Dealer Irrelevance? (Part I of II)

Ready for a bombshell? You bet, who doesn’t enjoy bombshell news, dropped from above with collateral damage. But nice collateral damage, the type that doesn’t harm or kill.

Ok, that doesn’t exist, but this type of bombshell news did turn a handful of heads. McKinsey & Company is a well-respected international consulting firm. They work across a range of sectors, and one such sector is the Automotive & Assembly, Operations and Private Equity practice (a very long title for the larger auto related business). One of their crack staff, Ms. Inga Maurer, is the face behind the bombshell we’re going to drop, but don’t blame her if you don’t agree with the message. She’s simply doing her job, and odds are, there is some merit to what she’s saying.

Maurer rattled more than a few cages when she boldly stated auto dealerships are not making any money selling new cars anymore. Read that again. Dealerships are not generating money selling new cars. The very product a dealership spends every waking moment trying to market, said product is failing. And to make matters worse, Maurer doubled down with another bold declaration – dealers aren’t making much revenue on used cars either!

Wrapped In A Box

This could have all been summarized into dealers not making cash period, but then there’s not really a news story, is there. Maurer however is not casually spouting off at the mouth. She has facts to back it up – facts like for every incremental 1% of online used-car transactions an eye-popping $40 million in profits (used-car) are eroded. She further posits that by 2030, 50% of sales will be online.

There was a great video that emerged not too long ago of a gentleman in Mexico City receiving a new VW, wrapped in a box, delivered to his house. He ordered the car online, had all the bells and whistles he wanted added to it, and simply pressed click. A couple days later, said car was sitting in his driveway. However, Maurer does not simply state that dealers will disappear into the ether. Rather, there are some alternative moves they can make to stay relevant.

Stay tuned for these new moves …

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