Because car dealerships will swerve a bit
Automotive: in the face of changes in the sector, dealers are forced to reinvent themselves. The study of Le Monde
We read in Le Monde how the Dealerships, large SMEs and heirs of a centenary system, have to face the decline in sales, the transition to electric vehicles and the emergence of competition on the Internet, sometimes unleashed by the manufacturers themselves.
A fascinating look, an inexhaustible stream of words, a smile that shines like a rim… Cyrille Frantz excels in the art of selling cars, and it shows. The deputy general manager of the Bymycar dealership group, responsible for the BMW and Mini brands in the Paris region, welcomes visitors to his experimental site in Chennevières-sur-Marne (Val-de-Marne). Bymycar has made the 10,000 square meter boutique garage, decorated with the German brand's logo, the showcase of the dealership of tomorrow. The one that must respond to the revolutions of mobility, where the car is electrified, shared, confronted with digital transformations.
“Imagine walking into the dealership,” says Frantz, who quickly assumes you can become a customer. "We will not only offer you a new or used car, but also a package of services: a mobile workshop truck to go and overhaul the vehicle at your home, an app with a video interface to make repair estimates more transparent, the possibility of renting accessories, such as a roof box for holidays or even a car from the dealership. "
"And if you are short on time, you can, via a smartphone application, leave the vehicle for a service without going through the reception, or, for professionals, buy spare parts outside the opening hours", adds the manager, indicating files of lockers with touchscreen intended to leave the vehicle keys or to collect a package. The firepower of a company like Bymycar – the third largest French dealer group with € 2 billion in turnover, 18 brands (including Renault and Peugeot), 90 sites and 2,730 jobs – allows it to invest in its future.
FRANCHISING SYSTEM
The owner, Jean-Louis Mosca, who according to Challenges magazine is the 386th richest man in France in 2020, intends to make his company a European mobility leader. It therefore bets on all-out development, beyond the very walls of its dealerships. To guide his strategy, in July 2020 he hired a former PSA executive, Carlos Gomes, as general manager. He just bought the VTC operator Marcel from Renault. And it has in its sights the start-up En voiture Simone, an “app” to overcome the driving license.
Woe to those who will not be able to change like Bymycar. Because the road is dangerous for car dealerships, which have entered an era of unprecedented upheaval. In France, there are about 4,000 car dealerships (out of 50,000 car sales and repair companies). These large SMEs (representing 160,000 jobs in France), often grouped in the “car boulevards” typical of medium-sized cities, can have a significant weight in the economy of these territories.
Until now, they have operated "sometimes with a spirit of shopkeepers and in the short term", says an expert in the sector, and according to the following mechanism: first sell a new car, then take it back to resell it second-hand, ideally twice, and, throughout the process, add the profitable after-sales activity (assistance, repairs, tires).
The system is not new. Invented by Henry Ford in 1914 and widespread in the United States in the 1930s, it consists in having the trade in vehicles granted to private investors, who buy the cars from them and resell them. Today, a small fraction of auto shops are owned by the manufacturers themselves. These are called branches, as opposed to dealerships. At Stellantis (ex-PSA and Fiat Chrysler), 8% of the sales sites are subsidiaries. At Renault, it's 7%.
Today, all these companies are involved in the crisis of a declining market, marked by Covid-19 and the difficulties of car production linked to the lack of semiconductors and raw materials. The decline in new vehicle sales – from a 2019 record – has been steep and looks set to last for a long time. This unexpected but profound crisis adds to the changes that have been silently disrupting the model for several years.
AREAS OF UNCERTAINTY
These changes have intensified since 2020, with rapid electrification leading to fewer workshop visits (an electric vehicle lasts longer than a combustion vehicle), and the arrival of new competition, essentially digital, sometimes unleashed by same manufacturers. This competition takes various forms. These are sites like Aramisauto, owned by PSA since 2016, which proposes a new distribution model, and which has just been successfully introduced on the stock market on Thursday 17 June, reaching a valuation of 1.9 billion euros.
They are new entrants like Tesla, which sells its cars only on the Internet, or like China's Aiways and its electric SUV, which arrives in France without a shop and has joined the Feu Vert chain to maintain and repair its vehicles. These are new ways of selling a vehicle, such as the small Citroën AMI, available as a smartphone at FNAC or Darty.
But the dealership economy is fragile. "If we calculate the ratio of profit to turnover, the profitability of a dealership in France is only 1% on average," says Christophe Maurel, chairman of the dealership business of the National Council of Automotive Professions (CNPA, the union of employers in the sector) and himself the owner of 26 Stellantis, Volkswagen and Toyota dealerships in the Occitanie region. "It is clear that we cannot be profitable without our three businesses: new, used and after-sales."
Finally, the sector is about to enter an area of legal uncertainty. In 2023, European regulations will be re-evaluated and this will be an opportunity for manufacturers to renegotiate their contracts with dealers. Stellantis and its 14 brands (including Peugeot, Citroën, Fiat and Jeep) was the first to strike, announcing on May 19 that it was terminating all its commercial contracts to create "a new, more efficient distribution model" within two years. Renault is also negotiating with its dealers, in a somewhat more discreet way. A new contract should be offered to them at the end of the year.
"Carlos Tavares, the head of Stellantis, makes no secret of it: he wants to apply Darwinism and the frugality he has implemented in his industrial sites to distribution," analyzes Eric Champarnaud, co-founder of the consulting firm C-Ways. “It is clear that the conflict is bound to grow between the manufacturer and the distributors. And not everyone will continue to remain in the fold of the group. " The CNPA is less alarmist. “This European reorganization with new contracts happens every ten years. There is nothing shocking about Stellantis' position, ”says Mr. Maurel. “At CNPA, we will be alert to the fact that there is a real debate between the parties on the quality of the contract. "
FIGHTING THE COMPETITION
The relations between producers and traders could therefore become increasingly conflicting. Forced by manufacturers to comply with brand standards and sales targets at the cost of sometimes heavy investments (failing which they are deprived of their bonuses, also called "back margins", without which they lose their shirts), traders are silently furious at the idea of seeing their clients compete directly with them via the Internet or on the second-hand market.
Especially during this time when the demand for second hand cars is high and cars are hard to find. A sign of some concern, the issue of competition from producers is provoking reactions. “Manufacturers don't know how to make money in operational distribution,” says Cyrille Frantz. "Nothing can replace this technical expertise, this capillarity and the human relationship that we find in the dealerships."
Across the Paris region, at the Peugeot dealership in Argenteuil (Val-d'Oise), the owner, Olivier Hossard, head of the Vauban group (22 sites west of Paris), was alarmed in March that dealerships could become nothing. more than a collection point for cars already sold online: “This is a fundamental point for us. Manufacturers want to recover € 400 per sale, while our margin is € 500 on average on a new vehicle. "
The big car dealers are trying to counter digital competition, whether it comes from Leboncoin (60% of second-hand sales are between private individuals), Aramisauto or, perhaps tomorrow, Amazon. Bymycar (through its main holding company) owns two automotive e-commerce sites, Elite Auto and Proxauto. French number 1, Emil Frey France, also has his own mega-site, called Autosphere. Even smaller players, such as Christophe Maurel's group, which successfully launched Maurelauto.fr, are innovating in this sector.
The logical result of all this is that the concentration movement of auto shops, which began a long time ago, is expected to accelerate further in the coming years. According to a 2018 study by the National Association for Automobile Training, there were still more than 6,000 dealerships in France in 2009, up from 4,000 today.
(Extract from the Epr press review)
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/concessionari-auto-cosa-succede/ on Sat, 26 Jun 2021 06:00:11 +0000.