The vast majority of leaders in UK automotive expect the number of brick-and-mortar dealerships to as much as halve by 2025, according to KPMG.
The accountancy firm’s annual Global Automotive Executive Survey found that 75% of UK automotive executives think that between 20% to 50% of all dealerships will no longer exist in less than a decade.
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“The majority of UK automotive executives are convinced that the only means for dealers to survive is by restructuring into a service factory or a used car hub in the future,” said Justin Benson, UK head of automotive at KPMG.
“This is certainly a warning sign for physical retailers and presents a need to rethink retail concepts and business models, particularly with customers purchasing more of their goods and services at the touch of a button,” he said.
Additionally, 60% executives worried about the effect of lower residual values over contract hire and PCP.
“We live in the age of credit, which is often convenient for those who want to make big purchases and spread the cost out over a period of time,” said Benson.
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By GlobalDataHe added: “However, existing credit arrangements for vehicles taken out over the past couple of years could cause additional risks for credit companies.
“This is particularly true if residual values fall further in the short term and people are handing their keys back when the residual value of the vehicle is lower than the PCP contract value.”
Three-quarters of executives also saw data as the main source of revenue for automotive companies, thanks to the rise in connected cars and autonomous vehicles.
However, consumers surveyed highlighted data and cyber-security as key factors in a purchasing decision, suggesting that as carmakers shift to a data-driven business model, they will also need to demonstrate their maturity in regards to security.
“In the UK, our findings are clear on one thing, there are more significant disruptors to the automotive sector than Brexit. Electric vehicles, autonomous vehicles and Mobility as a Service (MaaS) are going to drive change in the automotive sector for the foreseeable future,” Benson said. “New business structures and new economic models are on the horizon, driven by these disruptors and the associated new technology. It’s an exciting but uncertain time for the industry.
“Data ownership is a sensitive issue, and the question of who owns the data generated by vehicles and consumers on the go is one that is yet to be answered. What is clear is that consumers predominantly only trust themselves, and with data breaches and hacks making headlines in recent years, who can blame them?
“What is interesting, however, is that almost one in three executives believe that car manufacturers will be the data guardians.”
