By Alysha Webb, Editor and Publisher
ZHUHAI, CHINA — By 2025 dealerships will be focusing on selling more vehicles rather than selling vehicles with larger profit margins. That was one of the most significant finding of a new study commissioned by NADA, says Glenn Mercer, who conducted the study.
Dealers aren’t really “dealers” anymore, he says. That is, they don’t buy wholesale and mark up the price to sell for a profit. Now, everyone knows the price of a vehicle because of the internet. That will drive the change.
Mercer was speaking at the annual convention of the China Automobile Dealers Association about the second study he has conducted for NADA. He also presented the findings in Los Angeles at the NADA JDPA AutoConference LA, held just before the Los Angeles Auto Show, which now goes by AutoMobility LA.
His previous study for NADA, presented in 2012, looked at factory image programs.
This study, titled “The Dealership of Tomorrow,” considered how the dealership business will have changed by 2025.
The good news: The study concluded the dealership model will remain the dominant method of retailing vehicles. But online sales will account for 15 to 20 percent of sales by 2025.
That could produce what Mercer called “death of geography” as dealers are able to reach customers who are much farther away from the dealership. The increased online presence will also lead to increased cyber-security risk, says Mercer.
Since consumers will know the price of a vehicle, by 2025 negotiated prices will have disappeared.
Despite all the fuss about Tesla’s direct sales model direct manufacturer sales will only account for around 10 percent of retail sales. The manufacturers aren’t interested in buying back dealerships, says Mercer.
One manufacturer executive told him, “’We already control 95 percent of what a dealership does. Why would we have to buy the last five percent’?” says Mercer.
Nonetheless, “there is a role for factory direct sales” in the future, he says.
Other predictions: Dealership profits will be lower in 2025; the manufacturers will have more control over dealers as the retail auto business shifts to a service business; and there will be slightly fewer rooftops, but significantly fewer owners.
“In America, thirty years ago we had 30,000 dealers and 30,000 owners,” says Mercer. “Now we could end up with 16,000 dealers and 6,000 owners.”
To conduct the study, which is due to be released on November 15 though not to the general public, Mercer read reports and academic papers; interviewed around 50 dealers; interviewed regulators, vendors, brokers, and professors, surveyed and visited dealerships; and attended conferences.
Compiling it was challenging, Mercer says, because there were so many divergent opinions, topics ranged from narrow to very broad, and “it is tricky to project out over 10 years.”
NADA commissioned the study, he says, because it realized its members were very short-term focused. This study is not an NADA position paper, says Mercer. Rather, it is intended to “stimulate long-term thinking and planning among dealers.”
The dealers surveyed didn’t seem to see change coming very quickly. For example, 35 percent figured factory direct sales would represent less than two percent of all sales by 2025.
The survey also makes recommendations for adapting to the changing retail environment. One suggestion — more stand alone service facilities to take business away from the aftermarket service chains.
It looks at the advent of electric and autonomous vehicles, and the rise of mobility services. A big risk, says Mercer, is “if mobility services converge with autonomous vehicles to break the age-old bond of ownership” between owners and their vehicles.”
