A disturbing new analysis was published in September by the well-known Danish business newspaper Børsen. The article summed up the international research house ICDP’s market research regarding the Danish automotive industry. It revealed interesting trends affecting danish car dealers and importers. We’d like to present to you some of the key takeaways from the analysis.
Major changes in the car industry threaten Danish car dealers
Car dealerships in Denmark account for a multi-billion business currently facing a massive amount of revenue loss— the article claims. This is accounted for by the purchasing patterns of the past years, the green conversion, and aggressive manufacturing. This development could recalibrate car salesmen and destroy most of their earnings if they do not adjust now.
“Dealers are not exactly going bankrupt, but their earnings are facing significant threats by 2030,” said Gareth Arnould, senior analyst at ICDP, which closely monitors the international automotive industry.
Based on key figures from a typical Danish dealer of new cars, they risk losing 92% of their earnings until 2030 if they don’t respond to the changes affecting the industry.
“It’s now that they must act and implement change. Otherwise, it will be more about survival than well-being for the dealers,” he adds.
Nic. Christiansen Group, one of the largest car dealers in Denmark, acknowledges that the company and the rest of the car industry are facing significant changes, and action must be taken.
“We have to change the business model and focus on other things if we want to survive,” says Niels Vrist Bertelsen, Executive Vice President of Nic. Christiansen Group.
A hit at workshops
In Denmark, the total turnover from car sales was 120.6 billion DKK in 2020 together with 34 billion DKK in turnover from car repair shops. Out of this, the workshops’ turnover was 120 million in 2020, which was a new record.
It’s the aftermarket where dealers will have challenges as a large part of their earnings come from this segment. The way people own their cars will change, be it car-sharing, leasing, or rental which is expected to grow in Denmark. This new shift in car ownership will account for revenue loss for workshops.
Workshops’ customers in the future will to a greater extent be leasing companies with large car fleets. They are able to push prices further down compared to private customers. This will put pressure on car dealers’ earnings in the aftermarket. Consequently, dealers’ workshops will also be pressured by the advent of electric cars, which is on the rise in Denmark in the coming years. Furthermore, it will also affect dealers’ earnings, as EVs require less maintenance.
With the electrification of the car fleet and changing consumer patterns, several car manufacturers are also testing new sales models. They’ll try to sell cars directly to end-users, which could also put pressure on car dealers.
“The good thing is that car dealers can improve efficiency throughout the business and minimize unnecessary costs,” says the senior analyst at ICDP.
A reasonable solution for car dealerships
Although the article was an analysis of the Danish automotive landscape and its future, we can also see these emerging trends all around the world.
As the experts stated above, a new view on doing business could be a solution, together with cost cuts and efficient ways of working.
The only Volkswagen importer in Denmark, Semler Group, has recognized this problem and invested in workshop digitalization.
Since the aftermarket accounts for a significant amount of revenue and has still a lot of untapped potential, Semler decided to invest in this area.
The key point of revenue maximization is customer retention. Currently, 90% of a dealership’s effort goes into selling new cars. It’s a well-known fact that the majority of customers leave their workshop after the warranty period ends. That’s why Semler invested in Connected Carsm, that’s main focus is customer retention, efficiency, and cost-saving.
“It’s a great opportunity for us to be able to be part of changing workshops’ mindset from being reactive to proactive. Our workshops’ service advisors now have the necessary real-time data about a car. They can prepare well ahead and book customers ahead for their next service. On the Nordic roads, many connected cars drive already. Workshops want to give the best service of all time. We see a fantastic response from both the end users and the workshops. From our experience, it’s clear that strengthening workshops’ and customer relationships is the way forward in the automotive industry,” says Hakan Ohlin, former general manager of Nordics.
An increase in revenue – Volkswagen Commercial Vehicles Denmark’s success through connectivity
The Danish Volkswagen Commercial Vehicles had the same problem as most in the industry: low customer retention. They decided to implement ConnectedWorkshop together with the ConnectedFleet solution. As a result, in 2020, they connected 10.000+ vehicles experiencing a 86% boost in revenue for cars 7+ years old cars.
By implementing this solution, they gained a competitive advantage. It can now provide customers with a comprehensive package that includes leasing, insurance, service management, and fleet management.
“Connected Cars has created a digital platform that allows us to start a direct and proactive dialogue with our customers. This solution is data-driven, which enables us to provide customers with better advice. When it comes to daily operations, it helps them a lot to keep the downtime to a minimum. All this thanks to the proactive vehicle maintenance and the service from our side,” says Lise Bülow, Head of After Sales, Volkswagen Commercial Vehicles Denmark
To conclude, changes in consumer behavior are here and the dealerships need to be ready for this change. Connectivity and a proactive approach are some of the solutions that proved their place in the equation. To conclude, changes in consumer behavior are here and dealerships need to be ready for this change. Connectivity and a proactive approach are some of the solutions that proved their place in the equation.
