Honda begins selling cars online, highlighting new role for dealers

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TOKYO – Driven by the COVID-19 pandemic, consumers are increasingly buying online, even expensive items like new cars that they previously only bought after having had the chance to inspect the merchandise.

Japanese maker Honda Motor is the latest automaker to sell its cars online, a move that could create new points of contact with younger customers, but also challenges the traditional role of dealerships.

On October 4, Honda began allowing drivers to use their smartphones to select the desired model and options, receive a quote, and sign a purchase contract. It is the first major Japanese automaker to sell new cars on the Internet.

Dubbed Honda On, the store offers monthly rental-style subscriptions to the N-Box mini-car, the compact Fit, and two other popular models. The subscription includes the costs of motor vehicle inspection and taxes. Customers collect their cars from a nearby dealership, where they also go for maintenance. The service is only available in Tokyo for now but will be gradually expanded, according to the company.

Honda said in a statement that it has made the service “easy to use for Gen Z customers who have never been to a dealership and feel the bar is too high.”

Sanshiro Fukao, a senior researcher at the Itochu Research Institute, says demand for online sales is high among young car buyers. “Many young drivers often say they don’t want to negotiate prices with dealers face to face,” Fukao said. He added that this mindset presents a challenge for automakers: How can they seamlessly deliver digital experiences to Gen Z and Gen Y shoppers?

Others follow Honda’s lead. Nissan Motor will allow its new Ariya SUV to be sold online in Japan this winter. It launched a program that allows customers to buy new cars online from Nissan dealers in the United States last December. In February, Toyota Motor also launched a similar service in the United States.

Before the pandemic, it was already common for drivers to go online to search for the new car they might be interested in and use third-party auto market websites to purchase used cars. COVID-19 quarantines have forced dealerships to close their doors and expand their online services. Today, buying new cars online has become a trend in the United States, China and other markets.

Amid upheavals in the automotive retail landscape, some brands are phasing out dealerships almost entirely.

“The process was extremely simple, like buying a laptop. You fill out the Tesla forms, get financing and pick up the car a few weeks later,” said Jake Seliger, a grant writing consultant based in the U.S. city of Phoenix, which bought its first Tesla, a Model Y crossover, in March.

“Auto dealers usually make buyers sit down and then try to stick a few hundred dollars in random extra charges on the bill,” [but] Tesla showed the total cost of the vehicle online, ”said Seliger. He road tested a Model 3 and a Model Y in a Tesla showroom before buying.

Tesla, a pioneer in online and direct-to-consumer auto sales, announced in 2019 that it would sell its models exclusively online, closing most of its showrooms and laying off retail workers.

Elon Musk, CEO of the company, said the move would help the U.S. electric car maker reduce operating expenses and avoid local laws that prevent it from operating its own dealerships in some U.S. states.

Chinese luxury car maker Lynk & Co is trying to create a new car buying experience. Founded in 2016 by Geely Auto Group and its Swedish subsidiary, Volvo Car Group, Lynk & Co not only uses a direct-to-consumer online sales model with monthly subscriptions, but also has showrooms – the company calls them ” clubs “- in Europe which doubles as community spaces.

Chinese Lynk & Co has opened the fourth European club in Berlin. The company says the era of car-centric showrooms is over. (Photo courtesy of Lynk & Co)

Instead of serving only as dealerships, Lynk and Co’s showrooms also serve as concert halls, retail stores for clothing brands that share its sustainability philosophy, and café lounges where fellow drivers of his cars can meet. Volvo takes care of the maintenance. The company, which opened the fourth European club in Berlin last month, said it had attracted 25,000 new members, surpassing its 2021 goal of 9,000.

“Lynk & Co clubs are a creative approach to experiential retailing, exchanging arrogant salespeople for a warm, pressure-free experience,” the company said in a statement. “You can test the 01 [compact crossover SUV] and sign up to become a Club member, but the days of car-centric showrooms are over. “

The surge in online sales by some automakers might lead some to wonder if the days of dealerships are numbered. But Fukao of the Itochu Research Institute says they will remain valuable to drivers, improving the digital tools that automakers offer online.

“The technology offers more contact with customers, so instead of focusing on vehicle sales, [dealers] can shift their efforts to insurance, vehicle inspection and other long-term activities to their benefit, ”Fukao said, adding that knowledge of local markets is an advantage that global automakers do not have. , indicating ways to improve their after-sales service.

ABeam Consulting’s Akihiro Muto said in a note in September that it will be vital for auto dealers to put more emphasis on customer relationships, as online sales will allow automakers to manage every step of the buying process. of a car until the signing of a sales contract. traditionally a key function of dealers.

“If physical dealerships are only seen as places for auto sales and maintenance, they will be replaced by large repair shops connected through vast networks, and ultimately those stores will be destroyed,” Muto said in his memo. Dealerships can provide a gathering place for local residents, showcasing products and services other than cars. The spaces could be transformed into cafes or any other type of physical place that embodies the values ​​of the brand, he said.


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