The coronavirus pandemic has been a matter of concern for the entire business industry. The extended lockdown measures and social distancing procedures disrupted the normal routines of the business. Among many other critical issues, the stats reveal more uncertainties and bumps in the franchise system. Ranging from online selling trends to car sharing, there are so many challenges that the business industry is facing these days. Among this long list of concerns, the experts report considerable damage to the franchise model.

Years ago, the automotive industry was highly dependent on a franchise model. Right after the manufacturing of vehicles, they were shifted to franchises at different corners of the world for easy access to the buyers. However, Tesla’s push towards selling new cars at factory stores only lead to the weaker franchise system. Furthermore, the popularity of self-driving cars, car-sharing technology has further weakened the demands of the consumers to own personal vehicles.

Few other pressure points that affect the franchise system in the world are:

  • Automaker sales programs as well as dictates that focus on the facility investment.
  • Dealership struggle and consolidation for the survival of smaller groups.
  • Regulatory crackdowns on advertising and lending procedures.
  • Slimmer vehicle margins due to rising competition in the internet-powered world.
  • Difficulty in retaining and hiring dealership staff.

Although there are several aspects that give rise to uncertainty in the market, dealers are still optimistic about the trends and are looking for some growth opportunities. Although several changes are happening on edges, the system is also getting robust with each passing day. In fact, buyer’s love for automobiles is much more than what they use to express in surveys.

Some recent reports also point out another important concern that threatens dealerships and sales in the industry; this factor is affordability. Experts reveal that as technology is revolutionizing, the new age vehicles are turning out to be highly efficient and feature-rich. But at the same time, these vehicles are priced very high and this range is considerably higher than the common expectations of the buyers. However, even after that, the market appears healthy these days. Dealers in the past few years have enjoyed an extended range of profits with higher sales figures. The light vehicle sales reports from the United States show peak level in the year 2015 and it was further increased to 17.5 million sales by the end of 2016.

Although the dealership franchise model has experienced lots of popularity during good financial times. The Federal Trade Commission has announced some hearings to re-examine the franchise laws in the year 2016. The close look at these policies has been triggered by the multiple attempts of Tesla to sell cars at factory stores only within the United States. During the past few years, the dealers have battled Tesla in many states for stopping their approach of factory store-based selling as the franchise laws do not permit the direct sale of vehicles for an automaker.

The biggest concern for most dealers is that Tesla may set up a trend of factory sales and then other automakers may also start following the same. With this, the franchise system will be hampered by considerable levels and dealers may experience great loss. It means, the matter is not just concerned with the new approach proposed by Tesla; instead, it is about disrupting the normal structure of the market. Therefore, it is important for the dealers to stop other automakers from following the footsteps of Tesla.

It is important to mention that the Alliance of Automobile Manufacturers which includes 12 famous automakers, other than Tesla have already pushed on the fact that if Tesla succeeds with its approach, other automakers will also have the right to sell in the future. In this way, it will be difficult to maintain control of market trends as per franchise laws. Moreover, the dealers require policymakers to set up a transparent system for leading franchise systems at national and international levels. This strategy is expected to attract more competition in the market.

Even the new car franchises will find some creative ways to boost sales in the automotive sector and it will be beneficial for the entire industry.