Car dealerships decline with rise of electric car, ride share

Published On June 13, 2017 | By Beatriz Baleeiro | News
An electric car is pictured plugged into its charging station on the street

(Courtesy: Flickr Commons)

By: Esther Klein and Meaghan Wray

With the rise of electric cars and ride sharing, car dealerships in North America are beginning to see an end to their existence.

According to a new study released by San Francisco-based think tank RethinkX, by 2030 about 95 per cent of U.S. passenger miles traveled will be by electric cars owned by fleets.

RethinkX’s conclusion is the days of window shopping for shiny cars are ending and electric cars and rideshares are in.

The report cites an emerging business model they refer to as “transport-as-a-service” (TaaS) in which many consumers will hire their rides rather than owning a vehicle. TaaS will “have enormous implications across the transportation and oil industries, decimating entire portions of their value chains, causing oil demand and prices to plummet.”

However, the report also says that TaaS presents new business opportunities and chances for consumer surplus and GDP growth. More importantly, the business model anticipates families having a huge opportunity to save money annually.

According to ThinkX, the average American family could save more than $5,600 USD per year, which is equal to a wage raise of 10 per cent.

Mark Bujalski, sales manager at Acura of Oakville, is doubtful that dealerships will see their end any time soon, however, because consumers still want face-to-face interaction.

“I doubt it’ll happen, it’s all speculation right now,” he said. “Customers like first-hand contact at stores.”

Even if customers want to purchase an electrically-powered Tesla, he said, they will still be required to go to a storefront for maintenance, which nullifies the convenience of online purchasing.

“Just because the customer purchases a car online, doesn’t mean they don’t have to go to a store in person,” Bujalski said. “At the moment, there are three Tesla service centres in Toronto, meaning they’re always running into problems.”

A Tesla battery only lasts 10 years and consumers experience a phenomenon called range anxiety: the concern for an electric car owner that their battery will die at any moment.

In a CBC article published early this morning, Dennis Derosier, an Ontario-based auto industry analyst, said the report isn’t exactly clear.

“There are some serious question marks and and a lot of assumptions in the report,” he said in the article.

Derosier said this points to the hype surrounding hybrid vehicles, which were originally introduced to the market 17 years ago and predicted to take over the industry by 2020, which is no longer slated to happen.

Joseph Chow has been a sales representative at Mazda Toronto for seven years. According to him, dealerships know their business may slowly come to an end.

“We all know it’s going to go very soon. We aren’t necessarily scared because sales is a transferable field,” Chow said. “But the reason dealerships won’t be as up and coming has to do with a couple of reasons.”

Chow cites the increased popularity in online self-education as a factor in the decrease of window shopping and test driving. In the ‘80s, he said, customers would come to a dealership and test drive 15 to 20 cars at a time.

“With YouTube videos on a high, people are well informed before coming to any dealership, and have a car narrowed down,” he said. “We’re already seeing slower visitation at our store. However, with electric cars, people tell themselves it is helping the environment and are less hesitant to spend the money and can order them online.”

On the other hand, Chow said, the everyday consumer still wants that face-to-face interaction provided by purchasing at a dealership.

“It’s very tough to make a $30,000 decision, which is why you need a dealership,” he said. “The attitude in buying a car is different than anything else. Everyone asks for a discount, so they’ll still go to a dealership.”

Another important factor to consider in this shift, which is also mentioned in RethinX’s report, is the desire for consumers to go green, Chow said. With the increase in ridesharing and electric car useage, people will likely see significant declines in environmental destruction.

“It’s a culture thing,” he said. “When people choose to go green, they don’t overthink it, they just buy it.”

Andrew Hines, a Toronto native and project coordinator at local event management company Wynford, relies on his Toyota Camry to get to and from work every day. His daily drives take about an hour and a half every day, and he makes the long drive to Montréal twice a month to visit his partner.

On average, Hines spends about $350 per month on gas when he drives to Montréal.

For a few of his trips, Hines has used the carshare service Car2Go, a smartphone application that provides users with easy access to a car, anywhere in the city. Car2Go offers daily rates but also allows users pay-per-hour to pick up and drop off a designated Car2Go vehicle anywhere in the city for $0.41/minute.

Hines said he’s chosen to use the Car2Go service over driving his own car, simply to offset the cost of gas.

“I use it more because of the convenience factor, and you have to consider insurance and maintenance costs on my own car, which you don’t have to worry about with ridesharing,” Hines said. “It’s super convenient if you’re going out on the weekend and want to drink, you can drive a Car2Go and then leave it there.”

For people who don’t have the means to buy their own car and or pay for insurance and maintenance fees, services like Car2Go have proven useful.

“It’s definitely more affordable for small weekend trips, but not as your main form of daily transportation,” he said. “It’s great for people who can’t buy their own car, but it’s not a longterm solution.”

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