In recent years, original equipment manufacturers (OEMs) have been making efforts to transition their dealerships toward an agency model. This model gives OEMs greater control over their dealerships, with the dealers functioning more as service providers. This transition aims to enhance the customer experience and ensure brand consistency.
A pivotal factor driving this transformation is the digital revolution in the automotive industry. Dealerships are leveraging digital tools and technologies to optimize operations and elevate the customer experience. From online vehicle sales to personalized marketing campaigns, digital platforms are changing how dealerships connect with customers.
Furthermore, dealership consolidation and mergers have become a common trend in the industry. Larger dealership groups are acquiring smaller ones, leading to increased economies of scale and improved operational efficiencies. This consolidation allows dealerships to offer a wider range of services, streamline their operations, and provide a more consistent experience across multiple locations.
Factors Influencing FWS and Genuine Oil Sales
There are several factors that could impact the growth of the franchise workshop (FWS) channel and genuine oil sales. One of these factors is the slowdown in vehicle sales. As vehicle sales decline, it directly affects the FWS channel and genuine oil sales because new vehicles, especially those under warranty, have the highest percentage return rate for dealerships. With fewer new vehicles being sold, dealerships may experience a decrease in customer traffic and service needs, which would affect the demand for genuine oils.
The transition to electric vehicles (EVs) may decrease the demand for traditional internal combustion engine (ICE) lubricants. Yet, it could also bring customers back to dealerships for EV parts and services as the EV aftermarket continues to evolve. Additionally, advanced technology in new ICE vehicles may attract consumers to dealerships for expert handling.
Before full EV adoption, ICE vehicles will undergo significant changes to meet emissions and fuel economy standards. This will drive the need for higher–performance lubricants that protect emissions systems while maximizing fuel economy. OEMs will have to collaborate with lubricant marketers, harnessing their in-depth expertise in lubricant and additive chemistry, to fulfill these requirements.
Challenges and Industry Dynamics
There are several challenges to the trend of customers returning to dealers for advanced vehicles. Right-to-repair lawsuits are emerging, which could force OEMs to open their proprietary systems for DIY and non-OEM workshops to repair new vehicles. If successful, this could slow down the trend of consumers returning to dealerships for service and parts.
In addition, the pandemic-related supply chain shortages and inflation concerns have prompted some OEMs to explore the multi-sourcing of their genuine fluids. This approach allows OEMs to mitigate risks associated with supply chain disruptions and manage potential cost increases.
Moreover, self-driving cars are an emerging trend in the automotive industry. As autonomous vehicle technology advances, it could disrupt the traditional dealership model, potentially impacting car ownership and maintenance. Dealerships will need to adapt and provide new value-added services in this evolving landscape.
As the automotive industry continues to evolve, it is important for OEMs, dealerships, and lubricant marketers to adapt and find innovative ways to meet the changing needs of customers. Our comprehensive OEM Genuine Oil Brands and Programs in the Consumer Automotive Segment: Market Analysis and Opportunities report offers valuable insights into the FWS channel growth and trends, as well as how the channel is changing. We will also publish a report on OEM Genuine Oil Brands in the Heavy-Duty Commercial Segment. For more details on our market studies, please contact us.