BIRMINGHAM, England – Dealers can’t make money by solely focusing on new cars any more, Audi’s director of sales strategy and retail business development says.
“I don’t know any entrepreneur beside the Chinese that make money just selling new cars,” Horst Hanschur told the Automotive News Europe Congress here last week.
Hanschur, who was part of a panel that discussed the future of retailing, said that dealership profit now comes from aftersales service and selling used cars.
He added that dealership costs needed to be reduced. “Selling cars is very capital intensive. In the future, we think the amount of tied-up capital will go down,” he said.
Massive cuts needed
Panelist Steve Young said automakers need to go further than that in Western Europe. They need to start shrinking their dealers networks. “We need to take out a huge amount of capacity,” said Young, who is managing director of dealer analyst group ICDP said.
Young said that 20,000 of the roughly 43,000 dealerships in Western Europe would need to be closed to ensure that the remaining stores could achieve a profit. “One of the big brands is seeing around half of its dealers lose money,” he told Automotive News Europe on the sidelines of the event.
He said that dealers in four of Europe’s five biggest markets -- Germany, France, Spain and Italy -- were averaging sales of 200 to 250 a year, while his group estimated that 145 sales annually is needed to reach break-even.
“Unprofitability is uncomfortably close,” Young said. UK dealers, meanwhile, sell 500 vehicles a year on average, Young said.
Panelist Simon Dixon, founder of UK-based digital car retail company Rockar, took issue with Hanschur’s position that dealers can’t make money selling new cars. Rockar partners with Hyundai in the UK to sell only new cars. The company supplements its online tools with a store front at a popular Bluewater mall on the southeastern outskirts of London. Dixon told the Congress that just three weeks after opening last year, Rockar became the most visited Hyundai dealer in the UK.
The success came about because Rockar had put more emphasis on encouraging customers to interact with the brand and less on the actual process of buying a car, Dixon said. “What we did was focus on the experience,” he told the Congress. “A dealer is 90 percent about transaction, 10 percent brand interaction. We thought that could be swapped.”
He said the Rockar store in the Bluewater mall had 100,000 customer visits in six months, more than the entire Hyundai network in the UK put together.
The Rockar shopping-mall model was something dealers would have to consider along with a range of other retail innovations, including leveraging the Internet, Young told the Congress.
That point was also made by panelist Peter Fuss, senior advisory partner for automotive at consultancy EY, who said that the days when salespeople could “sit around the showroom waiting for customers” were long gone.
He said that dealers should investigate an “omni-channel” approach that brought the brand experience closer to customers and could also include car-sharing schemes. Fuss: said that dealers that do this right “will be a very successful businesses” despite earning money “a different way than they have done in the past.”