Auto retailing is under pressure from a variety of overlapping fronts.
Automakers will roll out more battery-electric vehicles over the next several years, with some planning to steer customers to reserve the vehicles through new branded online retail platforms. That, in turn, has some franchised dealers concerned that automakers may be interested in dipping more toes into Tesla's model of selling directly to consumers.
These factors are converging at the same time the industry is in the midst of a digital transformation sparked by the pandemic. There's a lot of change happening at once, and for some dealers, it's even prompting discussions about whether it's time to exit the business.
We explored all of these issues in a three-part series, Triple Threats, which concluded this week with a look at automakers' digital retailing platforms. I recommend giving the series a read if you haven't yet done so.
Top automaker executives say they remain committed to their dealership networks. Those automakers developing their own digital retailing tools say they desire a more consistent online experience among dealerships and want to make online car-buying easier.
Automakers and dealers together need to root out the pain points that get in the way of a satisfactory purchase experience, such as the time customers spend waiting at a dealership, said Len Bellavia, founding partner of law firm Bellavia Blatt, which represents dealers.
Dealers have to acknowledge that automakers may have a model that improves customers' satisfaction with the process, Bellavia told me. And automakers have to recognize the conflict in encouraging digital retailing tools that keep people out of stores while asking dealers to invest millions in new facilities.
If manufacturers choose to perform more of the sales process traditionally done by dealers, such as setting vehicle prices or trade-in values, then they also should compensate dealers with "an agency fee or a commission" to make up for any profit dealers might not earn using that new model, he said.
"The amount of money has to be commensurate with the amount of money that a dealer would make if they sold the car the traditional way," Bellavia said.