IS THE CAR DEALERSHIP MODEL OUTDATED? Think again!

The future of car dealers will be becoming a network of mobility hubs.

The world is changing faster than ever triggered by major global trends: technology, innovation, and connectivity. Consumers are seeking equilibrium in all aspects of their lives while their consumption behavioural drivers are constantly changing.

The Global automotive sector is also undergoing a deep transformation, even faster than other industries. Connectivity, Autonomous Driving, Shared Mobility Services, and Electrification (CASE concept) are accelerating the automotive industry’s transformation towards a duality – dealers vs. direct sales, physical vs. digital, product vs. services.

Biggest automakers’ CEOs declared that during the next few years the automotive sector is going to change more than in the past 100 years.

With that in mind, the traditional car dealer business models are also set to dramatically change in the upcoming years. Dealers will not only be allocating selected cars in showrooms but will also be thinking about customer touchpoints and creating suitable spaces to boost their mobility experiences. Thus, becoming a mobility service hub will be one of their primary objectives.

Frost & Sullivan predicted a potential Car-Sharing market of roughly 36 million users by 2025, with a fleet of slightly less than half a million vehicles distributed in the main cities. Likewise, MWC19 Barcelona, Best Mobile Innovation for Automotive, estimated a 7.5 million shared car fleet in Europe by 2035.

Furthermore, more players coming from a group of non-traditional companies in the sector and disruptive companies without any previous experience will force dealers to rethink the relationship with the brand and redraw the business model of vehicles in the market.

Companies such as Apple…. proves this: they do not come from the sector itself. However, they are considered potential threats, as they have the capacity to be rivals due to their disruptive services and products, and because of the fact that they listen to their customers and offer what they ask for through the creation of unique experiences.

It seems inevitable that dealerships have to be transformed or, more accurately, rapidly adapted to emerge as mobility services centres in order to ensure their continuity as a crucial link of the chain. The new role of mobility hubs in urban areas will favour and strengthen Car Sharing, Subscription, and other mobility services.

The main drivers for this change are:

  • Technology: Introduction of new mobility services software.
  • Customer Experience: Focus on delivering unique experiences.
  • Skills: Train employees on new roles and skills.
  • Data: Enable customized treatment utilizing data as a key pillar.

These different drivers on which the dealership will have to act and make decisions have several challenges associated:

■ Technology and tools: find and select a mobility technology partner who can provide a digital, connected, seamless and integrated solution for the more demanding customer who proactively and quickly expects solutions (either products or services) adapted to their needs.

■ Human capacities: acquire new skills and train own resources. New services that allow the customer to use vehicles in new ways, necessitate momentous changes from a technological perspective in relation to the skills required as compared to the traditional selling model.

■ Partnerships: look for alliances. The new business model based on the use of the vehicle and the development of mobility services will require collaboration with different actors both inside and outside the sector.

■ Relationship with the brand: decide the level of engagement and alignment with the brand mobility strategy. Dealerships could embark on projects independently, without the involvement of the manufacturers and their respective importers or be engaged and aligned with the manufacturer’s mobility strategy.

Whether by aligning with the brand or moving forward with the independent project, it is clear that dealers need to be prepared to transform their products and services. The dealers must introduce measures for retraining their own staff, and they should look for best-in-technology providers that guarantee unique customer experiences.

Certainly, dealers need a new business-model approach in the era of the CASE concept (Connectivity, Autonomous Driving, Shared Mobility Services, and Electrification)

So, what is the plan? It is to rapidly start developing the dealership footprint based on mobility trends. Dealerships must continue improving the customer experience and introduce modern technologies for digitalization and more innovations in different areas, like in-store, online and offline car purchases, test drives and maintenance services. They must also maintain the focus on operational excellence and improve operating efficiency.

In the midterm, the shift from a traditional purchase approach (ownership) to a customer-based view of understanding their mobility needs and creating a more personalized customer outreach can help dealerships offer various products or services.

In the long-term plan, dealerships must find the right balance between protecting the traditional business while generating growth in what is already a disruptive mobility era. Focusing exclusively on new mobility models could be unsuccessful. Therefore, dealers should consolidate a business mix approach considering customers’ insights. The focus should also be on capturing new revenue streams while implementing operational improvements and digitizing traditional segments to emerge as Mobility Hubs for the upcoming changing realities and new customers’ demands.

CONCLUSIONS

1 The car dealership will play a different role. In a near future, the sale of vehicles will not be the main purpose of the car dealership, instead, these dealerships will gradually become mobility services centres.

2 The future is digital and what is digital will influence us in all areas of our life and our relationship with others. The automobile and its sales and service channel will not be an exception.

3 People are key. Technology is a tool, but human beings are the protagonists. Customers are the centre of everything that happens while external co-workers and employees are the actors who make decisions and execute the processes to give the customer a better experience.

4 Information is the new “oil”. Customers want to be given an experience suited to their tastes, preferences, and needs at all times. To achieve this, information based on data must be obtained from remarkably diverse sources which will require advanced analysis capabilities to become true quality information.

It is not a milestone of the future. Ready or not, mobility is transforming the Automotive Industry and forcing dealerships to become Mobility Services Centers. In essence, MIRAIICO remains to be the preferred mobility partner to deliver mobility expertise on business development.

Sources: Frost & Sullivan. MWC19 Barcelona. NTTData/ Mckinsey As-dramatic-disruption-comes-to-automotive-showrooms-proactive-dealers-can-benefit-greatly

Mobility Industry Expert, Gabriel Madero, MIRAIICO