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The Evolution of Dealerships....The Automotive Business is Changing

Updated: May 13, 2019

As we see the automotive industry changing dramatically over the past 10 years, we can only assume that there will be more significant changes on the horizon. Are you ready to make the dynamic shift or is it someone elses turn?

What Direction Is The Automotive Industry Going?

There was as a time not too long ago when a used vehicle hit the lot, you marked it up six, eight or even 10 thousand above what you brought it in for. Mr & Mrs customer would then walk on your lot, tell you what they are looking for, find the vehicle they like and then negotiate. You always made money. Now on the back on platforms such as trader and their new customer centric pricing gauge- dealers now have to be hyper focused on their operational strategies. Here are some issues facing the modern dealer .

Direct distribution/personalization. As we see a shift in consumer habits and millennial preferences, we can acknowledge that personalization is the key to succeeding in the new age of business. From boutique coffees to customized shoes, being able to produce a product or service that is “me specific” is an integral focus of many businesses to answer the question of, “How does this product/service make me more relevant and unique?”. As proven in the Tesla direct B2C structure, dealers have to acknowledge that OEM's will likely extended optional features/customizations in vehicles or perhaps look at going to a B2C model as well eliminating dealership sales entirely. Whether OEM’s will shift to this model is uncertain, but we do know that the new expectations of the customers if for dealerships to provide a personalized experience to earn their business.

OEM supplied F&I packages. In my 7 years as a Mercedes Benz Dealer, I personally experienced the transition from 3rd party F&I product providers to a OEM direct model to capture more revenues. When I first started, we were using aftermarket tire/wheel warranties, L&D insurances, SMART program key replacement services and installing remote starters all to increase our revenue streams. Fast forward 7 years and all these services are now all provided by Mercedes-Benz Finance and all with significantly less margins.

Rising Interest rates and floor plan requirements. This ties into the previously mentioned personalization obstacles that dealerships are now facing. If OEM’s in the future elect not to go to the B2C model then how does this affect stock inventory ordering strategies? In my experience just last year on several occasions, we would have the exact vehicle- I mean exact vehicle- that a customer built online with the only exception that the wood trim was different. In these cases, we either ended up factory ordering a vehicle which may or may not get delivered or we lost the sale to another store that had the exact vehicle. Having a strategic Inventory ordering strategy is more important now than ever.

There is no such thing as AOR (anymore). With the advances in technology, the ability for the customer to find the exact car they want, review photos/video’s, negotiate and purchase can all be done from a smart phone. This expectation to get the exact vehicle is forcing dealers to provide a better e-commerce/on-line experience. The dealers that embrace technology and find better ways to market on-line will be miles ahead of the dealerships that don’t embrace change.

HR/Keeping and staffing great people. Finding a balance between providing a great work environment and managing expenses is so critical in the dealerships. Having websites like glassdoor where your employees can rate you as a business/employer definitely affects the quality of people you can bring into your organization. I was able to finally get over the hurdle myself just a few years ago and accepted that some non-typical and $0 return social expenses actually created a better work atmosphere and increased our staffs sense of pride, efficiency and ultimately increased their loyalty to our company.


Some Initiatives launched:

  • Yay Days- Every employee got 2 yay days per year…PAID! This gave the employees an opportunity to attend a Christmas concert, spend the day with their spouse on their anniversary or just to take a decompression day.

  • Charitable Days- Every employee had the opportunity to spend 2 x half days per year or 1 full day to offer their services to their community…PAID!

  • Spending Money on social events. Renting bowling alleys, potluck lunches, BBQ’s in the summer, pumpkin carving contests and so much more.

We were not providing anything that other dealers weren't offering, but if you are not providing social benefits to your employees, will they stay or will good talent come to you?

Electrification/Autonomous driving. Are you prepared for electrification of vehicles and what does this mean for your business. As mandated by BC, they intend on having all automobiles being ZEV by 2040. How does this affect your CI compliance and what improvements/cash flow will be required to meet these new mandates. It still seems like far in the future, but we can all imagine self driving cars and how it will impact our business.

Will they just drive to the customers house with no sales associate?

Will they come in without a driver for warranty repairs or general maintenance?

Will our technicians have the expertise to repair them?

What will happen to warranty repairs? According to quora, the average combustion engine has 10,000 moving parts while the Tesla Model S has 150.

Many questions arise from electrification/autonomous vehicles and this will surely be the biggest disruptor to the 100+ year old automotive sale business model....times are changing.


At Tim Lamb Group we have over 90 active listing and process billions in annual transactions. We are committed to our clients, respect their discretion and have continually been the market leader. If you are considering an expansion or selling active stores. Please reach out to me and I would love to help!

Gordie Gerbrandt

January 15th 2019

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