Turning Tensions into Triumph: How car subscription services are paving the way for stronger manufacturer-dealer partnerships

Turning Tensions into Triumph: How car subscription services are paving the way for stronger manufacturer-dealer partnerships

Written by Michael Higgins (pictured), Founder and Managing Director at Loopit.

The relationship between car dealers and manufacturers is one of the automotive industry’s most discussed topics. While spats between manufacturing and retail are nothing new, the level of transformation across the industry in recent years has the potential to completely redefine automotive retail as we know it.

Rising tensions over technology, digitisation and electrification has dealers and automakers locking horns over the future direction of automotive retail. As consumers increasingly demand seamless digital buying experiences and environmentally friendly vehicle options, traditional dealership models are being challenged.

While digital sales channels are dividing manufacturers and dealers, the emergence of flexible car ownership alternatives, like car subscription services, are reshaping consumer expectations and providing new opportunities for manufacturers and dealers to collaborate.

The personalised approach required to manage car subscription services is something that most dealers are already equipped to handle. Dealers have spent years building trust with their customers, understanding their needs, and providing personalised services, all of which are integral to the successful implementation of subscription services.

The car subscription model thrives on customer-centricity and convenience – it’s not just about giving customers access to a fleet of cars but also about ensuring they have hassle-free, round-the-clock support, quick maintenance, and seamless switchovers. This is where the extensive customer-facing infrastructure of dealers becomes critical.

For manufacturers, partnering with dealers to leverage this infrastructure can lead to a successful transition to the car subscription model. Dealers, with their established network of service centres and trained personnel, are naturally suited to managing these complexities, allowing manufacturers to focus on vehicle production and technology innovation, at a time of rapid industry advancement.

Amidst this evolving landscape, a more collaborative approach between manufacturers and dealers could redefine the automotive retail industry, ensuring its survival and prosperity at a time marked by digitisation and changing consumer preferences.

As it stands today, automotive incumbents currently have the upper hand in adapting to subscription business models, thanks to their robust customer-facing infrastructure and deep-rooted relationships with customers. These factors provide them with a distinct advantage to transition into this emerging business model smoothly, as they can readily handle the associated complexities.

However, the landscape is quickly shifting. Disruptors in the automotive industry, propelled by innovative technology and flexible business models, are rapidly catching up. Many of these disruptors are already demonstrating the ability to streamline operations and offer value-added services that attract modern consumers. They bring a fresh perspective to the market, harnessing the power of digitisation to break down traditional barriers.

Incumbents need to maintain their proactive stance and keep improving their services, or they risk being overtaken by these fast-evolving newcomers. Embracing the evolving dynamics between manufacturers and dealers, and fostering collaboration in the context of the car subscription model is not just a choice but a necessity to stay relevant in this rapidly changing industry.

Michael Higgins is the co-founder and managing director of Loopit.co, a leading provider of car subscription technology for the automotive industry. Michael will be presenting his workshop on how car subscription has come of age at the AADA Convention & Expo on Jun 14, 2023.