The Incredible Shrinking Car Dealership

Few people like car dealerships. They are stressful and sprawling, and it is difficult to get rid of the feeling that someone becomes a raw deal. But as the auto industry becomes more electric and moves online, companies like Honda are rethinking every aspect of the buying process, including the spaces in which it happens.

Honda today announced the rollout of a new dealership design, which takes up less square footage and is modular and flexible; what was once an exhibition space, for example, can be transformed into offices for employees. It will also have electric vehicle chargers, as the company aims to sell half a million electric vehicles in the United States by 2030. “Our dealerships are looking for ways to modernize and digitize their business,” Mamadou Diallo, vice president of auto sales at American Honda, told reporters last week. Recent experiences, he says, have taught the automaker that selling cars “won’t take up as much space.” And they’re not the only ones looking to lose ground.

Like so many recent transformations, the change is partly a reflection of the pandemic. Automakers have battled a shortage of semiconductor chips, a serious problem for vehicles that need hundreds, even thousands, or more to run. The supply chain bottleneck means new car dealerships have fewer vehicles to show customers. Meanwhile, inspired by a new breed of electrified direct selling companies, like Tesla and Rivian, major automakers have started experimenting with letting customers reserve and even buy their cars online. Ford made its first sales of its electrified sports car, the Mustang Mach-E, on the internet and took online reservations for its electric pickup truck. Volvo said last year that its electric vehicles – which the automaker says will account for 100% of sales by 2030 – will be sold exclusively online.

It might make buying cars more convenient, but it makes sale easier too. Building cars to meet online customer orders takes some of the guesswork out of vehicle production, which means fewer unexpected and unpopular models end up languishing — and ultimately selling at a discount — in showrooms. “We’ve learned that, yes, operating with fewer vehicles on lots is not only possible, it’s better for customers, dealers and Ford,” Ford CEO Jim Farley told investors in the summer. latest. “But we are also driving a significant increase in the number of customers configuring and ordering their vehicles online, so we have better visibility into actual demand.”

This pandemic-era adjustment hasn’t always worked out in favor of car buyers. Dealerships report that the combination of a tight auto market and limited inventory means they can offer fewer discounts to customers hoping to make their new purchases stand out. Buyers pay more and dealers earn higher margins per sale. But industry experts are divided on whether those conditions will last beyond the public health emergency and supply chain difficulties.

Yet the era of rows and rows of brands, models and colors may be over for good. “The dealership doesn’t have to be a Taj Mahal somewhere down the highway,” says Mike Anderson, president of the Rikess Group, an automotive consultancy. Dealers advised by Anderson began bringing vehicles to potential customers for test drives and then returning them to their homes or offices when they closed the deal. Automakers like Tesla, Ford, Mercedes-Benz and BMW are also experimenting with mobile servicing or having technicians travel to customer vehicles. In some places, “many guests won’t see the dealership at all,” Anderson says.

It could take years or even decades for dealerships to physically change, as it takes time and money to retrofit a building. Honda executive Diallo says the automakers’ new dealership design “is not a program we’re forcing dealerships to adopt,” but a direction Honda wants its dealerships to follow when they renovate and perform updates. Volkswagen of America vice president of network operations Brian Kelly said the automaker is considering similar adaptations. “We recognize that the increased adoption of electric vehicles, growing consumer preference for purchasing vehicles through digital retail solutions, and the proliferation of mobile services and vehicle delivery – among a host of changes to industry-wide – will ultimately impact the common size and layout of traditional vehicles. concession facilities,” he said in a statement.