Automotive News Canada - June 2022 - 4

4
* JUNE 2022
VW to launch
25 satellites
into retail space
As its EVs lift off, the
automaker wants current
dealers to build smaller
stores in underserviced
parts of Canada
By DOUG FIRBY
CALGARY CORRESPONDENT
VOLKSWAGEN GROUP CANADA
plans to expand its dealership network
with 25 Volkswagen " satellite " rooftops,
part of an aggressive strategy to boost
sales as the brand moves to electrify its
product lineup.
The company is asking Canadian franchised
dealers to build the locations
in underserviced portions of the country,
said Michael Ricciuto, director of
network development for Volkswagen
Canada.
" You know the saying, 'If you build it,
they will come?' " Ricciuto said. " There's
a lot of truth to that. "
Nineteen per cent of the country's 38
million people lack access to a VW dealership
within an hour's drive, according to
the market intelligence firm IHS Markit.
In March, Volkswagen Group of
America announced that it plans to spend
at least US $7.1 billion in North America
through 2027 to build up EV production
capacity. The company, based in
Wolfsburg, Germany, aims to introduce
more than 25 new battery-electric vehicles
(BEVs) by 2030, the company said in a news
release.
The ID4 electric crossover will arrive
in Canadian showrooms this year,
while the ID Buzz electric microbus is
expected to be launched as a 2024 model.
Volkswagen Group Canada manages
the Volkswagen, Audi and Lamborghini
brands.
MISSED OPPORTUNITIES
The Volkswagen brand has 145 dealerships
in Canada, but there are gaps
in many areas, such as portions of
Vancouver Island, the Prairies and
Atlantic Canada, Ricciuto said. Only
Subaru has fewer dealerships across
Canada (94). Mazda has 163, Toyota has
287, and Honda has 237.
Worldwide sales of VW and its affiliated
brands - such as Audi, Porsche,
Skoda and Seat - total
more than 10 million
vehicles a year. The
company sold 98,757
Volkswagen branded
cars and trucks in
Canada in 2021, representing
a 5.2-per-cent
market share, according
to the Automotive
News Research & Data
Center in Detroit.
In 2019, before the
COVID-19 pandemic,
the company sold
110,781 Volkswagenbranded
vehicles, representing
a market
share of 4.1 per cent.
Ricciuto:
" You know the
saying, 'If you
build it, they
will come?'
There's a lot of
truth to that. "
SUPPLIED PHOTO
Volkswagen Canada is adopting a huband-spoke
retailing model that has been
used successfully in Europe, said Ian
McIlravey, consulting associate director
at data company S&P Global Mobility.
" You have to have a presence in a market
in order to make a car attractive to
purchase, " he said, adding that after-sales
service is a critical factor in the consumer
purchasing decision.
" There's potential for this model to
serve Volkswagen very well, " he said.
" They can increase their footprint in a
responsible way that doesn't overextend
their investors. "
CURRENT DEALERS KNOW THE ROPES
During an April 26 media roundtable
in Toronto, Volkswagen Group Canada
President Pierre Boutin said most of the
new rooftops will be extensions of existing
dealerships and dealership groups.
They know the brand and have solid
relationships with the automaker, VW
Canada's Ricciuto said. Current VW dealVolkswagen's
satellite stores will be linked to full-service " hub " dealerships.
The satellites will have fewer employees and about 30 per cent less floor
space. SUPPLIED RENDERING
There's potential for this
model to serve Volkswagen
very well. They can increase
their footprint in a responsible
way that doesn't overextend
their investors.
IAN McILRAVEY
S&P Global Mobility
erships and groups have committed to 24
of the 25 planned stores, he said.
The company initially targeted 2025 for
completion, Ricciuto said, but it will likely
take longer because
dealers face lengthy
processes to buy land,
secure permits and
find contractors and
suppliers during a
time of shortages.
The satellite rooftops
will be associated
with full-service
" hub " dealerships,
existing stores that
are in closest proximity
to each satellite,
Ricciuto said.
Eatson: TADA
president
prefers satellite
stores because
Cheaper to build
and operate than a
full dealership, the
satellites will have
about 30 per cent less
floor space - 7,500
they get
automakers
closer to
potential
buyers.
FILE PHOTO
square feet (700 square metres) versus
11,000 square feet (1,000 square metres) -
less administrative space and less staff,
although those employees will often take
on dual roles. For example, parts managers
and general managers at the hub will
oversee the satellites. Major repair work
will also be done at the hub.
" Think of the hub store as the main
operation, " Ricciuto said. With the satellite,
" We're just going to take a piece of
that and move it. "
VW plans to make two of the satellite
rooftops for electric vehicles only, he said.
COSTLY, BUT WORTH IT
Michael Eatson, dealer principal at
Peterborough Volkswagen and president
of Ontario's Trillium Automobile
Dealers Association (TADA) - representing
more than 1,000 dealerships - said
starting even a small dealership " involves
significant costs, " and dealers have to be
convinced that the business plan is solid
before committing to a satellite.
Eatson favours the satellite concept
because it increases proximity to more
potential customers.
VW has also eased requirements
for its full-scale dealerships to cut the
investment costs, Ricciuto said. New
guidelines set the size at 16 per cent
smaller than existing dealerships, and
expensive enhancements such as skylights
are no longer required.
VW Canada expects dealers to divert
those cost savings into enhancing online
strategies, Ricciuto said. More customers
shop online and " just want a place where
I can pick up my car and get it serviced. "
Jim Garofalo, general manager of
Maple Volkswagen, a dealership about
30 kilometres northwest of downtown
Toronto, said he believes the expansion
will help VW grow market share.
" There are some markets that are suffering
[from a lack of representation],
and we could use some presence there, "
Garofalo said.
Maple Volkswagen, part of the 37-rooftop
Zanchin Automotive Group, sells
about 940 new vehicles a year, he said,
making it one of VW's highest-volume
dealerships in Canada.
Both the Maple dealership and a
Zanchin dealership in Milton, west of
Toronto, will add satellite rooftops,
Garofalo said, although for competitive
reasons he declined to say where.
- ANC
Automotive News Canada - June 2022

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