Will you buy your next car from an Auto Dealership?

The coming wave of EVs means changes

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The President of the United States will be in Detroit next week attending the auto show. Joe Biden will be touting all the programs he’s pushed through Congress to quicken the move to electric vehicles (EVs).

The auto show is about new models. Manufacturers will unveil their latest and greatest and there will be new EVs to see for the first time. Nervously watching all this are automobile dealers across the country who fear this transformation is a threat to their business. They have reason to worry.

Just last week General Motors offered to buy out all of its Buick dealers in the US. That’s 2,000 dealers. A GM executive told the Wall Street Journal that with the Buick brand going all-electric by 2030, some dealers may not want to make the investments necessary to change their operations.

Buick all-electric concept car called the Wildcat. (Credit: Buick)

The global head of Buick, Duncan Aldred told WSJ, “Not everyone necessarily wants to make that journey, depending on where they’re located or the level of expenditure that the transition will demand.” He added, “So if they want to exit the Buick franchise, then we will give them monetary assistance to do so.”

GM expanded on that a bit when I asked for comment. A company spokesperson said, “The future dealer requirements are a logical and necessary next step on our path towards electrification to ensure our dealers are prepared to properly sell and service these unique vehicles in order to provide customers an exceptional experience.”

(Credit: Buick)

This is just the latest evidence of the changes that are coming for the automobile dealership business in the US. The more than 18,000 dealers know their business-model is under threat.

They watched Elon Musk build Tesla into the best-selling EV with no dealerships. There are Tesla-owned stand-alone “stores” and “galleries” in shopping malls. Some other startup EV brands are using the same model.

Tesla "Gallery" in a shopping mall in Virginia.

As the Buick news shows, the major automakers see the competition and are signaling to their dealers that changes are coming. Ford’s CEO Jim Farley has been the most direct. He told an investor conference that Ford needs to sell online and have a non-negotiated price. That is not what his dealers want to hear.

Last year’s Chairman of the National Automobile Dealers Association (NADA) told his more than 16,000 members as he entered office that they need to be proactive. He suggested they take out a clean sheet of paper and figure out how to strengthen their business.

Paul Walser speaking to his fellow auto dealers in 2021 at the association's virtual convention. (Credit: NADA)

A year later as Paul Walser was ending his term as Chairman, the message had not changed. “Rather than letting seismic shifts rock us to the core, let’s make this a defining moment and create our own destiny,” he said in his farewell address in Las Vegas.

“Instead of caving to short-term pressure, let’s focus on what really matters: capitalizing on our existing dealership presence and finding new and better ways to excite our customers,” said Walser, who has a number of dealerships in the Midwest.

One of Paul Walser's dealerships. (Credit: Walser Automotive)

Even Ford’s Farley says there will be a significant role for the dealers. It may not be selling cars but rather customer service, building a longer-lasting bond with owners.

The new Chairman of NADA delivered a similar message when he told dealers they can no longer think of the industry as two separate businesses, the manufacturer and the retailer. That is what is disappearing. But Mike Alford, who owns a dealership in North Carolina, told his colleagues they can survive if they partner more closely with manufacturers to satisfy the customer.

Mike Alford speaking at the 2022 NADA convention. (Credit: NADA/MarineChevrolet)

Alford says his fellow dealers need to collaborate with carmakers, “to bring about a customer experience that could be the envy of every other industry in the world.”

As the GM executive suggested, not all dealers may want to take this trip.

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(Cover images credit: Chevrolet)