Insight

Will this be the end of car dealerships as we know them?

Online shopping, ride-sharing services, collision avoidance technology, and self-driving cars will lead to a sharp drop in dealers' sales and profits.

U.S car dealerships have long had a lock on new-car sales, with most states prohibiting automakers from selling their products directly to the public. That arrangement has obviously worked out well for the dealers.

But today’s dealer model is under threat from a number of technological, economic, and cultural changes. Websites are arming potential buyers with information to drive better deals. New entrants like Carvana are cutting into dealers’ used-car margins and volumes. The imminent arrival of Autonomous Mobility will suppress new vehicle sales and make them safer, resulting in loss of lucrative body shop work. Automakers will likely look to bypass dealers to equip and maintain these autonomous ride-sharing fleets.

These changes will force a radical reinvention of the automotive retail landscape. This paper explores a number of options car dealerships can take to help them protect their profitability as the auto market undergoes this transformation.

Will this be the end of car dealerships as we know it?

Online shopping, ride-sharing services, collision avoidance technology, and self-driving cars will lead to a sharp drop in dealers' sales and profits.