Where do dealers fit in the world of car sharing, ride sharing and ride hailing? Is it a big threat or great opportunity?
This is a big-picture topic and concerns nothing less than the future of automotive retailing as we know it today.
I’ve thought about and studied this topic as someone with one foot in automotive-retail world and one in the tech world.
Although these ideas may be a bit out of the box, they are a natural evolution of the Mobility as a Service (“MaaS”) business model, a logical next step for the car-sharing and ride-sharing business.
In a Wall Street Journal article, “How Self Driving Cars Could Wipe Out Uber,” the author points out that if indeed self-driving cars become a reality, then those who currently know how to manage and service vehicles are in the driver’s seat for the future of MaaS.
“Automakers have a great deal of experience working with a complex web of dealers, financing companies and fleet managers – even car rental agencies – that could potentially be repurposed to manage millions of self-driving vehicles,” the report notes.
I attended the TU Automotive conference in metro Detroit in June. It featured more than 150 of the brightest speakers on the topic of MaaS and the autonomous car. Two points came up again and again.
First, mobility as a service will explode over the next few years regarding revenues and market capitalization, dramatically affecting the very premise and nature of private vehicle ownership.
Second, the structure of MaaS providers will change dramatically, as market share and technology evolves, to the point where the critical factor will be the management and maintenance of a fleet, something not done by most MaaS providers currently.
Another Wall Street Journal report on the future of transportation says ride sharing and self-driving vehicles will redefine our relationship with cars.
The trend is clear. Ignoring it, either as a vehicle manufacturer or an auto retailer, even at this early stage, would be imprudent.
So let me get to the heart of the issue. Yes, it is clear from the predictions of many learned institutions that mobility as a service (think ZipCar and DriveNow for car sharing, and Uber and Lyft for ride hailing) will play an increasing role in how people get around, particularly in metro areas.
This inevitably will reduce the private ownership of vehicles, which will in turn affect automakers and dealers. To deny this is to be like a city cab driver denying Uber and Lyft are affecting your business.
Where I take issue though, is that this necessarily will negatively affect the astute car dealer.
First, even if MaaS remains in the control of third parties, and even if someday autonomous vehicles do become commonplace, this will mean more miles will be placed on vehicles in service, not fewer.
(The predictor folks that promote the end of private ownership note that most vehicles are only in use about 15% of the time for private owners. This percentage goes up substantially for car sharing/ride sharing vehicles, which is why it represents a value to consumers).
Some organization will have to service and maintain these vehicles, whether they drive themselves or not, and, Carl Icahn and his network of Pep Boys/AutoZone/parts manufacturer purchases aside (there is one guy who gets it), car dealerships, in general, are the best, most conveniently located places where most of this service can take place.
Second, and most importantly (and most controversial) dealers are best suited to get into the MaaS business directly.
That’s because dealers have been providing vehicles, vehicle service, fleet management and temporary transportation needs since the dawn of the automobile.
Yes, those new transportation providers have a head start (and have lost a lot of money for it), but dealers can provide the best of these services and at the lowest cost if they broaden their business model to accommodate them.
I seem to be the only voice out there saying that. But it is downright amazing that as the manufacturers pour hundreds of millions of dollars of investment in MaaS partnerships with Lyft, Uber and others, they don’t seem to even mention the idea of letting their dealers in on this action directly or focus on broadening the traditional dealers’ role to include a MaaS business operation. Why not?
As has been pointed out, there is no real first-mover advantage in MaaS for these initial entrants, other than amassing huge amounts of investment capital. There is no proprietary “secret sauce” software.
When it comes right down to it, the Ubers and Lyfts of the world have spent a lot of investor’s money breaking down the legal barriers to car sharing and ride sharing and have successfully gotten the general public accustomed to mobility as a service. But outside of a recognizable brand, is there any consumer loyalty to being first?
Indeed, unlike most technology related start-ups, the competitive advantage in MaaS, comes not from proprietary software, but from the ability to have the lowest cost and maintenance of the asset – that is, the vehicle – and the expertise and ease with which it can be seamlessly provided to the most people in the most locations.
Do you see what I’m describing here? Car dealers have been providing and servicing vehicles to customers for a long time. They can easily adapt to making money with an MaaS model, as this utilizes all of the fixed asset base they have already established and paid for in the retail model.
Adding MaaS would provide car dealers with immediate incremental revenue, without adding to fixed costs.
Unlike the current MaaS players who have no fixed-facility structural advantage, dealers could, even in start-up mode, provide MaaS as a department, and be cash- flow positive in a short amount of time, adding only some variable cost to a business that is already in the business of promoting, selling, leasing, renting and servicing vehicles.
Consumers already go to their local dealer to satisfy transportation needs. Is it such a stretch to say they would naturally gravitate there for MaaS options as well?
With nearly 18,000 franchised dealers operating in the U.S., if even a small percentage were “mobilized” to provide car-sharing and ride-sharing services under a global brand, could they not out-Uber Uber almost overnight?
Okay, just because something should happen doesn’t mean it will. Clearly the biggest obstacle to transforming a dealership into a MaaS center is not related to technology, acquiring financing and insurance suppliers or even capital.
All of these are available in a financial market that has made Uber the highest valued start-up in history, with an over $70 billion valuation.
Rather, it is changing dealers’ culture and mindset and broadening their business outlook.
Incorporating MaaS early into a dealer’s transportation offerings will make them the NetFlix of transportation and prevent them from becoming the next Blockbuster.