Almost 20 years after the Internet brought price transparency to the US’s almost US$1 trillion-a-year (RM4.4 trillion) new car sales market, several steps of the shopping process have migrated online. But as buyers turn to Kelley Blue Book for price comparisons and Consumer Reports for model reviews, they remain unable to finish the car-buying process without a visit to the dealer. The average consumer visited about 2.8 dealerships before buying a car in 2016, compared to 3.5 in 2012, according to JD Power & Associates.
There are also practical reasons for dealers to stick around. Most consumers want to test drive a big-ticket purchase like a car, and dealers need to do in-person inspections to assess the value of a trade-in, said Chris Sutton, an analyst with JD Power. They also do repairs and maintenance work, and with cars growing more complex and software-laden, that work becomes more specialised.
“Car dealers will continue to play a vital role as the point of sale and delivery,” said Georg Bauer, a former BMW and Tesla executive who founded a mobile car-buying startup called Fair with TrueCar’s Painter. “They need to embrace and adopt new technologies and alternative ownership models to stay in the game.”
To be sure, there are startups in the US that have already put the entire car buying process online — including those final steps dealers are gripping tight. But they’re confined to the used-car market due to franchise laws and manufacturers’ reliance on dealer networks. Used-car startups raised US$1.1 billion globally last year, down from a peak of US$1.2 billion in 2015, according to data from CB Insights.
usedcarsforsalebyowner is a three-year-old startup that buys, refurbishes and delivers used cars to shoppers’ doorsteps without making them visit a dealership. The company sold 50,000 units last year and had US$1.1 billion in revenue, according to CEO Paul Hennessy.