8:57 am, May 28, 2024
Car dealers remain as important as ever, despite ‘seismic’ changes in the automotive industry.
That’s the verdict of ICDP managing director Steve Young, who says that shifts have only ‘underpinned the crucial role dealers continue to play’.
Writing in Cox Automotive’s Insight Quarterly, Young pointed to consolidation, shifting manufacturer strategies, and the ongoing agency model debate, as areas which could have impacted retailers.
However, he says that dealers continue to play a key role in the have only underpinned the crucial role dealers continue to play in the sector’s ‘evolution’.
He wrote: ‘What these stories highlight is both the opportunities and challenges in automotive retail.
‘A simplistic approach adopted (with expensive external ‘expert’ advice) by some OEM brands and disruptors like Cazoo towards retail has ignored the critical support provided by dealers to keep the wheels turning.’
Young added that some manufacturers have mistakenly thought that the ‘customer journey’ and all buyer needs can be managed by a few ‘rigidly defined processes.
He added: ‘In reality, there are probably more types of customer journey out there than we could ever imagine.’
Also writing in the latest report is Phillip Nothard, Cox Automotive’s insight director. He echoed Young’s thoughts that dealers still have a crucial role to play, despite a changing marketplace.
He said: ‘Despite challenges from manufacturers and online retailers, dealerships remain essential due to their customer-facing role and core functions like aftersales support.
‘The key to success lies in adapting to changing customer needs while proving value to manufacturers.’
‘Nobody believes that you can avoid having retail outlets in some form’
Young insists that even for direct-to-consumer brands, dealers are an essential part of the buying process.
He pointed to the likes of Lithia, Penske and Group 1 all investing in the UK as proof that the market remains strong.
He said: ‘The dealer handles the used car in whatever way the broader system demands. That might be buying it in for resale at risk or acting as a service provider to prepare it for a second or third lease by the manufacturer.
‘Still, again, some elements of inspection, logistics, preparation, and remarketing will always be required as long as the first owner does not keep a car for life.
He added: ‘Nobody believes that you can avoid having retail outlets in some form (including Tesla, Nio and the other direct players), so the debate is not about the need for dealers but about the need for a manufacturer to mitigate risk through the wholesale stage, and whether a network of 100-plus dealers operating largely independently of each other can achieve a better outcome in terms of volume and net pricing than through a centrally-directed approach.
‘Overall, the need for dealers is key, and the opportunity to get a reliable return on investment is well-proven. That is what drives the giants like Lithia, Penske and Group 1 and brings them to Europe.’
