LOS ANGELES -- The typical U.S. car dealership will see evolution, but not revolution, over the next 10 years, says a consultant hired by the National Automobile Dealers Association to study the future of dealerships.
“We see change coming to the dealership but not a disruptive overthrow of the business model,” consultant Glenn Mercer said Tuesday at AutoConferenceLA.
The goal of the research was to look at the state of auto retailing in 2025. NADA commissioned the study in March as a way to stimulate long-term thinking and planning among dealers, said Mercer, a former McKinsey & Co. partner who previously studied automaker facility programs for NADA. He presented key findings Tuesday. His report is being finalized and will be released to dealers at a later date.
Other conclusions reached by Mercer:
- The dealership model will remain dominant, with direct-sales efforts focused on high-end vehicles and representing just a small fraction of U.S. vehicle sales. But dealerships will become more alike with dealers adopting prescribed features of factory stores.
- The number of U.S. dealerships will shrink slightly to around 16,500 stores in 2025, down from just under 18,000 today.
- Steady but slow consolidation of store ownership will continue. Mercer forecasted a pool of 6,500 owners by 2025, down from 8,000 today. Private ownership will continue to dominate.
- U.S. light-vehicle sales will be in the range of 17 million-18 million vehicles, similar to today’s level. But the mix will shift to more-expensive vehicles and higher-income customers, Mercer said.
- Vehicle profit margins will be lower, but asset returns such as return on equity may be more stable. The gap between strong and weak stores will widen, Mercer predicted.
- Purely online sales will become common but not dominant.
- Satellite service outlets run by dealers will multiply.
Mercer also studied the impact of electric vehicles, autonomous cars and mobility services.
He concluded that electric-vehicle sales will grow by 2025 but remain less than 5 percent of the market. Still, it is crucial for dealers to embrace the electric-vehicle market. By 2025, all vehicles will have high levels of assisted-driving features though perhaps just 10 percent will be capable of full-fledged autonomous driving.
The single biggest risk to the dealership system is the potential link between autonomous vehicles and mobility services, Mercer concluded.
“Our own estimate is that this is relatively unlikely to happen, but, if it did happen, it would be cataclysmic and has to be flagged,” Mercer said.
“If mobility services converge with autonomous vehicles, such as what Uber is testing in Pittsburgh today, and, in so doing, succeeds at breaking the age-old bond of ownership between Americans and their cars and trucks, that would change things dramatically.”
