With several growing trends in the automobile world, electric cars are beginning to gain a lot of attention, and many seem to be replacing old-fashioned combustion engines during this process. Given some of the overwhelming media coverage headlines, a lot

of people may be thinking that petrol and diesel engines are destined for the scrap heaps. However, the reality is quite different. Yes, the car industry is enjoying some remarkable change in the manufacturing of innovative automobiles, yet still, experts believe there is much more ahead for the industry.

The recent Frankfurt Motor show in Germany has again been inundated by the need for electrification in the automotive industry. Brands like Volkswagen announced in certain terms that it would build electrified versions of every model under its range by 2030. Automotive powerhouse Daimler, the parent company of Mercedes also announced that it would have electric versions of its models by 2022.

Although electrification has been gaining popularity in the automobile world, this trend equally comes with a lot of limitations, as countries will have to start investing in infrastructures that will fuel electric vehicles.

While electric car enthusiasts are anxiously rooting for this technology, it is important to note that electrification will have to wait a little longer before it finally kicks diesel and petrol engines to the back burner. While automobile companies are embracing this technology, they aren’t looking to get rid of diesel or petrol engines.  They are simply promising to manufacture electric versions of all their car brands.

For people who have little knowledge of the technology, it is important to know that while electric vehicles can be referred to as fully electric battery powered cars, they can also be used to describe hybrid-powered cars. Anyone who knows anything about hybrid cars, will inform you that hybrid comes in many forms. For instance, plug-in hybrid comes with a large battery capacity and can entirely run on electric power for some time, although it also has a petroleum engine. There are also full hybrid electric car like the Toyota Prius that powers electric motors with a conventional engine. The difference with this type of electric car is that you don’t need to plug it in for a recharge.

For people who may wonder why it will take some time before cars become fully electric, it’s mainly due to the fact there are several laws that comes with the adoption of a new technology. Governments have to invest into infrastructures that support electric vehicles, which is costly and time consuming.

It has often times been said by dealers that “everything begins when you sell a car.”  However, is this term still true into 2018? Is it worth dealers cutting deals and losing cash on an initial sale, with the hope and expectation that the dealer might pick up a service customer?

Some say that merchants could have it in reverse. Dealers are investing 80 percent of their energy and strategy into the piece of the business that returns 20 percent of their revenue: sales.

When actually, fixed operations speak to approximately 15 percent of automotive dealer income. However, focusing on the maintenance of vehicles is scarcely on the radar of numerous automotive dealerships.

Most dealerships focus on sales because that is the means by which they achieve the highest return in the shortest amount of time. It’s the lucrative but more fun side of the business. It’s where sales-people learned a crucial skill: how to negotiate with the processing plant as well as haggle with the consumer.

One of the best tactics to ensure consistent revenue, is to provide the customer with incredible service.  This keeps the dealership clients satisfied, and thus they continue to take their next car back to the service department in which they are satisfied, regardless of whether they bought their car from that particular dealership or not.

Auto resale services such as CarMax won’t repair the cars that they sell. Neither will a dealership like Nissan that became tied up with Nissan’s high-volume sales technique, and doesn’t have the accompanying service capacity.

Throughout the coming three years, many predict that the dealership’s prosperity will depend less on the number of new vehicles they offer, and more on the number of client pay repair orders they satisfy- as well as how well they deal with and leverage their inventory.

Earlier this week, the Environmental Protection Agency (EPA) released its final determination in its mid-term review of greenhouse has emissions that will govern new passenger vehicles sold in the United States from 2022-2025.  The agency decided that the standards are too high, and now plans to lower them.

Many news articles have been written about the EPA and the decision, and it seems that auto companies wanted to revisit the standards.  The reason may not be about improving auto standards but rather innovating the credit market.

Here is the relevant text, which comes in a section about electric vehicle sales and is intended to explain one of the major differences between the original determination completed by the Obama Administration and the one completed by the Trump Administration:

“The agency’s January 2017 Determination was completed at a time when the trends and data…showed that the majority of the major car-manufacturing companies were “over-complying” with their relative GHG compliance requirements and building up credits. EPA’s latest data show that starting in MY 2016, many companies, for the first time, had to rely on credits in order to comply with the program. While these companies did remain in compliance, they are relying on banked credits which suggests that it may be increasingly difficult for them to comply going forward as they use up their supply of credits. Additionally, the stringency curve dramatically increases at around the same time these credits could run out, further complicating the feasibility of compliance for MY 2022 – 2025.”

At the time that this determination was made, the industry as a whole was producing vehicles whose performance was already above the standards.  As a result, companies were focused on greenhouse gas emission shortfalls.  When the oil prices crashed in 2014, American consumers began purchasing more SUV’s and pickup trucks that were less efficient than cars. Because trucks are less efficient than cars and generally more costly to improve, compliance levels started to drop. Following the oil drop, incentives on flex-fuel vehicles expired.

While the EPA discussed these developments as indicative of a problem, the credit system was still working as intended. The credit provided flexibility and the ability to reduce compliance costs in the event of a plunge in gasoline prices.

Part of the problem has to do with the kids of vehicles that companies sell in regards to the EPA rule.  The three biggest U.S. auto companies that were major credit consumers in 2016 were GM, Ford, and Chrysler.  Moreover, some of the big three will soon likely be out of banked credits. After consuming 13 million tonnes of credits in 2016, GM, for instance, had only 19 million left entering 2017. Chrysler and Ford are in similar situations. These companies were all likely consumers of credits again in 2017, though EPA has not yet publicly released that data.

As of March 2018, Honda announced that the Honda Accord is not selling as well as anticipated.  Honda is asking dealers to help move their Sedans off the lot, and because of the slow sales- will also halt production in spurts over the next few months.

According to popular news source Automotive News, Honda is telling its workers at their Marysville, Ohio plant to take two days off per month from April to June. Honda will extend it’s summer shutdown in July by five days, making for a total of 11 days that production will idle for the Accord.  As an alternative to days off, employees can opt to work jobs not related to production on those 11 days instead. A Honda spokesman told Automotive News, “This is just really business as usual and we’re adjusting production down to match the market condition at this moment.”

The market shows that consumers are starting to favor crossovers over sedans, so it’s expected that the Accord is experiencing a drop in sales.  This February, Honda sold 50,178 copies of the CR-V crossover but just 37,430 Accords. On March 1, Honda had a 104-day supply of Accords, which is quite high compared to the industry average of about 70 days. And it’s particularly high by Honda’s standards.

Honda typically stays away from offering incentives to buyers, however time will tell if the automaker plans to move or cut down on inventory.  Earlier this month, Honda announced that they were “pleased with the growing market share and top transaction prices that the all-new 2018 Honda Accord is garnering in its segment.”  However, they plan to “work collaboratively with dealer partners to ensure the overall value proposition with each of our products is competitive in the marketplace.”