Are dealerships on the way out?

You might not want to buy a car but it can be fun looking around a dealership to see what’s on offer. That may soon change. Some 85% of leaders in the global auto industry are convinced 20-50% of dealerships will be shut within seven years. So what will local dealerships do then? And how will we buy a car?

Touch of a button

KPMG surveyed 907 automakers, suppliers, dealers, financial services providers, rental companies and mobility services for their opinions. Over half of them say at least 30% of dealerships will be gone before 2025.

The KPMG report concludes the results are a warning for retailers because customers buy goods and services at the “touch of a button”. Certainly many people are buying things online. But there is usually more to buying a car than just touching a button. Touching a button is the last thing we do in the long process of research, test driving, financing, and making the final decision.

Buy online

In the US, a CapGemini survey of prospective car buyers during 2016 found:

  • 60% were willing to buy a new car online
  • 88% still needed to see the vehicle or test drive it
  • 60% wanted to avoid sales pressure at a dealership
  • 55% still wanted to be able to negotiate the price.

The trend to buy online is already on the radar for car brands, such as Citroen, Hyundai and Peugeot. For example, Citroen aims to sell 10% of its models online by 2021 – only 3 years away. Hyundai is now selling online in the UK. Most manufacturers will sell their vehicles online, and may even bypass dealerships completely.

Already Amazon has been selling Fiats in Italy and now has big plans to sell cars online in Europe. The recent launch of the Amazon Vehicles research portal is part of that. While there are few details about the giant’s foray into car sales, it is a sign that dealerships cannot afford to become complacent.

How will dealers survive?

Naturally the National Franchised Dealer Association (NFDA) argues the case for dealerships. Its analysis found the number of visits to UK car dealerships actually reached a 5-year high in 2017. People were also visiting more dealerships on average.

Looking at the history of dealership visits is not necessarily an indicator of visits in the next 5 years. Whether or not dealers do survive depends on how they manage the inevitable move online.

For example, prospective buyers are likely to want to test drive them first, especially if it’s an unfamiliar vehicle. They need reassurance about what to do if the car turns out to be faulty. They also have to understand how the delivery process will work.

Dealerships could decide to restructure into repair and service factories or used car hubs. Given the high cost of property, dealerships might also get together with existing retailers to share space. This is already happening in the UK with Rockar and High Street chain, Next.

Future of sales

It is possible online buying will not completely replace dealerships but create three different sales models:

  • 100% online transactions
  • Hybrid – start in showroom; finalise online
  • Hybrid – start online; finish in showroom.

Some experts say the sales aspect is likely to move online, leaving the roles of repair, service, storage and test drives to the dealership. Dealerships may not be too happy about the prospect of giving up their stranglehold on car sales.

Would you miss your local dealerships?

Corrina Baird

Writer and expert

Corrina used to lend her car to her kids and discovered first hand what Ls, Ps and demerits mean for greenslips. After 20 years of writing and research in financial services, she’s an expert in the NSW CTP scheme. Read more about Corrina

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