What's In the Cards for Europe's Car Dealer

Auto Tech Outlook | Wednesday, July 13, 2022

The dealer sector in Europe has undergone the most substantial changes over the past 10 years, with the number of dealer outlets falling by 16% to 52,000 across Europe.

FREMONT, CA: The least expensive activity for dealers was already new-car sales, far behind aftermarket, and used-car sales. In this area, margin pressure will persist. As more vehicles sell online, OEMs are seeking closer consumer engagement, and the trend toward more leasing or personal contract purchases continues, the dealer role in new-car sales will alter. New competitors with innovative business plans, such as car subscriptions, are expected to enter the market. Even though it is facing economic difficulties, car sharing will witness a resurgence. The new-car industry is expected to implement an agency model for dealers who choose to promote their products in a consultative manner in the future. Additionally, it will be necessary because frictionless online and physical experiences, or what some refer to as omnichannel, are a desirable future for people looking to buy cars. Customers will seek information, make personal connections, and take test drives as they move between the online and offline worlds during the automobile purchase process. But it shouldn't matter where the ultimate transaction takes place.

Megatrends bridging the profitability gap

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Megatrends in the automotive industry have created new opportunities for dealers that have the potential to close a sizable amount of the profitability gap:

• New business concepts, such as establishing and running battery-charging stations or managing car-sharing fleets;

• Streamlining operations and offerings Consolidation and economies of scale are also important in sales operations.

• Enhancing the customer experience through the use of big data analysis, catering to specific client requirements, and providing innovative loyalty and incentive structures;

• OEMs are aware of the value of a strong and accessible dealer network. To promote consultative selling rather than aggressive selling, dealership staff will be paid a salary rather than a commission.

• In an omnichannel setting, dealers will assist consumers in customising their vehicles, scheduling test drives, delivering vehicles, and offering services. For instance, there will be chances for revenue-generating if electric vehicle (EV) ownership is connected to car-sharing services, as over the holidays.

Used-car operations are already a dealer's second-largest source of revenue, after the aftermarket. The success of used-car operations will continue to be a crucial pillar of dealer success. The good news is that even if new automobile sales may have peaked in Europe, secondhand car sales will increase. The principal motivators are the expanding trends in car leasing and auto subscriptions. Due to shorter holding periods, these business models produce more used cars than traditional car purchases. Leasing is especially popular for alternative powertrains because private buyers are less prepared to assume the greater asset risks involved. Additionally, OEMs are starting to promote leasing because it keeps customers close.

Dealers groups have a lot to gain from new business opportunities related to automotive megatrends, a changed position in new-car sales, and professionalised used-car operations. Scale economies will become more crucial than ever. Making the appropriate investing choices will be crucial during these difficult times. The most minor change will probably be the replacement of the archaic term dealer, which many people linked with the antiquated practice of bartering. There are many possibilities available, including service factories, sales agents, and retail professionals.

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