The Incredible Shrinking Car Dealership

Few people love it car dealers. They are stressful and extensive, and it is difficult to get the feeling out of them someone is getting a raw deal. But as the automotive industry becomes more electric and online, companies like Honda are rethinking every aspect of the buying process, including the spaces in which it is produced.

Honda announced today that it is launching a new dealer design, one that takes up less square meters and is modular and flexible; what was once an exhibition space, for example, can be transformed into offices for employees. It will also feature electric vehicle chargers, as the company aims to sell half a million electric vehicles in the U.S. by 2030. “Our dealers are looking for ways to modernize and digitize their business,” said Mamadou Diallo, vice president of American Honda car sales told reporters last week. Recent experiences, he says, have taught the carmaker that selling cars “won’t require as much space.” And they’re not the only ones who want to lose square footage.

Like so many recent transformations, the change is partly a reflection of the pandemic. Automakers have struggled with the shortage of semiconductor chips, a serious problem for vehicles that need hundreds and sometimes more than a thousand to run. The bottleneck of the supply chain means that new car dealers have fewer vehicles on hand to show customers. Meanwhile, inspired by a new generation of electrified direct sales companies such as Tesla and Rivian, major automakers began experimenting with allowing customers to book and even buy their cars online. Ford made the first sales of its electrified sports car, the Mustang Mach-E, on the Internet and made online reservations for its electric van. Volvo said last year that its electric vehicles, which the manufacturer says will account for 100 percent of sales by 2030, will be sold exclusively online.

This might make it more convenient to buy cars, but it does sale they are also easier. Building cars to meet customers ’online orders removes some guesswork from vehicle production, which means fewer unexpectedly unpopular models end up popping up (and eventually selling at a discount) in showrooms. “We’ve learned that, yes, operating with fewer vehicles in batches is not only possible, it’s better for customers, dealers and Ford,” Jim Farley, CEO of Ford, told investors last summer. “But we’re also driving a significant increase in the number of customers who set up and order their vehicles online, so we have better visibility into real demand.”

This pandemic-era adjustment has not always worked in favor of car buyers. Dealers report that the combination of a tight car market and limited inventory means they can offer fewer discounts to customers hoping to get their new purchases out of the lot. Buyers pay more and distributors get more margins per sale. But industry experts are divided on whether these conditions will last beyond the public health emergency and supply chain-related struggles.

However, the era of rows and rows of brands and models and colors may be over. “The dealership doesn’t have to be a Taj Mahal on the freeway somewhere,” says Mike Anderson, president of Rikess Group, an automotive consultancy. Dealers that Anderson advises have begun bringing vehicles to potential customers for driving tests, and then returning to their homes or offices when they close the deal. Car manufacturers such as Tesla, Ford, Mercedes-Benz and BMW are also experimenting with mobile service or getting technicians to travel in customers’ vehicles. In some places, “many of the guests won’t see the dealership at all,” Anderson says.

Dealers could take years or even decades to physically change because it takes time and money to renovate a building. Diallo, the Honda executive, says the car dealership’s new dealer design “is not a program we force dealers to adopt,” but a direction Honda wants its dealers to follow as they renew and upgrade. . Volkswagen of America Network Vice President of Operations Brian Kelly says the carmaker is considering similar adaptations. “We recognize that the increase in the adoption of electric vehicles, the growing consumer preference for buying vehicles through digital retail solutions, and the proliferation of mobile services and vehicle delivery, among a number of changes throughout the world. “will have a future impact on the size and common layout of traditional models. Dealer facilities,” he said in a statement.

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