abm car vendng machine via financial times

The American Car Dealership Is Doomed

Americans purchased 14.5 million new cars last year. While that number is about 3 million shy of 2016’s all-time-high, it’s still comfortably above record lows from the early 1980s and 2010s, when annual sales of new autos and light trucks hovered around 10 million. We’re clearly a nation of drivers, ever-consuming and brand-obsessed. And although the auto industry is in a perpetual state of flux, with disruptors of all stripes taking aim at every conceivable status quo, there’s no sign that people will give up their car keys any time soon. 

As of January 1, there were 18,260 auto dealership outlets in the U.S. (For comparison, there are 13,680 McDonald’s, 5,300 Walmarts, and around 2,000 Home Depots.) Considering that the average dealership has a floor area of about 21,000 square feet, that equals roughly 383.5 million square feet of retail space devoted to selling one type of product, and that doesn’t include the acres of parking and storage that are often part of these behemoths. Given these figures, it should concern nearly every community in the country that this is dead real estate walking.

An all-too-typical example of the building type.


Auto rows, as they’re colloquially known, often comprise up to a dozen sprawling dealerships, all competing for drivers’ attention as they zip along the road at high speed. If there is some master planning strategy behind this type of clustering, it’s beyond me. One doesn’t need to be a Robert Moses disciple to appreciate why a developer would place a strip mall’s worth of brand-name restaurants and retail shops near a suburban office park, but what about a Lexus dealership that’s within spitting distance of a Kia dealership? Show me the logic in this kind of development scheme and I’ll show you a consumer who’s on the fence between buying a Lexus LX and a Sportage.

In truth, there is no grand mystery. Auto rows exist because the land comes cheap, and there is safety in numbers. But the world now finds itself at an inflection point, and key staples of our built environment—shopping malls, brick-and-mortar banks, single-use office buildings—are at ever-greater risk of obsolescence. This definitely applies to the auto dealership model. And the reason for this has far less to do with how cars today are made, powered, and maintained, and much more to do with the evolving relationship between buyer and seller. 

Some noteworthy disruptors, like Carvana, Carmax and Autotrader, among others, have been conducting business out in the open for a while now, and many of them seem to be doing just fine without prime real estate on the side of the highway. And if visibility is still a premium for some, the growing novelty of the car vending machine is an otherwise cute solution to one part of the problem: a grossly inefficient use of land. But—and this should come as a surprise to no one—the greatest among all industry disruptors is the electric vehicle (EV) and its manufacturers. 

A car vending machine in Houston.


Tesla was the first to make strides in combating the century-old system of manufacturers selling exclusively through dealerships. To get around state franchise laws that prohibit direct manufacturer-to-consumer sales, Tesla’s stroke of genius came down to semantics and good timing. Instead of dealerships, the company operates “galleries” or “showrooms,” which has enabled Tesla to sell direct to customers in some 20 states and counting, provided no one talks dollars and cents during the transaction (because that would make them “dealerships”). And because those early-aughts EV’s were a bit clumsy and dismissed as “compliance cars,” the auto industry a decade ago didn’t consider Tesla a viable threat. But today, the company’s practices are shattering precedents, and not just with scrappy EV upstarts like Rivian, but with mainstreamers like Volvo, Cadillac, and GM as well. In March, Volvo announced that its entire fleet would be electric by 2030 and—here’s the gut punch—sales of its EVs would be online only. 

Many automakers today would enjoy the option of selling directly to consumers. Apart from a few states like Texas, Louisiana, and Michigan, which currently have bans on direct auto sales, there is hope that more state franchise laws will be relaxed in the coming years. Meaning what, exactly? First, more direct sales would mean a heavily reduced surplus inventory and distribution costs, which would then mean production could better meet consumer demand. 

According to a 2009 advocacy paper released by the Justice Department’s Antitrust Division, “whether or not direct manufacturer sales of autos is to evolve as a distribution channel in the U.S. should be determined by the preferences of consumers and the ability of auto producers to meet those preferences, rather than being precluded by fiat.” Now, combine some version of a made-to-order production model with the growing trend of online sales (not to mention all manner of incentive programs and tax credits that encourage the purchase of EVs), and auto dealers have an existential threat on their hands. And they know it. 

Just last March, the president of the National Automobile Dealers Association (NADA) lamented, “EV’s still don’t yet sell in the numbers that environmentalists want, and many groups feel as though they need a boogeyman to blame for fledgling sales … Dealers become an easy and convenient scapegoat.” Calling this position defensive is an understatement. Even if NADA can somehow convince the public that dealerships across the land are the victim of a smear campaign perpetrated by Big Electric, that will be just one small victory for them in a war that may be already lost.

A rendering of a General Motors dealership, depicted in GM’s 1948 guide, Planning Automobile Dealership Properties.


I don’t think it’s premature to ring the death knell, and here’s why: Today most white-collar jobs can be performed in perpetuity from one’s kitchen table, and the same company that owns the Washington Post can also deliver a year’s supply of toilet paper to your front door within 24 hours. In this brave new world, what chance of survival do car dealerships really have?

If we want to seriously consider a future for these buildings, rather than let them rot on the side of the road, then it’s reuse or bust. And why not? We’ve already witnessed the implementation of viable adaptive-reuse schemes for shuttered malls, commercial storefronts, and manufacturing centers. “Few, back in the dark days of the 1970s and ’80s,” wrote Richard Florida in a recent piece for CityLab, “would have predicted that the old manufacturing areas of the city would ultimately be repurposed and reused not just as arts and creative districts but as tech and knowledge hubs.”

Disregarding for a moment that dealerships rarely meet the kind of high-density criteria Florida is referencing, his point is well taken. Precedent here dictates that we can do pretty much whatever the hell we want! Modern auto dealerships are blank templates with little to no historical significance. This will make them too easy to dismiss once they go belly up. But it does present the building community with unique design opportunities that should have any number of architects and planners salivating. 

Feature image via Financial Times.



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