cars in parking lot

European Carmakers Grow Direct-to-Consumer Sales

Consumers Are Making Fewer Trips to Car Dealerships

European carmakers are devising new ways for consumers to purchase cars online. The pandemic has boosted online sales for products from groceries to vehicles. However, even before the pandemic, people looking to buy cars were starting to make fewer trips to dealerships throughout the process—they were doing more online research before looking at physical cars.

Now, Peugeot, Volkswagen (VWAGY), and Daimler (DMLRY), are rolling out ways for consumers to purchase vehicles without ever setting foot in a dealership.

A Variety of Approaches

Volkswagen’s first electric car, which will be launched in September, is called the ID.3. The company is using the EV’s debut as a way to shift its sales model. Volkswagen will set the price for the ID.3 which will be standardized across Germany, regardless of whether consumers buy the car online or at a car lot. Usually, dealerships set their own prices and consumers negotiate prices with salespeople. Volkswagen’s move will disrupt this pattern. Volkswagen is planning to roll out at least 75 other battery-powered cars over the next 10 years, and could use a similar strategy when they go live on the market.

Daimler already uses a direct-to-consumer sales model in South Africa and Sweden, and plans to launch the service in Austria next year, and in other countries soon. Peugeot made plans to deliver over 100,000 cars directly to consumers in the near future.

Dealerships Look Ahead

As consumers become more comfortable making big-ticket purchases online, dealerships have their work cut out for them. Though many dealerships make the majority of their profits from repairs and services after a car sale, they will need to adapt to maintain relationships with customers. Some dealerships see the upside of these developments and note that when these changes occur, they will be able to differentiate themselves through service, instead of through prices.

In the US, dealerships are still in a strong position because there is legal protection for them. For example, Tesla (TSLA), which sells cars online and in showrooms in shopping centers rather than at dealerships, has faced legal pushback in some US states. The culture of visiting dealerships is also strong in the US. However, the potential for direct-to-consumer car sales is vast, and investors will be carefully watching the sector to see how it expands around the world in the coming years.

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