The Future of Dealerships in Canada
(Disclaimer: This article may mention Ford, but in no way is a review or indictment of the awesome Ford dealership pictured above)
So Ford (the corporation) just laid off a few thousand employees. This article from the Washington Post (Click Here) details the move as the company continues its shift toward producing more and more electric vehicles. Most major vehicle manufacturers are shifting to EVs or, at the very least plug-in hybrids. The supply of battery components is finally starting to catch up to demand, and Ford is among the shift leaders committing to producing 600,000 EVs by the end of 2023.
So what does this mean for you? Well, you can expect that as the transition and the technology improve, there will be more options and subsidies to ease the transition. But your relationship with your dealership is likely going to change as well.
In a June interview with TechCrunch, Ford CEO Jim Farley said he foresaw “a massive consolidation of dealerships.” This transition will primarily be due to the elimination of dealerships holding inventory in favour of facilitating no-negotiation sales similar to the model that Tesla has been enjoying since it began shipping its vehicles directly to the consumer.
So the question will be how the current model of dealerships and service departments will adapt to the upcoming shifts.
It'll All Be About Service, But With No Oil...
It’s no secret that dealerships make a modest margin on sales and make most of their money on parts and services. So what happens when sales are handled online, and all the Electric Vehicles no longer need regular oil changes and service appointments?
Any dealership built in the last ten years has a pretty standard design: a partitioned warehouse with a large showroom and a service garage. But what happens when there is no new inventory on the lots?
We recently bought an EV from our local dealer, and you can see a picture of Jericho (Fake Mustang and Bob’s Burgers Reference) at the top of this post. We picked up the basic service package for it, but to be honest, getting a vehicle that is only in its second year of existence, we have no idea whether that will be enough or too much.
So what are dealers to do? Well, I would venture to guess that the CEO of Ford is correct in assuming that we will see massive consolidation of dealerships in cities and small towns. For example, in Edmonton, you have the GO Auto Group, which owns no fewer than five distinct brands of dealerships. Without the need for inventory, we should expect the expansion of service departments into massive service departments that work across multiple makes.
How To Compete
Many dealers might be caught flat-footed on this, especially in rural areas in Canada where large consolidations of dealers are not already present or practical.
In reality, once new vehicle inventory is a thing of the past we are likely to see a few things occur.
- Like in 2009, sub-brands will begin to fade away, KIA into Hyundai, Jeep back into Dodge or Chrysler (or Fiat)
- Sales will be primarily limited to used vehicles. Although rural Canada needs to come a long way in its supportive EV infrastructure, it is conceivable that any cars on the lot will be demos or used within ten years.
- Dealers who survive need to act more as fulfilment centres and success specialists.
- Service centres will be judged harshly.
Without the ability to show off the sexy new Bronco (sorry to pick on ford for this one) for dealerships to remain relevant, they will have to communicate why they will be the best team to keep your brand new EV on the road and working optimally.
BMW is now instituting paid subscriptions for features like a heated steering wheel, and I see that my blue cruise will expire in 2025 too.
Do you know what people invest in when times are uncertain, and change is inevitable? Savings bonds, insurance, low-risk steady return options. In the next five years, many people will purchase a vehicle sight-unseen for the first time. So how can dealers and garages stay relevant and top of mind?
BE THE GUIDE
Your next vehicle will be a new experience for you, regardless of who you are. You’re going to buy an EV for the first time or another model that must be ordered. So dealers should work to diminish fears and build trust as experts, not just sales guys:
- Collect reviews of every new model sold at your dealer so that people get an idea of what that vehicle is like in their hometown.
- Spend time, money and effort to feature the expertise of your service team of mechanics and soon-to-be electricians.
- Make service appointments white-glove experiences.
- Pick-up and drop-off from the office or home
- Make your service lobby feel like the Maple Leaf Lounge
- Teach people what they can expect from their investment as time progresses.
- Recommend services that will help increase the trade-in value down the line.
- Detail the car every time.
- Reward loyalty
I know this all seems like a lot. But if the attraction, especially in small towns, will no longer be what’s on the lot, then you (the dealer) have to be ready to make it about something else. And the only way to do that is to ensure that every time someone comes to your service department on their 8-year extended warranty, they feel almost as cool as when they were given the keys to their new shiny mustang… I mean generic car.
As always, if you want to chat with me about cars, how far the mustang goes on a single charge or how to grow your business, feel free to reach out and book a meeting.