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The Retail Performance Company: This will change in the automotive industry in 2025

2024 became clear: The automotive industry in Germany is in crisis. The overall economic situation poses challenges for many manufacturers and dealers, in addition to the shift towards electromobility, growing competition from Asia, and digitalization. To be prepared for the future, it is therefore important for all players to engage with the current trends that will sustainably change the face of the industry.

New challenges: In the automotive industry, some new courses will need to be set in 2025. | Photo: Rawpixel/Unsplash
New challenges: In the automotive industry, some new courses will need to be set in 2025. | Photo: Rawpixel/Unsplash
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The only constant is change – this also applies to trade and sales, where the automotive industry is facing major transformations. One thing is clear: new paths in sales are both present and needed.

Direct sales and agency model under scrutiny

The traditional sales models of the automotive industry are increasingly under scrutiny. More and more manufacturers are pursuing the strategy of gaining more control over their sales processes. The advantages are obvious: manufacturers gain direct access to customers and their data and can ensure more consistent pricing. This change is particularly driven by the integration of digital platforms through which customers can configure, finance, and order their vehicles online.

The agency model is becoming a cornerstone in this development. Dealers, who were traditionally responsible for inventory and pricing, are now encouraged to focus primarily on customer consultation, customer experience, and regional market development. Their role is shifting to that of a facilitator and service partner. This restructuring reduces the dealers' autonomy but simultaneously requires higher qualifications for personnel, particularly in advising quality and customer management.

Although these new sales models offer many opportunities such as more efficient management and stronger customer loyalty, they are also associated with challenges. Dealers struggle with the loss of margin flexibility and a restricted scope of entrepreneurial action. Manufacturers, in turn, are tasked with ensuring the profitability of their new logistics and distribution processes. Furthermore, they need to build powerful online platforms and deal with the skepticism of long-standing dealer partners. Currently, it is observed that many manufacturers who had announced a shift to the agency model have put these plans on hold. In the long term, it will only become clear which model will gain the most acceptance among customers and partners.

Used electric vehicles: Transparency, trust, and new impulses

The used car market will continue to be shaped by the changes that arise from the increasing spread of used electric vehicles (BEVs). The high number of new registrations in recent years, heavily promoted by government subsidies, is bringing the first wave of used BEVs to the market. Leasing returns and compact models like the VW ID.3 or the BMW i3 are increasingly found in the used car market.

The rapid development in battery technology and the accompanying steady increase in vehicle ranges result in many used car models losing their appeal. The reason is concerns from many customers about battery degradation. These uncertainties cause the residual values of used electric vehicles to drop significantly, heavily impacting margins for dealers and manufacturers. Dealers are often forced to offer discounts or hold their inventory longer.

The crucial uncertainty factor is the condition of the battery. Customers are increasingly demanding transparency regarding the State of Health (SoH) of the battery, but a standardized evaluation system is still missing. To build trust in the used BEV market, certification programs for manufacturers and dealers are necessary. These should include guarantees on batteries and electrical components, transparent battery tests, and evidence of charging cycles and remaining ranges. Additionally, used vehicles can be utilized in battery recycling or second-life programs and thereby promote circular economy and support sustainability goals.

In addition to the mentioned programs and initiatives, dealers play a crucial role: to reduce skepticism towards electric vehicles, they must actively dispel customer prejudices and highlight, for example, the lower operating costs and environmental benefits in the sales process. Another possibility is offering additional services such as access to charging cards, installation of wall boxes, or discounts on fast charging rates to increase the buying appeal.

The power of the big players

The automotive industry is facing an intense phase of consolidation in 2025. Large trading groups use their market power to take over small and medium-sized dealerships. Increasing demands in areas such as digitalization, sustainability reporting obligations, or the shift to direct sales have made it increasingly difficult for smaller dealers to keep pace.

The consolidation movement is particularly driven by leading trading groups such as Emil Frey, Penske Automotive, or the Hedin Group. These groups are expanding not only nationally but also pushing into international markets to leverage economies of scale and strengthen their market position. The focus is on creating European or global synergies and the central management of IT and marketing resources.

The consequences of this development are diverse. On one hand, large trading corporations benefit from a stronger negotiating position with manufacturers and suppliers as well as from the integration of new technologies. On the other hand, the individual customer care, that smaller dealers can provide, is often lost. Furthermore, the number of dealership locations, especially in rural areas, decreases at the expense of accessibility for customers.

In the long term, consolidation will increase the professionalism and efficiency of the industry. Standardized processes, modern infrastructures, and a unified customer experience can improve the quality of sales. For smaller dealers, it is crucial to specialize or enter into cooperations to remain competitive.

 

 

Retreat from Alternative Mobility Solutions

After a phase of intensive diversification, a declining interest in alternative mobility solutions is observed in 2025. Dealers are increasingly withdrawing from areas such as the bicycle and e-bike market and focusing on their core automotive business. This development is mainly driven by a lack of market penetration and missing synergies with the core business. The strong competition from specialized providers and the often higher margins in the automotive sector make alternative products less attractive.

Given the overall economic situation and the challenges the industry in Germany must face, it is quite understandable that manufacturers and dealers are focusing on their core automotive business and opting for more profitable and brand-strengthening offers.

What does this mean?

To compete globally, the automotive industry must transform by 2025. The adaptation of sales models, challenges in the used car market, consolidation in distribution, and realignment of product strategies show a clear direction: The industry is becoming more efficient, specialized, and digital. Manufacturers and dealers who recognize and actively shape these trends early on will have a competitive advantage. It remains crucial to put the customer at the center of all actions to be successful in the long term.

The overview was created for us by Philipp Kranich, Senior Manager Automotive Market Intelligence at rpc – The Retail Performance Company. Previously, he was active in various management and consulting roles in the automotive sector for several years. At rpc, he works on strategically relevant topics around the future of automotive retail.

Translated automatically from German.
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