As in so many sectors of the economy, automotive franchising was initially hit hard by the COVID-19 pandemic.
Though demand bounced back swiftly in the second half of the year—surprising industry participants and observers alike—the pandemic has brought significant change to the industry by accelerating consumer demands for new ways of engaging in the automotive sales process. The pandemic forced companies and consumers to embrace online retailing which was once viewed as maybe "someday" and made that a reality today. While many manufacturers had already been in planning, pilot, or limited roll-out stages of online platforms and tools, consumer expectations and demand are forcing manufacturers and their dealer networks to transform their customer experience and distribution and selling strategies at an accelerated pace. This transformation will require careful attention to, among other things, the control, ownership and use of consumer data.
The pandemic has brought significant change to the industry by accelerating consumer demands for new ways of engaging in the automotive sales process.
Of course, the pandemic is not the sole driver of this transformation. EV-only manufacturers, such as Tesla, and used vehicle e-commerce sites, such as Vroom and Carvana, present unique competitive challenges to manufacturers with traditional dealership models. State dealer statues and new motor vehicle boards have resisted many of the statutory changes "traditional" manufacturers and dealer networks will need in the very near future to compete with the coming wave of EV-only market entrants largely unencumbered by state laws mandating distribution of new motor vehicles through established dealer networks. One emerging area of tension concerns "over the air" (OTA) updates. These updates by definition require no dealer interposition between the manufacturer and the consumer, but dealers have already proposed legislation in some states requiring dealers to be compensated for these "OTA" updates.
The EV revolution will also create ripple effects far beyond the issues of direct sales, dealership models, and evolving consumer behavior. EVs will require a significant infrastructure investment across the country. The Biden administration's commitment to tackling climate change may be the impetus for an increase in EV charging infrastructure, clean energy to fuel those charges, and a standard protocol for EV charging interfaces.
EV-only manufacturers and used vehicle e-commerce sites present unique competitive challenges to manufacturers with traditional dealership models.
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