End of the road for glitzy car showrooms?

May 14 2008 by Mike Birkett for The Journal

THE rapidly escalating cost of fuel, and other increasing costs of driving, are making drivers re-think the use of the car which in turn could threaten the success of car dealership ‘clusters’.

The insistence by major car manufacturers that car retailers should invest heavily in futuristic showrooms as an essential part of being retained as key dealers prompted development to take place in various parts of the region. Before this ‘deluxe’ form of car retailing was introduced, showrooms were fairly cramped affairs with a noisy maintenance department within earshot.

Now it’s a case of glass and chrome structures, piped music and coffee on stand-by, creating a certain status that underpins a global brand aimed at the unwary potential buyer.

But what if that buyer says ‘enough is enough’ when it comes to running costs and feels that the depreciation and the cost of borrowing to buy simply don’t make a car purchase worthwhile any more? Motor manufacturers will have answers and well-rehearsed packages to keep moving ‘sales’ on, such as leasing.

However, falling sales may make those car ‘palaces’ too expensive to keep. What next? There is the opportunity to sub-let or sell the property but its highly individual design will limit its uses. A way forward to reduce costs could be to combine two or three rival dealers with one centralised service facility. If it came to it, demolition of the almost brand new showroom could be a last resort. But there is one key advantage here – most showroom clusters are in high-profile locations close to main roads which offer good access. Redevelopment for other uses would be a serious option.

There is no doubt that the automotive sector is being challenged, with better cars lasting longer, the credit crisis giving many pause for thought, and that rapidly escalating cost of fuel making large inroads into disposable income. Possibly it will be the car which is the easiest sacrifice to make in tougher financial times.

Mike Birkett is director of retail agency at Atisreal in Newcastle.