The vehicle dealership model will evolve in the coming years, but it’s not about to disappear anytime soon, say those in the industry.
A report that suggests the growth of electric vehicles and the eventual shift to ownership and operation of autonomous cars by ride-sharing companies will lead to the demise of dealerships as soon as 2025, doesn’t worry the president of the Canadian Automobile Dealers Association (CADA) and other industry stakeholders.
John White says the report, titled Rethinking Transportation 2020-2030, researched and released by the San Francisco think tank RethinkX, is over-exaggerated and oversimplified.
One premise of the report is that pending government approval of fully autonomous vehicles, which RethinkX forecasts to happen in 2021, demand for vehicle ownership will plummet resulting in 70 per cent fewer passenger cars and trucks produced by manufacturers each year.
Moreover, it suggests this could result in the disruption of the car-value chain with dealerships, maintenance and insurance companies suffering “almost complete destruction.”
It says car dealers will “cease to exist” by 2024 given that transport-as-a-service ehicles will be fleet owned, that car insurance costs will fall 90 per cent, and almost US $50 billion in revenue from gasoline taxes will be lost (in the United States).
“Dealerships are an essential element of our business going forward,” said Ted Lancaster, vice-president and chief operating officer of Kia Canada.
Dealers must adopt new ways of reaching consumers, particularly by embracing new ways of easing the transition from online shopping to in-person purchasing, but the physical aspects of buying a car — test driving, having features properly explained — remain critical to the process, Lancaster said.
“If you step back,” White said, “there have been predictions of the demise of the automobile dealer network since the advent of the Internet, and these have proven to be false over time.”
STILL SINGLE-DIGIT SALES
“You still have some 24 million vehicles on the road in Canada that need places to be serviced. There are still going to be a couple more million a year [vehicles sold], of which less than one percent at this point is EVs.”
White acknowledges that electric vehicles will require less service as they have fewer moving parts, but said they present a challenge of a different sort. “If anything, the electronics are going to become so complex and complicated, they’ll require a very educated, well-trained network to complete those repairs because everything breaks down at one point or another,” he said.
CHANGE IS COMING
Todd Bourgon, executive director of the Trillium Automobile Dealers Association (TADA) of Ontario, agrees.
“We won’t put our heads in the sand and suggest the service model is going to be the same; it will definitely change,” Bourgon says. “But the thing we know for a fact is you can’t figure out if the space in that vehicle is functional for you and your family by not being able to sit in it, and you can’t do that if you’re just buying it on the Internet.
“Quite honestly, all cars would be sold on the Internet right now if that was the case,” Bourgon said. “Right now, you don’t see the infrastructure or the demand in place to even support the time line suggested.”
Ready Honda owner Bob Redinger in Mississauga, Ont., is dubious of the report’s projected timelines.
“The big thing that’s holding back electric cars is obviously the driving range and operating in cold temperatures to make [them] viable for day-to-day use,” Redinger said. “For shortterm commuting yes, but who’s really buying cars for short-term commuting? Not the majority of drivers.”
Joe McCabe, president of Pennsylvania-based Auto Forecast Solutions, which has most of its clients in Canada, says the report is reactionary to the current cycle of electrification. “I think there are too many moving parts to completely throw the entire sales model on its ear,” McCabe said. “I think we’re very far away from having a tipping point where most vehicles are electrified and subsequently there are no dealers anymore.”
Chad Heard, spokesman for Hyundai Canada, said the Genesis online-concierge model works for a small volume premium product but would be hard to scale up for mainstream brands.
“What the industry will more likely see over the next 10 years is a simplification of the shopping and ownership model through digitization,” he said. “If a customer is buying a vehicle, moving things such as trade-in evaluation or lease and finance paperwork online allows dealerships to spend more time educating the customer about the product, how it’s differentiated from the competition and most importantly, how the features work.”
Paul McCallum, vice-president of global automotive accounts at Bond Brand Loyalty in Mississauga, Ont., said predicting the future in today’s fast-changing world is a fool’s game.
“I can guarantee that whatever you and I might agree might happen in 10 years, we’re going to be wrong,” he said.