Car dealers fight the threat of extinction as the Teslafication of their industry intensifies

by Jacob Solomon Mar 24, 2023 News
Car dealers fight the threat of extinction as the Teslafication of their industry intensifies

It used to be that car-buying was what it used to be.

The shift to online car shopping was accelerated by the swine flu. The dawn of electric cars is threatening to eliminate dealership altogether.

The auto dealers are trying to stay relevant.

The staff are being trained to be EV experts. Carvana is an example of a firm emulating others and moving some of the buying process online. Lounges and dog parks are features built by dealers to lure shoppers to their showrooms.

Some dealers are unsure about the future of selling cars as they experiment with new strategies.

Scott Kunes, COO of Kunes Auto and RV Group in the Midwest, told Insider that no one knew what the new car business would look like. It's the same with EV. We don't know how the car business is going to look going forward with this EV shift and how much the EV shift is actually going to happen.

One dealer hopes luxury perks and a dog park can lure shoppers

Mitchell Sherwood, general manager at Porsche Fort Meyers
Mitchell Sherwood, general manager at Porsche Fort Meyers.
Porsche Fort Meyers

A new showroom and service center in Southwest Florida will include indoor and outdoor event space, a full Catering kitchen, lounges, workplace, and even a mini dog park.

Dealers are trying to improve the customer experience by opening a new store. The customer experience is more important to dealers than inventory and profits.

"We want to get away from that: 'I really don't want to go into a dealership,'" feeling among some buyers, according to the general manager of the store.

EV startup are trying to prove that they don't need a dealership.

Rivian and Lucid have physical storefronts, but transactions are done through a digital only, direct to consumer model. Despite the benefits of a dealer network, the more traditional auto companies have yet to go that route.

Industry experts say the dealership will not disappear completely.

Dave Thomas, CDK's director of content marketing, told Insider, "I don't see that dealership relationship and how the dealer interacts with the whole process of retail changing too dramatically just because a few EV startup have had success doing it in a different way."

He thinks a hybrid model is the best for dealers.

"If dealers have a process where they can get that done online, it changes the buyer's perception of the transaction itself greatly."

A woman walks by two cars inside a showroom.
A shopper peruses a Mini showroom.
AP Photo/David Zalubowski

The hybrid model is being worked on byPorsche.

Consumers keep telling us that they still want to see it, touch it, feel it, even though we think the digital is everything. How do we combine those ideas?

"We really need to improve the experience in-dealership, that makes it feel like a place where somebody would actually say, swinging by the dealership is more of a regular part of my schedule," he said.

Dealers prep for EVs while sustaining the gas-powered business

Staff trainings, special certifications, and more are some of the things dealers are trying to get ready for.

Thomas said that consumers are viewing the sales rep and the people at the dealership differently when it comes to electric vehicles. They are looking for help from the dealer.

GM told Buick dealers to get out of the EV business if they didn't get up to speed fast. They rely on dealers to sustain most of their business through gas powered car sales and service.

Some dealers have dropped out of Ford's EV certification program due to its unfair requirements. The dealers who enroll in the program to sell the Ioniq cars have to comply with certification requirements. GM is leaning on retailers to invest in a charging network.

Fontana Hyundai in Calif., on January 5, 2022.
A hybrid online and in-person dealership model might be best going forward, experts say.

Whitney Yates-Woods, dealer principal and president at Yates Buick GMC in Arizona, invested a lot in tooling and infrastructure for her store over the past two years and said that the technicians had to get trained on EV. We might as well be the first one because we felt like we would have to do it anyways.

When the return on investment is not yet clear, some dealers are reluctant to make changes.

Kunes said that the manufacturers were asking for large investments in their facilities, and that they were willing to do it once they had a plan. He said the dealership hasn't been given enough electric vehicles to justify the changes.

If we only get 25 electric vehicles a year, how can you ask us to invest more than a million dollars on our facilities?