The number of dealerships across Europe needs to be cut by half in the medium term to adapt to changing customer behavior and the rise of online car purchasing, according to a report.
The dealer network is shrinking far slower than it should to properly adapt to these changes, automotive distribution analyst ICDP says in the latest edition of its European Car Distribution Handbook.
The number of dealer outlets has fallen 16 percent in the 10 years between 2009 and 2019 to 52,000 across Europe, figures from ICDP show.
The reduction in dealer numbers resulted in an all-time high of 331 sales per dealer across all markets, an increase of 1.1 percent from 2018 data from ICDP shows.
However, the pace of reduction is not fast enough for the remaining dealers to stay profitable and free up income to help dealer groups and automakers invest in online sales, ICDP managing director Steve Young said.
Changing customer behavior is driving changes in how cars are sold. "Customers do not need sales points to be as dense as they are today and almost all want to conduct at least part of the purchase journey online," Young said.
The reduction in outlets will be compensated in part by an increase in secondary sales locations, for example in shopping malls, that are less expensive to set up and maintain, and maybe separated from the service function, IDPD said.
However, folding secondary sales points into existing networks could prove difficult. "The format of the secondary points will generally not be well aligned with the format of an existing dealer," Young said.
Of the big five European markets of Germany, UK, France, Spain and Italy, Germany had the lowest sales per dealer.
ICDP said Germany is "over-dealered." The UK, meanwhile, averaged nearly double the 331unit sales average per dealer.
Opel/Vauxhall had the largest decrease in dealer outlets, falling 27 percent between 2009 and 2019, ICDP data shows. PSA, which bought Opel/Vauxhall from General Motors in 2017, has folded the brands' dealer network into PSA Retail.
Automakers across Europe have been experimenting with online sales as they try to get more involved in the customer buying process.
Customers are also shifting away from the traditional methods of buying and owning a car and toward monthly payments.
"My personal view is that in a few years' time, people will not buy cars but just lease them," Toyota Motor Europe CEO Johan Van Zyl told Automotive News Europe in a recent interview.
The number of service centers has declined 17 percent in the last 10 years but remains at almost double that of dealer outlets at 96,000 across Europe, ICDP data shows.
Despite the decline, the number is still too dense, IDCP believes.
"The data often shows low numbers in the car parc per authorized service outlet," the analyst firm wrote. Mainstream brands were often servicing less than 5,000 cars per service center, too low for sustained profitability, ICDP said.
The company predicted that "dramatic change in traditional network numbers and structures is inevitable" as new buying methods shook up the sector but it said it was "impossible to predict when this will happen."