In January, my travels took me to three different industry shows. The Consumer Electronics Show in Las Vegas, the North American International Auto Show in Detroit, and the National Auto Dealers Assn. show in San Francisco. As surprising as it may sound, the NADA show was by far the most impressive.
The automotive retail space is attracting more attention than at any time I can ever remember. Big-money investors are pouring billions into the segment. High-tech firms are patenting algorithms to turbocharge the retail process. And new car dealers may be in the perfect position to take advantage of the car-sharing boom. No wonder there is so much action, the future looks bright!
At most industry shows people walk up and down the aisles ogling the shiny new products on display. And that’s what they’re there to do: look. But at NADA, every booth was crammed full of people who were there to do business. They were getting information, explanations and presentations on all kinds of services and products. And they were buying. As soon as one wave of people moved out, a new wave moved in. I’ve never seen anything like it at a trade show.
All this action is attracting Big Money. Last year, billionaire investor Warren Buffet bought the Van Tuyl Group, the largest privately held dealership group in the U.S.
Now comes word that billionaire investor George Soros also is searching for a dealership group. These guys don’t make investments like this on a whim and typically are in it for the long run. Not only do they like what they see right now (record dealer profits), they believe that automotive retail has a lot more room to grow. I think their actions could set off a stampede of other investors.
Then there’s the high-tech angle. Much of the talk on the floor centered on software and algorithms that can help dealers run their operations more effectively. One company, vAuto, developed the software to send “spiders” crawling throughout the Internet, collecting real-time data on car sales and updating it every 10 seconds. Using algorithms to parse the information that it gleans, dealers now can figure out the best way to manage new-car incentives in their local market. Or they can use the info to determine the best used cars to put on their lots and where to price them.
AutoNation, the largest automotive retailer, announced plans to start shifting part of the car buying process onto the Internet.
One of the biggest problems in automotive retail these days is that it takes so long to buy a car, typically four hours or more. I’m told that once you pass the 90- minute mark, all the excitement has been drained out of buying a new car and it becomes a dreadfully tedious process.
AutoNation wants to make it as easy to buy a car online as it is to buy a toaster from Amazon. Or at least that’s the goal. The challenge is that car dealers face a tangle of 85 federal rules and regulations, as well as state and local laws, which takes a ton of paperwork. But if buyers can complete many of the forms online, they can eliminate spending hours at the dealership, allowing them to drive home giddy with glee in their new set of wheels.
As I gaze into the next decade, it seems to me that automotive retail outlets are ideally suited to take advantage of the growing interest in car sharing and autonomous cars. As OEMs start to experiment with how they can deliver mobility services, car dealers likely will play a pivotal role. After all, mobility service providers will need a large variety of vehicles in inventory, lots of space to park those vehicles, and plenty of garage stalls to repair and maintain them. And they will need thousands of facilities like this scattered from coast to coast. Anyone come to mind?
Car dealers fit the bill perfectly. Maybe this is why long-term investors like Buffet and Soros are investing now. They’re getting in on the ground floor before there even is a ground floor.
Historically, car dealers have had an unfortunate reputation as being sleazy or not reputable. But with Big Money, hi-tech and new mobility services converging on this space, car dealers could emerge as the smartest looking people in the room.
John McElroy is editorial director of Blue Sky Productions and producer of the “Autoline” PBS television show and “Autoline Daily,” the online video newscast.