As electric vehicles continue to gain popularity, the question of how consumers will buy them is becoming increasingly relevant.
Dealerships are here to stay
I believe that the traditional dealership model is not going anywhere soon. Despite the potential for disruption from new technologies and business models. One reason for this is that buying a car is a significant and emotional decision that typically requires a personal touch and expert guidance.
Which dealerships have traditionally provided.
Car dealerships have always been the fulfilment stage for car buyers, providing a physical location where customers can test drive cars, negotiate deals, and receive after-sales support.
Even with new agency models being trialled by some OEMs (Original Equipment Manufacturers), the evidence shows that dealerships are still winning. For example, Carvana, a large business in the US, tried to create a vending machine-style environment for car purchases. This suggests that while new technologies and business models may offer attractive alternatives to the traditional dealership model, they have yet to fully replace it.
Overall, the dealership model will continue to play a significant role in the car-buying experience for the foreseeable future. While new technologies and business models may change the way people buy cars, the emotional and personal aspects of car buying are likely to remain essential, and the traditional dealership model is well-equipped to provide them.
Fragmentation of the value chain
The buying and selling of a vehicle involve a complex value chain that includes multiple stages and stakeholders. Dealerships need to consider financing options, insurance coverage, maintenance and repair services, and parts replacement. Additionally, they may require delivery services for their newly purchased vehicle. This means that customers are not just buying a car, but also a range of services that are essential for car ownership.
OEMs are not equipped to provide all of these services on the ground for the volume of consumers that need them. They are primarily focused on designing and producing vehicles, and they rely on dealerships to deliver services to their customers. For example, dealerships offer financing options, insurance products, and maintenance services that OEMs may not have the capacity to provide. Therefore, dealerships play a crucial role in the value chain of the car-buying experience.
Moreover, dealerships have developed relationships with multiple service providers, such as insurers and lenders, over the years. These relationships give them an advantage in providing a seamless and integrated car-buying experience. By working with different service providers, dealerships can provide customers with a comprehensive range of services that are tailored to their needs. In contrast, OEMs may have a different level of experience and expertise in providing these services, which can lead to a fragmented and disjointed experience for the customer.
Dealerships can adapt to change
This adaptation will be essential because the rise of electric vehicles is changing the way we buy cars. For instance, the service intervals for electric vehicles are much longer than for traditional cars. Electric vehicles require less maintenance due to their simpler design and fewer moving parts. While this may sound like a threat to dealerships that rely heavily on after-sales service, dealerships can still play a role in executing some elements.
As electric vehicles become more prevalent, the demand for specialised service centres will increase. Dealerships that specialise in electric vehicles will be well-positioned to meet this demand.
Furthermore, as electric vehicles come with more features and technologies, dealerships can provide value-added services. For instance, if a car has heated seats that are not standard, the dealership can switch them on from the software services. Dealerships can also offer training to consumers on how to use the car’s advanced features, which can enhance the customer experience.
While the rise of electric vehicles is likely to change the way we buy cars, the traditional dealership model is here to stay. Dealerships are better equipped to handle the fragmented value chain of car buying and to deliver the services that consumers need. However, dealerships will need to adapt to changing consumer preferences and the rise of electric vehicles. The future of car buying is changing, but the dealership model is still an essential part of the car-buying experience.