The automotive industry in the United Kingdom is set to face a series of new challenges commencing in 2024. Initially, the controversial Rules of Origin (RoO) legislation, which stipulated that 45% of electric vehicle components must be sourced locally to avoid tariffs, was scheduled to come into effect on January 1. However, this legislation has been deferred until December 31, 2026. The delay of this legislation has been viewed as a crucial opportunity by manufacturers and retailers. The postponement was attributed to the recognition of the more intricate and dynamic supply chain associated with electric vehicles in comparison to petrol and diesel-powered vehicles.
Consequently, the development of the necessary infrastructure to support electric vehicles, such as gigafactories and a fully operational distribution and supply chain, is estimated to take up to five years. This presents a significant challenge not only for manufacturers but also for dealers and consumers. It is anticipated that the cost of vehicles may rise, and certain models may not be available in specific markets. Furthermore, the challenges posed by the legislation fundamentally revolve around consumer confidence and cost, aspects that, regrettably, are beyond the dealers’ control.
To confront these challenges, dealers may contemplate embracing fleet sales, as electric vehicles are particularly appealing to businesses seeking to reduce operating costs and meet sustainability objectives. Additionally, consumer education can enhance the relationship between dealers and buyers, which may entail dispelling misconceptions and enlightening consumers on electrification choices. It is noteworthy that brand loyalty no longer holds significant sway in the electric vehicle market, heightening the importance of consumer education.
In addition to these challenges, the role of dealers is evolving due to shifts in consumer behaviour. Customers are increasingly inclined towards online purchasing, prompting dealers to adapt by providing an ‘omnichannel’ experience that seamlessly integrates both physical and digital channels. Given the current low levels of customer and brand loyalty, embracing an omnichannel approach is imperative for dealers, particularly in the context of electric vehicles.
Furthermore, the ‘agency model’ presents another challenge for dealers. This model involves manufacturers establishing national pricing, managing customer sales relationships, and assuming responsibility for inventory and administration. While this model offers benefits for both manufacturers and consumers, questions persist concerning the role of dealers and how they can benefit from this new retail chain. A hybrid approach encompassing both franchised and agency models may come to the fore, offering dealers opportunities to leverage their expertise.
Finally, the utilization of artificial intelligence (AI) in automotive retail is projected to expand. AI models such as ChatGPT and Google’s Bard are already being employed by dealerships to enhance customer experiences, streamline operations, and spur innovation. The data generated by AI systems can aid dealerships in customizing their offerings and making informed, data-driven decisions.
In conclusion, the automotive retail landscape is undergoing transformation, and dealers must adapt to new legislation, shifting consumer behavior, and the ascent of AI in order to remain competitive. Through the embrace of education and technology, dealers can surmount the challenges posed by the evolving automotive industry in 2024.
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