Peter Vosper: Uncertainty in the Motor Industry – bad for dealers and bad for customers?

Some years ago motor manufacturers were wondering how they could ensure profitability to invest in the new future, electric powered vehicles.

One man and his business, Elon Musk and Tesla, seemed to have the answer. Within a relatively short space of time Tesla share price had made the company the most valuable motor business and the envy of its competitors, many of whom had been established in the industry for many years.

What they wanted to know was what was the secret of this success.  Some decided the obvious difference was the Tesla brand had no dealers and had effectively removed the largest cost from the operation.

New thinking was necessary. Why not sell their cars direct and retain a smaller number of dealers to carry out the handover of their vehicles and look after the servicing and repairs.

Instead of the problems of building and holding expensive stocks they could build many of their vehicles to order, giving the customers exactly what they wanted. Agency would seem to be the solution but there were potential disadvantages.

This would require expensive showroom fitouts and fleets of demonstrator vehicles to enable their products to be viewed and test driven, becoming the responsibility of the manufacturer.

This problem would need to be resolved. They were confident the customer of tomorrow would be happy to buy online and visit the showrooms only to see and test drive the vehicles.

Then when Covid arrived and customers had little choice in the lockdown periods, the success of online sales convinced the manufacturers this would become the norm in the future.

Announcements were made and arrangements were made to test how this would work. It was easy for them to install a partial change with the gradual introduction of the new models powered by electric and furthermore Tesla had proved this worked for their product.

What we as dealers discovered they had failed to invest in was a process to provide the information the customer wanted, and failed to ask the customers if they would be happy with the range, the facilities to charge, the change which may be required in driving technique to maximise range, and the difference in range in the summer and winter when the cold weather can reduce it by up to 25 per cent.

Problems also occurred in production and delays in predicted delivery dates and added to the parts shortages causing further delays, did little for customer satisfaction. 

Recently we have heard that Jaguar/Land Rover are no longer intending to go the agency route and just last week Ford Motor Company, who have been carrying out a pilot in the Netherlands, would not be moving to agency after all. 

Customers have generally returned to dealers since the end of the Covid crisis, but more importantly to people they can trust to give them full information and will not sell them a product which is not suitable for their needs.

Tesla, who have been building sales and service centres also announced they are laying off more than 10 per cent of their workforce. 

So where do we go from here? I will give you my thoughts next week.