Are Audi, BMW, and Volvo Cutting Down Dealerships for Online Sales in South Africa?

Johannesburg – The luxury car market in South Africa is undergoing a notable transition as Audi, BMW, and Volvo cut back on their dealership networks – prompting the question: Will they pivot to online sales?

This shift mirrors a global trend towards direct-to-consumer (DTC) sales.

In the United States, Volkswagen’s Scout Motors will entirely bypass dealers upon launching its electric vehicles (EVs) in 2027, sparking backlash from traditional retailers like Marc White.

A Bloomberg report suggests that second-generation car dealer White was turned down when he proposed a $10 million showroom in South Carolina, USA, intended for selling Volkswagen’s upcoming EV range.

White, keen to be among the first retailers for these vehicles, discovered that Volkswagen AG plans to avoid conventional dealers entirely for its Scout Motors brand, opting to sell directly to consumers upon the introduction of electric pickups and SUVs in 2027.

In response, White has testified to state legislators that this direct-sales model threatens the livelihoods of his 150 employees.

Established automakers such as Honda are also investigating online reservations for EVs, with CEO Shugo Yamaguchi calling the process “a breeze.”

SA’s Shrinking Premium Dealerships

• BMW has reduced its South African dealership count from 55 in 2015 to 46 in 2024.
• Volvo intends to shrink its network from 19 to just 7, citing the pressures of electrification and digital transformation.
• Audi has associated its restructuring with economic issues, including high inflation, interest rates, and currency volatility.
• Recent analyses indicate that German luxury vehicles (BMW, Audi, Mercedes-Benz) are becoming less accessible in smaller South African towns, except in mining regions where income levels are higher.
• Verification via BMW South Africa’s dealer locator and Mercedes-Benz SA’s network map confirms a decrease in rural dealerships, with most now focused in major urban areas and mining hubs like Rustenburg and Emalahleni.
• In 2014, Mercedes-Benz recorded strong sales in South Africa, selling 28,993 units. However, by 2024, sales plummeted by 82%, with only 5,048 units sold. Audi saw a similar decline of 70%, while combined sales for BMW and Mini decreased by 50% during the same timeframe.

Will South Africans Choose Online Car Purchases?

Globally, online car sales are flourishing:

Nonetheless, challenges remain.

Dealers enjoy advantages from franchise regulations in numerous markets, and many consumers still favor test drives.

However, with 95% of car buyers conducting their research online, brands may need to adapt to maintain competitiveness.

The Future: Virtual Showrooms & Increasing Chinese Competition

As Chinese brands such as Haval and Chery expand into smaller South African towns, premium automakers may utilize online sales to lower costs and boost their competitive stance.

Physical dealerships might soon focus more on pre-owned vehicles and Chinese brands, while new luxury models could be sold through virtual showrooms and home deliveries.

What about the mass-market competitors?

Volkswagen, Ford, and Toyota lead sales in South Africa but heavily depend on dealership networks. If premium brands successfully transition to online sales, could mass-market players follow suit?

One thing is certain: The purchase behavior of South Africans regarding cars is swiftly changing.

*This article was first published in our sister publication techfinancials.co.za