Few people like car dealers. They’re stressful and stretched out, and it’s hard to get rid of the feeling that someone gets a rough deal. But as the auto industry becomes more electric and goes online, companies like Honda are rethinking every aspect of the purchasing process, including the spaces in which it takes place.
Honda announced today that it is rolling out a new dealer design that takes up less square footage and is modular and flexible; For example, what was once a showroom space can be transformed into offices for employees. It will also have chargers for electric vehicles as the company aims to sell half a million electric vehicles in the US by 2030. American Honda, told reporters last week. Recent experience, he says, has taught the automaker that selling cars “doesn’t require that much space.” And they’re not the only ones looking to shed square footage.
Like so many recent transformations, the shift is in part a reflection of the pandemic. Automakers have struggled with a shortage of semiconductor chips, a serious problem for vehicles that require hundreds and sometimes thousands or more to operate. The bottleneck in the supply chain means new car dealers have fewer vehicles on hand to show off to customers. Meanwhile, major automakers, inspired by a new breed of electrified direct selling companies, such as Tesla and Rivian, began experimenting by letting customers reserve and even buy their cars online. Ford first sold its electric sports car, the Mustang Mach-E, online and took online reservations for its electric pickup. Volvo said last year that its electric vehicles — which the automaker says will represent 100 percent of sales by 2030 — will be sold exclusively online.
That could make buying cars more convenient, but it makes sale them easier too. Building cars to fulfill customers’ online orders takes some guesswork out of car production, meaning fewer unexpectedly unpopular models languish — and eventually sell at a discount — on showroom floors. “We’ve learned that, yes, working with fewer vehicles on lots is not only possible, but better for customers, dealers and Ford,” Ford CEO Jim Farley told investors last summer. “But we are also significantly increasing the number of customers who configure and order their vehicles online, so that we can better understand the real demand.”
This pandemic-era adaptation has not always worked in favor of car buyers. Dealers report that the combination of a tight car market and limited inventory means they can offer fewer discounts to customers hoping to drive their new purchases off the lot. Buyers pay more and dealers make higher margins per sale. But industry experts are divided on whether those conditions will continue after the public health emergency and related supply chain problems.
Still, the era of rows and rows of brands and models and colors may be gone forever. “The dealership doesn’t have to be a Taj Mahal somewhere on the highway,” said Mike Anderson, the president of the Rikess Group, an auto consulting firm. Dealers Anderson advises have begun taking vehicles to potential customers for test drives, then back to their homes or offices when they close the deal. Automakers such as Tesla, Ford, Mercedes-Benz and BMW are also experimenting with mobile maintenance or having technicians travel to customers’ vehicles. In some places, “a lot of the guests won’t see the dealer at all,” Anderson says.
It can take years or even decades for dealerships to physically change because it takes time and money to retrofit a building. Diallo, the chief executive of Honda, says the automaker’s new dealer design is “not a program we force dealers to follow,” but a direction Honda wants its dealers to follow as they renovate and make updates. Brian Kelly, vice president of Volkswagen of America’s network operation, says the automaker is considering similar adjustments. “We recognize that greater adoption of electric vehicles, the growing consumer preference to purchase vehicles through digital retail solutions, and the increase in mobile maintenance and vehicle delivery – in addition to a host of changes across the industry – will have a forward impact on the overall size and layout of traditional dealer facilities,” he said in a statement.
