Dead end automotive retail – How sustainable is the automotive retail business?

In 2011, I sold my 5th generation car dealership: a painful process that was associated with emotions and financial loss.
10 years later, in a changed environment, I can now take a more sober look at the situation back then and ask myself: Would I want to hand over a car dealership to my children? Would the value of my company at that time be higher or lower today than it was in 2011? And what would the business case look like for the next 5-10 years? Would I continue to invest boldly in the business? Or to put it another way: would I recommend investing in further growth to our clients in the Automotive Retail with a clear conscience?
At first, the requirements of the future and the disruption in the automotive environment seem overwhelming:
  1. It is becoming less attractive for end customers to own their own vehicle; parking spaces in city centers are scarce, alternative mobility offers are maturing and becoming competitive (see also our Impulse 03/2021).
  2. New competitors are entering the market with new concepts, both in sales and in service.
  3. Electrification requires new skills in sales and after-sales. Car dealers can ask themselves whether the capacities in which a lot of money has been invested over decades will still be necessary in the future.
  4. Manufacturers are clearly and obviously aiming to sell vehicles directly. Of course, because the customer’s data record is the most valuable thing the dealer has left. So what exactly will the dealer’s business purpose be in the future, especially in rural areas?
  5. Customer expectations have changed significantly in recent years: Services, products, information and experiences must be available in all analog and digital channels at all times.
Today, these five influencing factors would be described as “disruptive”, i.e. “destroying the balance” in the true sense of the word. It can be assumed that without appropriate countermeasures, these developments will have a significant negative impact on the profitability of the Automotive Retail. Disrupting an equilibrium can stimulate progress, but it can also destroy what already exists.
How exactly can entrepreneurs in the Automotive Retail defend themselves against the destruction of their life’s work? What creative opportunities are hidden in the current development?
The number of car dealerships in Germany has fallen by just under 4% in the last 10 years (source: Statista, 2021). Companies have left the market, others have been “consolidated” through mergers or sales. In the same period, new registrations have remained almost the same at 2.9 million units.
How can the Automotive Retail position itself for the future?
 
In this market environment, the following are the key success factors for safeguarding the continued existence of the dealership, but also for shaping its sustainable future development:
  1. The linchpin for sustainable corporate success is the uncompromising alignment of all services and processes with the needs of the customer. Process efficiency and effectiveness are crucial here. Relevant performance criteria include process costs as well as revenue per customer visit.
  2. All digital channels must be used by the retailer in an excellent manner in terms of time and quality. In concrete terms, this means that the customer – regardless of whether they are in the dealership or would like to be served via a digital channel – is served immediately and in line with their needs.
  3. New business models are needed: the existing company structures in the form of buildings, machines, personnel and administration must be reviewed for necessity and reduced if necessary. Then, however, it is important to create the conditions for growth and to create something new by expanding the company’s self-image to include mobility services for all customer groups (individual customers, commercial customers, major customers, special customers). Opportunities can lie in offering subscriptions, car sharing, charging stations, pick-up and delivery services, and much more.
  4. Winners of the transformation are embracing new formats in line with customer needs: pop-up stores in the city center, competence centers for e-mobility or the offer of e-bikes or e-scooters can open up new customer groups and prospects. Digital sales channels must become a matter of course, not only for vehicle sales, but also for the spare parts and accessories business and, of course, for service acceptance and order expansion.
  5. Joining forces with other dealers can combine forces when it comes to making important investments and asserting themselves on the market. Here, too, it is important to overcome old paradigms and break new ground, e.g. when it comes to building an innovative service factory for commercial vehicles.
The sale of automobiles and mobility will always be subject to high volatility, and taking into account the high level of investment required in the course of transforming the business model, the entrepreneurial risk must also be considered very high. Nevertheless, business owners can believe in the future of subsequent generations with a clear conscience and invest in the design of their business: Customers want to continue to know and use their local partner in the future, but in a different way than we know from the past.

The path of the future does not lead to a dead end, but opens up new perspectives!

Tobias Bald

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Tobias Bald

Clarity
Appreciation
Harmony
Truthfulness

Education

Lic. Oec. (Graduate in Business Administration from the University of Neuchâtel, Switzerland)

Experience

30 years of experience

Expertise

Transformation of Sales Structures

Organizational Development

Leadership

Expertise

Transformation of Sales Structures

Organizational Development

Leadership

Focus Topics

Leadership Development

Organizational Development

Strategic Transformation

Focus Topics

Leadership Development

Organizational Development

Strategic Transformation

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I enjoy opening up unknown spaces and perspectives so that new things can be created.

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