Electric cars the end of the road for dealerships

PHILIP KING
February 1, 2018
The Australian 

Electric vehicles will sound the death knell for half of all car dealerships as they lose vital revenue from servicing internal combustion engines, an industry survey by KPMG says.

With EVs capable of going 100,000km without maintenance, it said dealerships that survived would have to evolve into “experience hubs” akin to Apple stores, where buyers could sample products and immerse themselves in a brand. 

The KPMG annual survey of 900 car industry executives worldwide highlights changes to retailing as one of the key fallouts from the rise of EVs.

“The majority believed that over 50 per cent of bricks and mortar dealerships would close by 2025,” it says.

The survey casts doubt over prospects for the 60,000 employees in 3500 showrooms across Australia, the bulk of which are family-owned. 

Dealers rely on after-sales for most of their revenue as the margins on new vehicles average just 2 per cent, the Australian Automotive Dealer Association said.

In local analysis of the survey being released today, KPMG motor industry services chief Wayne Pearson said EVs would turn the business of car retailing on its head. 

“With fewer moving parts, the vehicles of the future will be more software driven than mechanical, which eliminates the need for expensive and specialised servicing,” he said.

The future shape of dealerships could already be seen from the recent opening of a Jaguar Land Rover facility at Westfield Bondi Junction in Sydney’s east and the first Mercedes me Store in Melbourne. 

“There may be fewer dealerships but they will be exciting places to visit,” he says.

“These hubs will interact with drivers at every stage of the ownership life-cycle and reinvent the concept of customer service.”

In this year’s pre-budget submission, the AADA says despite record sales of almost 1.2 million vehicles last year, its 1500 members were feeling the pinch from increasing regulation, online sales, the threat of transport-as-a-service and “unrealistic sales targets” set by carmakers. 

AADA chief David Blackhall said dealer numbers were already in decline but the KPMG consensus overestimated that decline. “There’s a certain geographical reality to be faced in Australia. You have to have something in the outer dormitory suburbs and urbanised strips. Fifty per cent fewer outlets in a country as geographically spread out as Australia — I think that’s too high.”

KPMG motor services director Steve Bragg said scale would be essential for future dealer groups and the industry was consolidating. “All the smaller family dealer groups are looking to get out by selling to the bigger groups, or looking to get bigger.”