VW Canada to create smaller, “satellite” dealership to expand footprint

Despite being one of the largest automakers in the world, Volkswagen Canada is the leading automaker with the second-lowest dealership in Canada. It plans to address the issue with a new hub and spoke model that will bring its dealerships closer to more customers.

Automaker currently has 145 dealerships in Canada, less than Mazda (163), Honda (237) and Toyota (287), though more than Subaru, which operates only 94 dealerships in the country. To make up for its deficit with other major automakers, it will tap into its existing dealerships.

The automaker plans to use a model that was first successfully launched in Europe where dealers are seen setting up “satellite” locations that are smaller than the entire dealership but ensure that the brand is represented in more places.

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“You know the saying, ‘Will they come if you build it?’ There is a lot of truth in that. ” Michael Riccito, director of network development at Volkswagen Canada, told Automotive News Canada.

Satellite locations will be a branch of the existing full-service “hub” dealership. Larger locations will have all the amenities and strict aesthetic requirements. Smaller satellites, meanwhile, need to be only 7,500 square feet (700 square meters) larger, instead of 11,000 square feet (1,000 square meters), like the hub locations. They will have fewer employees, be easier to see, and the vehicles will be sent back to larger dealerships for major repairs.

“Think of the hub store as the main operation,” Riccotto said. With Satellite, “We’re only going to take a part of it and move it.”

The move may prove bizarre because, according to IHS Markets, 19 percent of Canadians do not live within an hour of a Volkswagen dealership. Still, dealers are wary and quick to notice that building a dealership, no matter how small, is expensive.

Of the 25 initially planned satellite dealerships, at least two will be for electric vehicles only, and the automaker has received commitments from dealers for 24 locations.

Volkswagen initially expected them to be completed by 2025 but is re-evaluating that target due to permits and difficulties with contractors. Regardless, the move could help the automaker reach more Canadians and expand beyond its 5.2 percent market share in 2021.

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