WITH so much change and disruption going on in the auto industry, what lies in store for dealers in 2040? It’s a question taxing a lot of minds.
Hyundai UK President and Chief Executive Tony Whitehorn sits on the South Korean manufacturer’s global committee looking at this very thing and has highlighted two specific areas: alternative fuels and digitalisation.
He sees a dramatic change for dealers as electrification takes over from the internal combustion engine. The difference will be seen, and felt, in the workshop.
Whitehorn said: “To start with, EVs use no lubricants which are good revenue stream for dealers. Service times will be reduced from one hour now on a conventional vehicle to around 20 minutes because there are fewer loving parts and fewer parts requiring replacement. This means that in the future dealers are going to have to attract many more vehicles to fill the workshop.”
While he sees this as a big challenge for the networks, there’s no need to worry just yet. Whitehorn added: “We are looking at what might be happening 20 years from now and even then, according to a lot of data, 60% of vehicles in 2040 will still be powered by internal combustion engines.
“But the network will have to be ready for change and come up with new ways to deal with customers and to be more flexible. For example, with EVs there will be less of a necessity to put the car up on a ramp so one thing to look at is servicing the vehicle at the customer’s home or office.”
Those most likely to feel the impact of the move towards electrification, Whitehorn believes, is the independent sector. “The resource and specialisation will be much more geared to franchised dealers and the independent repairers will struggle to keep up, even more so if hydrogen fuel cell vehicles gather volume.
“FCEVs will involve an even more specialised degree of expertise, technology and equipment. Independent repairers may have to look at aiming there business at older vehicles.”
As for digitalisation, Whitehorn said that customers will increasingly buy their cars on the internet but he still sees a need for dealers who will become more of a handling agent.
“People will buy online but they will still need personal contact. Experience has shown that customers want an ongoing relationship and so there will still be a role for the dealer. However, the sales person might be different – There will be less ‘dealing’ and more servicing the delivery and aftersales requirements.”
Whitehorn does see more consolidation amongst dealers. As the industry changes in will become tougher financially for the smaller, family run businesses.
He said: “Running a franchise is an expensive business and you need a lot of money to attract a certain level of professionals into the dealerships. Their level of expectation, just like the customers’, will be higher. Their skill levels will be greater and they will demand higher wages and better working conditions.
“Large dealer groups will be able to resource their outlets better and put in higher levels of investment along with having economies of scale. The downside, though, is that we tend to see more churn at senior levels, people don’t stay in one place long enough and want to move on as they progress their career.
Hyundai UK has already been looking to the future not just by enabling customers to buy vehicles from its website but also with pop-up stores in the major retail centres at Bluewater in Dartford, east of London, and Westfield in Sheffield.
These outlets are now each selling 1,000 cars a year and have thrown up some interesting statistics. Whitehorn said that 96% of those sales are to people who have never bought a Hyundai before, the average age of buyers is 39 against an industry norm of 52 and 86% have never bought a new car before.
There are some interesting dynamics going on. Whitehorn said: “To start with, many of these customers have probably not gone into the shopping centre with the intention of buying a car and if they have £2,000 in their pocket they are probably thinking they can only afford an old vehicle.
“The average spend of those visiting Bluewater is £250, so when they see in our store that they can have a brand new i10 for that £2,000 as a deposit and then pay £160 a month, the numbers all start work for them.”