{"id":84804,"date":"2024-01-31T13:00:00","date_gmt":"2024-01-31T13:00:00","guid":{"rendered":"https:\/\/www.autocar.co.uk\/car-news\/business-dealers\/biggest-challenges-facing-automotive-retail-2024-and-how-tackle-them"},"modified":"2024-01-31T13:00:00","modified_gmt":"2024-01-31T13:00:00","slug":"the-biggest-challenges-facing-automotive-retail-in-2024-and-how-to-tackle-them","status":"publish","type":"post","link":"https:\/\/gamefootballmobileanimeiphone.com\/index.php\/2024\/01\/31\/the-biggest-challenges-facing-automotive-retail-in-2024-and-how-to-tackle-them\/","title":{"rendered":"The biggest challenges facing automotive retail in 2024 (and how to tackle them)"},"content":{"rendered":"

\"Dealership\"<\/a><\/p>\n

\n There are more ways to buy cars now than ever before \u2013 should dealers be worried?<\/p><\/blockquote>\n

From transformative legislation to the agency model, automotive retail is changing faster than ever before \u2013 that\u2019s where Cox Automotive can help<\/p>\n

\n

It has been a tough few years for the UK automotive industry. A quadruple whammy of Covid, Brexit, logistics crises, and now the cost-of-living crisis cutting consumer confidence mean that UK car sales have been down by around -30% for three consecutive years and have only just started to recover \u2013 increasing by 17.9% in 2023.<\/p>\n

But that doesn\u2019t mean the troubles are over. The shift to electrification, the rise of a wealth of new challenger brands \u2013 especially the new industry giants from China entering the European and UK markets \u2013 the introduction of more complex connected vehicles and transformative legislation will pose big challenges for manufacturers and dealers alike.<\/p>\n

Equally, the long-term role of the dealer in the sales model is changing dramatically as a result of gradually evolving consumer behaviour and the new agency model being investigated \u2013 or even adopted \u2013 by many manufacturers.<\/p>\n

But that\u2019s where Cox Automotive can help. Cox Automotive is the world\u2019s largest automotive services organisation and is committed to helping manufacturers, fleets and dealers flourish in an ever-changing world. As part of this mission, Cox Automotive recently produced its fifth Insight Report, a comprehensive analysis of the trends shaping the automotive sector, which you can download for free here<\/a>.<\/strong><\/p>\n

Cox Automotive\u2019s Insight Director, Philip Nothard, will be part of an upcoming Autocar Business webinar discussing how car retailers can survive and thrive in a transformative year, alongside Stellantis UK vice-president Eurig Druce, Vertu Motors CEO Robert Forrester and Autocar Editor Mark Tisshaw. Audience members will also be able to submit questions during the event, which will be answered live by our panel. Sign up for free here<\/strong><\/a>.<\/p>\n

Download the report<\/strong><\/a><\/p>\n

Sign up for the webinar<\/strong><\/a><\/p>\n

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New challenges for 2024<\/strong><\/h3>\n

Perhaps one of the biggest hurdles faced by car makers in 2024 comes in the form of the new and long-awaited zero-emissions vehicle (ZEV) mandate. In short, it dictates that 22% of all manufacturers\u2019 new car sales in the UK in 2024 must be ZEVs \u2013 rising to 28% in 2025, 33% in 2025, 38% in 2027, 52% in 2028, 66% in 2029, 80% in 2030\u00a0and finally 100% in 2035.<\/p>\n

While necessary to accelerate the mass adoption of ZEVs leading up to the 2035 ICE ban, the mandate brings interesting challenges for both car makers and sellers. And when you consider that just 16.5% of new car sales in the UK in 2023 were all-electric, it\u2019s clear that some manufacturers are ahead of the curve, while others lag far behind.<\/p>\n

Those who fail to meet the 22% benchmark will face hefty fines, potentially resulting in a unique situation where car makers may actually restrict the sales of their ICE models to avoid penalty; this will, of course, worry dealers.<\/p>\n

However, manufacturers were thrown a lifeline of sorts in late December when the UK government and EU postponed the controversial Rules of Origin (RoO) legislation to 31 December 2026. Initially due to come into force from 1 January 2024, RoO mandates that 45% of components for electric vehicles must be locally sourced. If not, a 10% tariff will be applied to each and every vehicle.<\/p>\n

Although RoO has been in play for petrol and diesel-engined cars since 2021, it will \u00a0present particular problems for electric vehicles due to their more complex, still-evolving supply chain. \u201cBattery manufacturing in the UK is still in its infancy,\u201d says the Cox Automotive report. \u201cIt\u2019s thought that up to five years is needed to construct the gigafactories needed, as well as a fully functioning distribution and supply chain.\u201d<\/p>\n

This will not only affect the cost of vehicles for manufacturers, dealers and consumers alike, but some manufacturers could even be forced to exclude certain models from certain markets.<\/p>\n

Above all, the main challenges posed by new legislation boil down to consumer confidence and cost \u2013 both of which, unfortunately, are out of the control of dealers. \u201cMore needs to be done for EVs to truly become the dominant mode of transport,\u201d says the Cox Automotive report. \u201cSignificant investment is still needed in charging infrastructure to support a growing EV parc. The cost of EVs also remains a barrier to entry for many people, despite the price of both new and old vehicles softening.\u201d<\/p>\n

So, how to answer these challenges? Well, fleet sales offer one clear opportunity, with electric vehicles having particular appeal to fleet managers, decision makers and user-choosers looking to cut running costs while also meeting broader corporate sustainability goals for their business.<\/p>\n

Consumer education is another opportunity, creating a richer, more trusting, more valued relationship between dealer and buyer. This could range from EV jargon and myth busting to even helping consumers pick the right level of electrification for them \u2013 whether it\u2019s going all-electric or picking a hybrid. It certainly helps in an EV market that is more turbulent than ever, with challenger and value brands \u2013 especially new\u00a0 brands from China \u2013 turning traditional hierarchies on their head.<\/p>\n

\u201cBear in mind that [with EVs] brand loyalty is an anachronism,\u201d says the Cox Automotive report. \u201cThe case for nurturing [consumers] makes a lot of economic sense. The time for dealers to become an authoritative voice in the EV space \u2013 experts, essentially \u2013 is now.\u201d<\/p>\n

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The changing role of dealers<\/strong><\/h3>\n

All of this comes at a time when consumer behaviour and the role of dealers is changing dramatically. First, the long-term shift towards online buying over bricks-and-mortar footfall.<\/p>\n

\u201cAccording to recent research, the majority of consumers \u2013 more than 80% \u2013 want to combine online steps in the buying journey with those taken at a physical outlet,\u201d says the Cox Automotive report. \u201cThe same study suggests that not all buyers share the same view as to which stages should be online and which face-to-face. So, flexibility is important.\u201d<\/p>\n

Dealers need to be increasingly \u2018omnichannel\u2019: integrating all customer routes to the dealers physical or virtual front door, so that consumers get a seamless experience whichever digital or physical channel they\u2019re using.<\/p>\n

\u201cWith brand and customer loyalty at a historic low, and with cars being regarded by many as \u2018white goods\u2019, there has never been a better time to explore the possibilities of omnichannel, especially where EVs are concerned,\u201d says the Cox Automotive report. \u201cA quality website, including video walkarounds, quality photography and part-exchange functionality are necessary to do omnichannel properly. The customer must have all the tools to conduct almost every part of their journey from the comfort of their sofa.\u201d<\/p>\n

For dealers, an \u2018omnichannel\u2019 approach should help them lower costs, and garner better customer data, enhancing the opportunities for improved customer retention.<\/p>\n

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\"\"<\/p>\n

Shifting to the \u2018agency model\u2019<\/strong><\/h3>\n

Heading into 2024, dealers are also facing the challenge of the \u2018agency model\u2019: essentially manufacturers setting national pricing, managing the customer sales relationship and assuming responsibility for inventory and administration.<\/p>\n

It offers customers consistent, transparent \u2018no-haggle\u2019 pricing and a more straightforward buying process. For manufacturers, it means increased customer data, increased customer satisfaction and reduced distribution costs and financial risk.<\/p>\n

\u201cThe agency model seemingly has several advantages for manufacturers and consumers alike,\u201d says the Cox Automotive report. \u201cFor the former, acquired data will no doubt aid consumer retention. It could also more sharply focus marketing strategies. And, for the consumer, at the outset at least, it means transparent pricing and, allegedly, a more hassle-free buying experience.\u201d<\/p>\n

The agency model has already been adopted by Mercedes throughout Europe. Brands like BMW, MINI, Ford, Skoda, Smart, Genesis, Jaguar Land Rover and Alfa Romeo are also investigating the rollout of this model.<\/p>\n

But what is the dealer\u2019s role in this new retail chain, and what benefits could it offer? Depending on the specifics of the agency model adopted by the manufacturer and how it evolves, it could mean potentially reduced financial risk and improved cashflow. This could free up additional revenue for dealers to invest in used cars and aftersales, or investing in customer touchpoints \u2013 especially digital.<\/p>\n

Questions remain over who will bear certain brand costs, such as the cost of demo vehicles, training and gross margins. Equally, the significant capital cost of the agency model could discourage manufacturers, and make them think again.<\/p>\n

\u201cPrivately, many dealer groups worry that the pure model won\u2019t work, because many of the aspects of the traditional arrangement, in their view are essential to their everyday working,\u201d says the Cox Automotive report. \u201cIt\u2019s feared that such aspects, which could be upended by agency model implementation, may render the new system impractical. Indeed, if manufacturers fail to comprehend the work dealers are already doing on the ground, introducing agency \u2013 in many cases \u2013 will prove to be painful and costly.\u201d<\/p>\n

Many in the industry believe the pure agency model will evolve over time to a more blended approach of franchised and agency, allowing manufactures to capitalise on the expertise of their dealers, especially when it comes to part-exchange, used vehicle management and aspects of finance \u2013\u00a0all of which require an experienced, enthusiastic and adept dealer to execute.<\/p>\n

But whatever happens, it\u2019s certain that working more closely with manufacturers to establish and reinforce long-lasting partnerships is key to planning ahead for this shift to agency.<\/p>\n

\u201cAs manufacturers gain new business, it\u2019s clear that they will value dealers who do a great job of representing their brand in the market,\u201d says the Cox Automotive report. \u201cThat could mean a closer alignment of business strategies for both the manufacturer and the dealer. The upshot being that any new dealer strategy will see them adopt a more operational role in the sales process and associated activity.\u201d<\/p>\n

This shift to the agency model is expected to encourage some dealers to swap out legacy brands in favour of younger manufactures looking to get a foothold in the European market. BYD, for example, recently overtook Tesla as the world\u2019s largest EV manufacture and is now establishing a physical dealer network with the likes of Pendragon, Arnold Clark and LSH Auto in a bid to establish a 100-strong UK dealer roster.<\/p>\n

\u201cThere\u2019s no doubt that manufacturers and dealers alike will continue to consolidate as revenues fall and market dynamics shift. It may well be that dealers have, in some sense, an even greater say in the dealer\u2019s future. Dealers will need to decide which manufacturer best suits their outlook. New entrants to the market may prove to be a better draw for many dealers who choose to swap legacy brands for younger manufacturers hoping to get a foothold in European markets.\u201d<\/p>\n

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Artificial intelligence<\/strong><\/h3>\n

Finally, we come to today\u2019s hottest topic: AI. The exponential rise of artificial intelligence models such as ChatGPT and Google\u2019s Bard over the past year has captured the imagination of all industries and demonstrated the sheer power of AI technologies \u2013 tools that will certainly shape the future of automotive retail.<\/p>\n

Indeed, both virtual and augmented reality systems are already being used by dealerships to enhance customer experiences, optimise day-to-day operations and drive innovation. And then there\u2019s the sheer amount of data these systems generate, allowing dealerships to better personalise their offerings and help their businesses run more effectively, whether through better inventory management or data-based decision making.<\/p>\n

At this point, it’s difficult to envisage just how much AI will affect automotive retail in the coming years, but successful dealerships of the future that embrace these technologies and adapt to changing customer expectations will be better placed to offer more attractive and engaging experiences at every touchpoint.<\/p>\n

So, there we\u2019ve covered on just a handful of challenges facing the automotive industry, and how, with forward-thinking and the right information, there are credible solutions for each. To find out more, make sure to download Cox Automotive\u2019s Insight Report and sign up to the upcoming Autocar Business webinar discussing how car retailers can survive and thrive in a transformative year.<\/p>\n

Download the report<\/strong><\/a><\/p>\n

Sign up for the webinar<\/strong><\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

There are more ways to buy cars now than ever before \u2013 should dealers be worried?<\/p>\n

From transformative legislation to the agency model, automotive retail is changing faster than ever before \u2013 that\u2019s where Cox Automotive can help<\/p>\n

It has been a 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