Dealers need to take proactive action by launching new businesses and forming partnerships, even with rivals, as automakers face the “fight for their lives” in a rapidly changing automotive landscape. That’s according to a study commissioned by the Canadian Automobile Dealers Association (CADA), which lays out the group’s vision for how automotive retail will evolve through 2030.
“Dealers are going to survive, [and thrive] no doubt about it,” now-former CADA John White, who spoke to Automotive News Canada before his tenure ended Sept. 1. “The degree of change is going to be different depending on where you are and the timelines are going to be different. Our message is, ‘look at it today and try to plan for what that means for you.’”
The 50-page report, titled Driving The Road Ahead, was prepared by Ontario-based Seguin Advisory Services over a nine month period. It comes as the global industry adapts to shifting buyer habits, the emergence of new technologies and expectations that car makers from India and China will enter the North American market.
DEALERS MUST ADAPT OR SUFFER
Consumers, meanwhile, are spending more time online researching before buying new vehicles — sometimes bypassing dealerships altogether — while automakers are investing heavily into electric vehicles and autonomous technology.
White said dealers who diversify their businesses and do not rely on one brand or on one aspect of the business will have an easier time succeeding in a future that is being shaped by global trends.
“At the end of the day, don’t have all your eggs in one basket with one business, one [automaker], one market, one of everything. You’ve got to diversify in some way, shape or form,” he said.
The report warned that automotive “brands are in for the fight for their lives for the foreseeable future. ... Dealers collectively can be an integral part of the solution instead of being targeted as the problem.”
As consumer habits and vehicle technologies evolve, brands will place “ever increasing demands on their franchised dealers [focusing] on the customers’ experience in both the physical and virtual forms,” the report said.
“At the same time, brands will likely continue to download costs to their dealer network. ... to account for this, dealers ... must develop new lines of business.”
Other major takeaways:
NEW BUSINESS OPPORTUNITIES
The report urges dealers to “expand and broaden their revenue opportunities,” whether that means expanding into similar businesses such as collision centres or by “developing expanded business opportunities.”
In other words, the days of simply sticking to selling vehicles for a steady revenue stream might be over. Automakers are investing in ride-hailing and car-sharing services and creating new subscription models, and dealers should consider doing something similar, according to the report.
What new areas dealers expand into would depend on their existing businesses and markets. Tammy Roach, dealer principal at Charlottetown Mitsubishi on Prince Edward Island, said her store, which opened last year, is already examining how to expand business, including in its service department.
“One thing we advertise is that we will work on any make or model. It doesn’t matter. We’ll treat you like one of our own,” she said. “You’ve got to keep your shop full.”
As well as accelerating dealer consolidation, the past several years have seen a host of joint-venture agreements, mergers and acquisitions among automakers, suppliers and high-tech companies.
Expect the consolidation trend to continue, the report’s authors said. But also expect more dealers to enter into joint-venture agreements with their competitors as a way to keep costs down.
White said it would be important for dealers to “share costs in nontraditional ways” as the cost of doing business rises and as margins tighten. He pointed to an example of several dealers in Quebec forming an agreement to jointly run a CarrXpert collision-repair franchise in their market.
Steve Chipman, CEO of the Birchwood Automotive Group in Winnipeg, said he has seen firsthand the benefits of such a partnership. Nearly 20 years ago, he said, Ford dealers in Winnipeg partnered to form a separate company dedicated to servicing their wholesale parts needs.
“We know how to collaborate and cooperate,” he said. “If you have a scarcity mentality, you try to hoard everything yourself. But if you have an abundance mentality, there’s more out there.”
USED CARS PRESENT OPPORTUNITY