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The big change to how you buy and service cars in the all-electric future

Jamie L. LaReau, Detroit Free Press on

Published in Automotive News

These future consumers are also open to alternative ownership options such as vehicle subscriptions, where they can periodically swap in and out of different vehicles. Another unique idea they'd consider is owning or leasing a vehicle jointly with a small group of people, Krebs said.

"Bottom line, in three to five years the consumer experience will center around technology, personalization, and alternative ownership," Krebs said. "Consider a future where retailers are no longer a place consumers have to go for products and services. Instead they become the channel automakers use for distributing products and services out to consumers wherever they are."

GM's mysterious plans

GM President Mark Reuss recently said he and CEO Mary Barra have a strategic plan to transform GM into an all-electric car company over the next decade.

In part, it will involve a change in the dealership's role and how people buy cars. Reuss did not provide detail, but he said GM is working with its dealers on the changes and investments they will need to make to sell electric vehicles.

“The dealers who are participating in our transformation ... they realize the growth potential for the future," Reuss said.

This summer, GM will launch the new 2022 Chevrolet Bolt EUV and a redesigned 2022 Bolt EV five-door hatchback. Chevy has about 3,000 U.S. dealerships and about 1,300 sell the Bolt, but as more EVs come into Chevy's portfolio, the number of dealers selling the Bolt and other EVs will go up, Chevrolet executives have said.

Barra has called GM's network of 4,071 dealerships across its four brands "a huge asset to the company," indicating dealerships will play a role in GM's electric future, but they will change.

"As the industry transforms, as the customer expects different things, both retail and fleet ... we are working with our dealers and they're transforming as well," Barra said during GM's fourth-quarter earnings call. "For competitive reasons, I'm not sharing all of the specific changes and transformation activities that we're doing. But they're pretty substantial."

A GM spokesman referenced how Cadillac has handled its dealer network as it heads toward a full-electric lineup by 2030.

The luxury brand offered dealers buyout packages if they did not want to invest in the infrastructure needed to sell and service EVs. Cadillac ended up trimming about 270 dealers, leaving about 600 in the United States.

The Cadillac Lyriq all-electric SUV will go into production early next year. Cadillac plans to offer consumers a choice on how they want to purchase one: Either go in person to the dealership or do it mostly online and take delivery at their preferred dealership, said Mike Albano, Cadillac spokesman.

Said Reuss: "(EVs) will be a growth opportunity for dealers and it will also change how people buy vehicles and simplifying how people buy cars."

'Repurpose their dealership'

The trend of increased online car shopping proliferated during the height of the pandemic last year when many dealership showrooms were shuttered.

Now customers have come to like it and expect it, meaning, “there’s no putting the Genie back in the bottle," said Mike Ramsey, vice president and analyst of automotive and smart mobility at Garnter Inc.

As consumers increasingly make car purchases online, dealerships of the future might also look physically different than today. For example, gone will be the huge parking lots full of rows and rows of cars, Ramsey said.

“If I had to predict, 10 years from now, it’s likely that almost everybody will be buying their cars digitally and dealerships will be experience centers where you go there, kick the tires, drive the car and learn about the car," Ramsey said. "The giant parking lots full of cars, will go away or they’ll just be used cars. I know people in the industry are discussing how they can repurpose their dealerships, whether it be the showroom itself or using the large dealership parking lots as test tracks or experience centers."

Shaheen isn't ready to clear out his parking lots. He admits his real estate use might change a bit in the future, but the carmakers need dealers to buy their inventory because it is cash flow for the automaker, he said. The car companies can’t wait for the unpredictability of the consumer to buy the cars directly, he said.

Plus, there is the mass manufacturing “just-in-time” supply chain process at each assembly plant that can’t be interrupted, Shaheen said.

“You have to order stuff ahead of time — batteries, tires and wheels — you have to have a flow to have it just in time,” Shaheen said. “Sales go up and sales go down, so you can’t have an assembly line starting and stopping. It has to have an even flow to it and a dealer offers the elasticity in the inventory.”

Still, Ramsey foresees dealerships centralizing online sales and service centers for an entire region, thus further consolidating buildings and land.

 

"If they created an online sales center for the region and even their used cars are online, do I even need to go onto a lot? They can deliver it," Ramsey said. "The dealership will become showrooms with small parking lots with one or two of every vehicle and a service center."

But this will be a long and slow transition, Ramsey said, and some dealers will struggle against it.

For most, the ideal dealership experience is to make an appointment, show up and they already have your license information and the vehicle awaiting your test drive, an app unlocks the car for you and you test drive it on your own, Ramsey said.

"I might talk to a person about how the vehicle works, but I don’t talk to a single salesperson until I am ready to do paperwork," Ramsey said. "That’s the better experience."

Ramsey said European automakers, such as Volvo, are aggressively moving in this direction because Europe does not have to face franchise laws. In the United States, direct car sales from a manufacturer to a consumer are typically prohibited in almost every state by franchise laws. which stipulate that new cars be sold only by dealers.

Some experts predict Detroit automakers will ultimately adopt a sort of hybrid model of Tesla's system and the legacy automakers' franchise dealer system.

"I wouldn’t be surprised if GM and other automakers go to this model where you do the order online and take delivery from the dealer," said Sam Abuelsamid, principal analyst of E-Mobility at Guidehouse Insights in Detroit.

Legacy carmakers' dealers have been bringing cars to peoples' homes for test drives during the pandemic, Abuelsamid said. The practice had an impact on how dealers sell cars now, providing the stage for how consumers will shop for EVs in the future.

"Every dealer has had to make changes in how they do business in ways that benefit them and automakers for the upcoming years," Abuelsamid said.

A resilient bunch

For now, GM dealers are prepared to do what it takes to segue to EV sales.

GM has hired a company to survey its Cadillac dealers about their existing electrical systems at their dealerships, Shaheen said.

When he built his new Cadillac building, he installed electrical conduit to eventually install charging stations in the showroom, the service area and his outdoor inventory lots. His Chevrolet store already has charging stations in it for sales of the Bolt.

Likewise, Ed Pobur, dealer operator of Cadillac of Novi, Mich., already completed his survey and is waiting for engineers to inspect his electrical grid, he said. He has earmarked $250,000 toward charging stations, tools and training to sell and service all electric vehicles by the end of the decade.

"It definitely is going to change everything. How fast that is going to change I don’t know?" Pobur said. "We’re all required to invest $250,000 in our dealerships to prepare for the electric vehicle. You have no choice because if you’re a single point Cadillac dealer and you want to keep selling Cadillacs, you have to do it."

But Pobur believes consumers will benefit. The sales process will improve, Pobur said, because buyers will have more research available to them and "will be more in-tune with what they’re buying."

It is EV's lack of need for service that "definitely keeps me up at night a little bit. But I don’t think it’s going to hinder our service work for quite some time because there are so many cars on the road that are gasoline."

Sheehan agreed, noting that the average car on U.S. roads is 11 years old and will still need service work, so the transition for service will be slow. Plus, he said, EVs might not require oil changes, but they will still need new struts, shocks, tires and suspensions.

Both men agree, selling EVs will change for them and for the consumers. Dealers will adapt or die.

“Until we get our claws into this, we’re a resilient bunch, but it’s something we’ve never had to deal with," Pobur said. "We’ve had hybrids, but it’s not the same with what we’ve had to deal with in this.”

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