Nissan could squeeze EV profit margins

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Switching to electric vehicles is an expensive proposition for automakers. This requires walking a tightrope, as automakers want to price their EVs competitively with other options and ensure dealerships are still able to turn a profit to keep them happy. As Nissan plans to release 15 new electric vehicles and aims to have 40% of its sales come from electric vehicles by 2030 in the United States, the Japanese automaker is seeking help from its dealers to offset the high costs of development of electric cars. Nissan will achieve this by reducing the profit margins of electric vehicles.

According to Automotive News, Nissan plans to cut dealer margins by 2.5% for the all-electric Nissan Ariya. Nissan dealers who are aware of what is happening say the new plan would see Nissan dealers receive 8.5% of the Ariya’s list price as a markup. The profit margin for the sale of vehicles equipped with an internal combustion engine is currently 11%. Nissan is still working on the plan, but the automaker has told dealers it needs to cut profit margins as it needs to help offset the high costs of developing electric cars.

Like many other automakers, Nissan has no choice as it seeks to focus on developing electric vehicles for sale. Tighter emissions and fuel economy regulations are forcing automakers to develop electric vehicles, but the associated costs are incredibly high, due to the short lead time available and the need to develop new powertrains high tech from scratch. Unfortunately, Nissan is taking a risk in trying to recoup some of the costs from its dealerships.

Without the same moving components that require over-the-air maintenance and software updates, EVs will see dealerships lose much of their gross profit from parts and service. Automotive News claims that dealerships can generate 60-80% of gross profit to cover dealership expenses from maintenance work. There’s also the issue of investing thousands of dollars in the infrastructure and equipment needed to charge and maintain electric vehicles at dealerships, costs that dealerships typically have to pay.

Clearly, dealers aren’t very happy with the new plan. Those who Automotive News spoke to believe that high R&D costs should be passed on to the consumer with higher vehicle prices. Especially considering the loss of revenue from service and parts, and the high costs of chargers and necessary equipment.

Nissan isn’t the only automaker seeking help from dealerships to cover the high cost of developing electric cars. The outlet says Mercedes-Benz will cut dealer margins by 0.5%.

Other automakers have done similar things, but manipulated a vehicle’s invoice. The 2022 Ford Lightning invoice is a mix of a traditional invoice and an electronic invoice, with the invoice price being calculated based on eight different factors. With the Hyundai IONIQ 5, the South Korean automaker has made the invoice price and MSRP the same, limiting the type of offers dealers can apply to the vehicle. Other automakers that have also eliminated the typical margin between an invoice price and an MSRP include GM with the 2022 Bolt EV and Ford with the Mustang Mach-E.

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Pictured: 2023 Nissan Ariya

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