For many months we have seen a frenzy of negative media attention on the automotive sector including comment on franchised dealerships, PCPs and diesel emissions.
Last week we saw headlines like “Old – Fashioned Forecourts: end of the road” with predictions of online dominance and questions over investment in the bricks and mortar of franchised dealerships.
This is bad for morale in the sector and amongst important stakeholders including banks and investors. I thought it was time for a bit of perspective on the sector:
1. Franchised dealerships only exist if they represent motor manufacturers and both parties make money. This is the great strength of the franchised dealer model. I firmly believe retailers will have bricks and mortar and will deliver the customer experience in new cars and be active in used cars and service. They serve a purpose and are valued by motor manufacturers and this will continue.
2. Technological change into autonomous, connected and electric cars will make the manufacturers more important and with them, the retailers. Higher retention of customers into aftersales operations will balance the lower servicing needs of electric vehicles. In the recent NFDA Consumer Attitude Survey, hybrid and EV customers trusted franchised retailers more than petrol/diesel customers. This bodes well for the future.
3. Price Waterhouse Cooper think only 21.7% of the vehicle parc in the EU and the USA will be electric by 2030. Change will be glacial in the servicing area and electric cars will still need aftersales so there is no need to panic. You never know cars with new technology may not always work first time!
4. Unlike other retailers, such as clothing, there will always be a need for aftersales and servicing to keep drivers and their family’s safe. This will have greater importance as the cars move to having greater control over driving.
5. Capital investment in premium franchises is going up but this current wave of spend is unlikely to be replicated for many years. There will also inevitably be fewer retailers with smaller sites closing or becoming satellites of larger sites, run with a lower cost base. Change will be slow over the next five to ten years but the trends are clear.
6. Shock fact: Contrary to what vested interests in the online retailing community would like us to believe, consumers actually like franchised dealerships.
There, I said it. We have a purpose and that is to meet the needs of our customers and we do this well and efficiently as the NFDA Consumer Attitude Survey shows:
• 79% of customers say they were satisfied with their last experience.
• This rises to 93% for regular uses of franchised dealerships and it is rising.
• Customers for service pay a lower price at franchised dealerships than at independent garages and chains.
I could go on.
I love the business and believe we have a great future in partnership with manufacturers.
We will have to evolve our business model and we will.
We will have to embrace robotics and become digital businesses backed up with bricks and mortar.
Vertu is doing full on-line retailing of used cars today including part exchange, finance and delivery to the door.
There are those who will say I am naive and over-optimistic.
There will be conspiracy theorists who say manufacturers are plotting our demise and we will be as relevant as hand weavers are in Manchester today.
They will sell up their business or seek a sort of Ice-age refuge in retailing used cars only.
I believe they do so at their peril. Non-Franchised retailing of used cars will become very tricky when the manufacturers increasingly control the used car supply and channel it through their franchised retailers only.
We are now at a cross roads and competing strategies will emerge. Decisions made today will determine future success or failure. My view is that franchised retailers have a future and it is a good one.
Author: Robert Forrester, chief executive, Vertu Motors