EVOLUTION, NOT REVOLUTION, SAYS US EXPERT

US car dealerships will evolve over the next decade but are unlikely to experience revolution, according to a consultant hired by NADA.

In March, NADA commissioned former McKinsey & Co partner, Glenn Mercer, to study the industry with a view to predicting the likely state of affairs by 2025.

In a recent edition of NADA’s Automotive News, Mr Mercer predicted the dealership model will remain the overriding paradigm, with direct sales concentrating on high-end vehicles.

Consolidation will continue, while the number of dealerships will slightly reduce. From 8,000 owners operating 18,000 dealerships, Mr Mercer predicts 6,500 owners operating 16,500 dealerships in 10 years’ time.

He predicts the gap between strong and weak performers will widen. He expects lower profit margins but more stable equity returns.
Online-only sales will become common, but still a minor factor.

Mr Mercer said electric vehicles would only make up five per cent of the market in 2025, but urged Dealers to embrace the technology. All vehicles would have some level of autonomous features, with about 10 per cent capable of fully autonomous driving.

He acknowledged the potential threat to dealerships of an alliance between mobility services and autonomous vehicle providers, but considered it unlikely.

“If mobility services converge with autonomous vehicles, such as what Uber is testing in Pittsburgh today, and, in so doing, succeed at breaking the age-old bond of ownership between Americans and their cars and trucks, that would change things dramatically,” he said.

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