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DEALERS remain vitally important to customers and the car-buying process despite “seismic changes” to the automotive industry, says the head of European automotive research group International Car Distribution Program (ICDP).

The managing director of ICDP, Steve Young, writing in the latest Cox Automotive UK’s Insight Quarterly report, said changes to the industry – including consolidation, shifting manufacturer strategies, and the ongoing agency model debate – have only underpinned the crucial role dealers continue to play in the sector’s evolution.

“What these stories highlight is both the opportunities and challenges in automotive retail,” he said.

“A simplistic approach adopted with expensive external ‘expert’ advice by some OEM brands, and disruptors like Cazoo, towards retail has ignored the critical support provided by dealers to keep the wheels turning.”

Mr Young said some manufacturers had “mistakenly” thought that the “customer journey” and all buyer needs can be managed by a few “rigidly defined processes”.

“In reality, there are probably more types of customer journeys out there than we could ever imagine,” he said.

“Digitalisation has brought with it a new need for skills and investment as well as the chance to get better answers about the customer journey from larger volumes of data.”

Cox Automotive’s insight and strategy director, UK-based Philip Nothard said that despite challenges from manufacturers and online retailers, dealerships remain essential due to their customer-facing role and core functions like aftersales support. 

“The key to success lies in adapting to changing customer needs while providing value to manufacturers,” Mr Nothard said. 

Mr Young said the dealer was essential to any physical interaction with the car.

“The dealer handles the used car in whatever way the broader system demands,” Mr Young said.

“That might be buying it in for resale at risk or acting as a service provider to prepare it for a second or third lease by the manufacturer.

Philip Nothard

He said that elements of inspection, logistics, preparation, and remarketing will always be required as long as the first owner does not keep a car for life.

That interactive role, which is key to the administration, registration, and handover of the car to customers, has become ever more important as vehicles have become more technologically advanced, meaning more customer support is needed.”

Mr Young said the debate about the dealer’s role must consider these elements, especially when the agency model has yet to prove itself as a viable alternative to franchise.

“Nobody believes that you can avoid having retail outlets in some form. This includes Tesla, Nio and the other direct players. 

“So the debate is not about the need for ‘dealers’ but about the need for a manufacturer to mitigate risk through the wholesale stage, and whether a network of 100-plus dealers operating largely independently of each other can achieve a better outcome in terms of volume and net pricing than through a centrally-directed approach.

Steve Young

“Overall, the need for dealers is key, and the opportunity to get a reliable return on investment is well-proven. That is what drives the giants like Lithia, Penske and Group 1 and brings them to Europe.”

Mr Nothard, commenting on Mr Young’s thoughts on the evergreen importance of dealers, said: “Dealers have a choice in this unfolding landscape, in that they must continually prove to OEMs that they are worth their salt and here to stay.

“That physical interactive element will always be with us – and will no doubt serve as proof of their importance, no matter the industry developments we are likely to see,” Mr Nothard said.

By Neil Dowling

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