Introduction to a highly opinionated thought paper.
In this paper we show how the current dealership model is not viable, and introduce 10 new business models, as well as a number of quick fixes to increase profitability of the network. Please join our webinar here
In the past years, the automotive industry has seen many white papers addressing the challenges of automakers and dealerships. All of them carefully suggest that if the retailer networks ever want to see the dawn of the new era, they urgently need to transform.
But we believe it is time we all faced the harsh reality: the transformation of a regular roadside shop & service centre into an AI-driven, VR-enabled, customer-obsessed showroom is both impossible and unnecessary.
Why do we think the dealer transformation is not possible? After all, during over a hundred years of the existence of the automotive sector, it was always a dynamic industry with a strong capacity to innovate. Its ability to reinvent itself helped it to weather more than one storm, including the recession of 2008. What is different now?
The simple answer is: the world. The current pace of changes in society is so quick that almost all industrial producers find it challenging to cope. The automotive sector is being hit by several disrupting forces at the same time. Shifting customer expectations, the development of electric vehicles, sharing economy, digitalisation, and growing pressure for a more eco-friendly world are just the top of the list. Sure, for some buyers who seek personal advice the dealership still is the place to go, and test-drives are still important. But in general, the whole relevancy of a dealership business model is being questioned. Already now, buyers can skip visiting the shop entirely and order their car online. In the world where digital dominates over offline, why have a middleman at all?
Mobility, in general, is becoming a service, while the sharing economy steadily grows along. Technological developments such as autonomously driving vehicles and sharing initiatives lead to more efficient use of cars. With one OEM after another entering this market (e.g. BMW’s and Daimler’s DriveNow and car2go, now merged into ShareNow and FreeNow), this trend will likely cause a further decrease in new car sales at the dealerships.
One can argue that the shared mobility will lead to more usage of an individual vehicle, and the more a car is used, the more it needs service. Therefore at least some workshops must be future proof: after all, service, not a new car sale, is the primary source of income for a car dealer. Well, think again. The new generation of cars already needs less unplanned maintenance: advanced software helps drivers to take better decisions, stop faster, and park better, which means fewer accidents and therefore less money spent on collision repairs. The necessity for regular maintenance is going down with the rise of hybrid and electric vehicles: scheduled service of their systems, including battery, motor, and associated electronics, are minimal; even the brake system of an EV lasts longer than that of conventional vehicles.
As a result, the dealer business is rapidly waning in many countries, and will start to do so in all others. For example, in the Netherlands, where digital innovations and the proliferation of affordable public transport are shaping the current mobility landscape, the number of dealerships has dropped almost 45% since the nineties, and the next five years are predicted to see another 40% drop. The massive investments needed at the corporate level for EV development, as well as at the network level are seen as prohibitive.
In our new white paper, The Future of the Automotive Dealership, we give a more detailed view of the threats to the industry. We also bring to your attention ten business models which a dealer, independent or part of a network, or a thoughtful OEM would be able to consider as an opportunity for dealerships to survive.
Of course, we will also highlight a number of solutions Futurelab can offer you to help improve the viability and profitability of your network by increasing conversion rates and improving the customer experience. .
We are happy to invite you to a series of webinars where we will share the insights from the whitepaper with you, and also showcase a number of quick solutions to improve the business of your dealerships.
If you cant join us then, we have a recording from one of our previous.
 Source: BOVAG, Association of automotive dealerships and workshops, the Netherlands