The NFDA's Driving Digital event offered valuable insights for car dealership owners. Here are some of the key takeaways.
Economic Outlook and Consumer Confidence
The economic outlook for the UK car market is cautiously optimistic. Inflation is expected to fall, leading to a gradual improvement in real GDP. However, consumer confidence remains fragile due to lingering concerns about inflation and interest rates.
New and Used Vehicle Market
The new and used car market is expected to grow in 2024, but this growth will likely be driven by a "push" new vehicle market, rather than organic consumer demand. Significant changes are anticipated in the automotive market over the next five years, so staying adaptable is key.
Battery Electric Vehicles (BEVs)
Battery electric vehicles (BEVs) are poised for a price drop. BEV list prices could potentially fall by 30%, making them more accessible to a wider range of consumers. The industry is transitioning from a market dominated by early adopters to a broader market, requiring more affordable options.
Chinese New Entrant Brands
Chinese car brands are making waves in the market with competitive pricing and value propositions. Many of these brands are vertically integrated, meaning they produce their own batteries (e.g., BYD). This allows them to offer competitive pricing. To counter tariffs in the US and Europe, they are building plants in Mexico and Hungary.
The Enduring Role of Car Dealers
Despite the rise of online car sales and changing consumer preferences, car dealerships remain crucial players in the car buying journey. They play a vital role in helping consumers navigate the complexities of BEVs, building brand awareness for new entrants, and providing a seamless omnichannel buying experience that blends online research with physical dealership visits.
Building Strong Manufacturer Partnerships
While not all manufacturers adopt the same direct selling approach, dealerships will likely remain essential partners for many. Fostering strong relationships with manufacturers is key to success in this evolving landscape.
Consumer Insights
Nearly half of car buyers in the UK still use franchised dealerships, while online sales remain relatively low (4%). This highlights the continued importance of a strong dealership presence. Additionally, most car buyers (88%) plan to return to dealerships for future purchases, indicating a high level of satisfaction with the traditional dealership experience.
The survey also revealed interesting insights into consumer preferences for electric vehicles. Electric vehicle owners are highly likely (80%) to stick with electric for their next car, indicating a high level of satisfaction with this technology. Hybrids remain a popular choice (34% of respondents), followed by petrol (39%). This suggests a continued mixed market for the foreseeable future.
Brand awareness for new entrants is still low, with BYD being the most recognized brand (13% spontaneous awareness). This presents an opportunity for dealerships to partner with new entrants and help them build and interact with brand recognition and the vehicle park.
Challenges and Opportunities for Dealerships
Car dealerships face a complex balancing act between political pressures, environmental concerns, and customer needs. Listening to customer concerns about electric vehicle charging infrastructure, for example, is crucial. Hybrid vehicles may offer the most practical solution soon, as infrastructure for fully electric vehicles continues to develop.
Dealerships need to adapt to a mixed vehicle market with a focus on exceptional customer service, talent acquisition to attract and retain top performers. Flexible business models need to adapt to changing market conditions.
Conclusion
The car dealership landscape is evolving, but the event underscored the enduring importance of dealerships. By embracing change, building strong partnerships, and prioritising customer needs, dealerships can thrive in this exciting new era.
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