric motorcycles will integrate at the dealership level, and not displace traditional products at this time. Though moving forward, displacement at the brick-and-mortar level will be a natural progression until new retail models are established.
The first point to discuss is the implementation of margins with this new product line. Unable to speak on behalf of all electric vehicle OEMs, the general consensus is that we (electric motorcycle OEMs) understand dealers need margin to thrive, OEMs provide as much dealer margin as possible to incentivize, but new technology costs more. Those three phrases are inherently linked, but also somewhat in opposition. To be able to offer higher margins, COGS (cost of goods) needs to go down. With the reduction of maintenance, electric OEMs are also removing from the equation another profitable revenue stream from the dealers hands, so the question is, does the additional margin from the sale of the product warrant the reduction of maintenance revenue coming in over the lifetime of the customer? Probably not, but that’s not a bad thing, which I will explain in more detail below. Rest assured that OEMs understand the need to incentivize all parties in the equation and as we grow as an industry, COGS of batteries and power electronics will continue to drop year on year, and, at least from Evoke Motorcycles, those COGS reduction will get passed along to the dealers to keep the doors open while you build the community of electric riders.
Typically on a high moving gas motorcycle, distributors or OEMs may kick back 4 – 15% margins on the product, forcing the guys on the floor to scramble to include helmets, gloves and other gear into the deal. On the electric motorcycle side of the equation, those accessories are still part of the deal, only now you’re starting off with a 20 – 35% margin on the product to make things that much more appetizing. Add to the fact that a good chunk of the riders coming in for electric motorcycles are going to be new riders (since e-motorcycles don’t have the complexity of the clutch and multiple gears), it makes the safety accessories a must-buy to those entering the sport.
Additionally, moving to a vehicle that is completely digital allows for a whole heap of new accessories to upsell. On the fundamental side of things, you have your go-to safety gear, but as the industry grows and develops, new smart safety gear will begin becoming more prominent. Imagine selling smart helmets with HUDs that integrate directly with your electric motorcycle, having a 360 diagnostic view of your motorcycle right on the visor. Or selling smart riding boots that pair with your e-bike to light up as you engage your turn signals. Think about the margins you earn on a pair of riding boots, and triple those margins wherever you add in the word "smart".
Those accessories of the future don’t just stop at physical safety products, but will soon expand into the digital age. Imagine selling wallpapers for your electric motorcycle display screen, or charging a lump sum for a completely new digital gauge cluster skin. The dealer ends up making great margins on digital services along with the installation time of the technician to flash it onboard to the bike.
How about charging out 1.5 hour’s worth of labour for throttle map re-tuning, to get the perfect setup for the customer’s riding style. On a traditional ICE vehicle, that throttle re-map would take a lot longer, custom tuning hundreds of data points to tweak the bike’s A/F ratios for a customer. Now it’s as simple as opening up an app or laptop and adjusting sliders. Moving forward, what encompasses the idea of “good customer service” will evolve, making it easier to handle customer's expectations while spending less time on physical repairs.
Finally, the elephant in the room, repair and maintenance. As many people know, the electric motorcycle only has a few moving parts that make up the power train component. This includes the electric motor and the final drive; everything else that is required to make motive power is all electronic. The act of moving electrons from the battery and turning it into motive force is really an amazing accomplishment of mankind. What that means from the dealer is that there are no more oil changes, valve adjustments, bottom end rebuilds, gasket replacements, transmission rebuilds, coolant refills, and so much more. This means that from the consumer end of things, electric vehicles are much more reliable overall than their gas counterparts. BUT that doesn’t mean they’re maintenance free! The misconception is that electric motorcycles function exactly like a mobile phone, set it and forget it. While the mobile phone and electric motorcycle share some overlap when it comes to battery technology, the major variable is the discharge rates and environmental conditions the battery is put through on a daily basis. Electric motorcycle batteries require periodic balancing and safety checks to ensure its working at prime optimum levels. Add to this all the other components that electric motorcycles share with motorcycles and you’ll be seeing your electric motorcycle customer sooner than you think. At the end of the day, beyond the standard oil changes and coolant flushes, everything else on a fossil fuel burning motorcycle usually falls under repairs, and repairs by nature are accidents that no one plans
So how will electric motorcycles fit into the future of the powersport retail industry? I believe dealers are going to make good margin retailing e-motorcycles to new riders, and new riders are going to love the simplicity and low maintenance of them that will impact overall sales volume. The upsells and accessories for e-motos are going to be wider, with more selection for the dealer to sell, while customers are going to love the variety and future connectivity to their newly purchased e-motorcycle. And finally, the dealer's service centers are going to go through an evolution from working on purely mechanical components to a more technologically savvy technician that is able to provide greater service to customers by spending less time monkeying around with hard parts, and more time digitally diagnosing through a tablet and re-flashing chipsets to get customers on the road again. That sounds like a win-win-win to me.
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