Notice to Silicon Valley: Car Dealers Can Adapt Too

Notice to Silicon Valley: Car Dealers Can Adapt Too

Why the smartest people in the room are wrong.

Stephen Hawking passed away in March and I recently attended three events, the National Automobile Dealers Assn. convention, the J.D. Power Auto Summit and the 2018 Automotive Forum. What could these things have in common?

Well, Hawking, who was of no small intelligence, once said, “Intelligence is the ability to change and adapt.”

Given that a key topic of presentations at the Summit and the Forum was the future of new mobility models for auto dealers, and based on the overwhelmingly positive reception I received from my NADA workshop on mobility as a service, I would say car dealers’ willingness to change and adapt is at an all-time high.

I regularly attend automotive retail industry trade events. In the last few years, the new technology-focused mobility conferences seem to happen almost every month in Silicon Valley, a little less often in other areas of the country.

While some technology innovators in shared mobility or mobility as a service are featured at automotive retail-focused events in Silicon Valley, I never have witnessed any car retailer-type presentations at these conferences.

Indeed, I’ve never actually seen any dealers or dealer group representatives in attendance. (I’m not sure if this constituency even is invited or welcomed at Silicon Valley “disruptive” mobility conferences.)

At best, I see some engineers from the OEMs, but no dealers attending the annual TU-Automotive Conference in Detroit of all places, a gigantic annual get together that has over 100 speakers and 3,500 attendees. 

I’m one of those strange few who believe that whatever the overall transportation future holds for individuals in the U.S., the most efficient place for this change to reach the general public is through retail automotive dealerships.

They make up the institution that has provided personal transportation solutions for over 100 years.  So, at every major new mobility disruptive event I attended in the last year or so, I sought out the smartest people in the room.

I asked them regarding whatever new mobility offerings or changes there are involving ACES (an acronym for Autonomous, Connected, Electric, Shared; Silicon Valley loves its buzz words) why car dealers wouldn’t be one of the best groups to be involved.

In the case of car sharing and ride sharing, aren’t they potentially the most economically efficient service providers and even operators of business, current and future? 

After all, in any shared mobility or mobility as a service innovation, dealers have a natural economic advantage.

They have the lowest cost of the asset, the lowest servicing cost of the asset (even with EVs, which, though requiring markedly less maintenance, if driven six times more in a ride-sharing scenario, as forecasted, will require more, not less, service per vehicle).

Dealers also have experience in managing the asset. To top it off, have a fixed facility and operation that is paid for by their traditional business. So every incremental dollar from a new department or enterprise falls directly to the bottom line. 

One other thing. Dealers all over the U.S. currently count as customers those people forecasters say will migrate to experimenting with other non-ownership forms of transportation. So it should be easier for a dealer to retain this customer, as opposed to each migrating to these new emerging transportation users.

The answers I got back from constituencies as varied as OEM representatives, major venture capital firm managing partners and academia, were surprisingly identical:

Yes, dealers currently have a naturally economic advantage in introducing and servicing mobility-as-a-service businesses, but would never lead or participate in them because dealer culture will never change (or at best not change fast enough to accommodate the bulk of new users).

Really, do these smartest people think dealers, when presented with a new opportunity that not only potentially opens up a new form of income and profits but may offer the key to survival, are so set in their ways that they couldn’t change culture, if not on a dime, quick enough to capture the lion’s share of a real mobility as a service business vista?  Have car dealers not, over the last 100 years, survived – intact – economic recessions, depressions and innovations (including the Internet) way longer than vaunted Silicon Valley itself has existed?

I take a very different view, consistent with what an industry-publication identified “legend” in the car business told me in his conference room a few weeks ago:

“Car dealers are like cockroaches, no matter what the future holds, they find a way to adapt, survive and prosper.” 

While being likened to a cockroach may not be the prettiest of representations, their species ended up way better than dinosaurs, which many outside the industry wrongly perceive as the more accurate analogy for dealers.

Patrick Sieben band plays at this year's NADA convention.

Dealers are very ready to jump into the new ACES future. Months ago, I proposed a workshop to present at the NADA convention this year in Las Vegas.

It was entitled, “Mobility as a Service: Threat or Greatest Opportunity.”  This presentation was not only accepted, but also later chosen as one of only six (out of 60), for a special add-on international session with four live translators.

Someone told me early on such a workshop would most likely never make the cut and if by chance it did, no dealer would attend. Exactly the opposite occurred. 

Each workshop played to a packed room, and one extended an extra half hour with questions within the group, and then an additional half hour with individual one-on-one questions afterward. 

Judging from the live response, and the many follow-up emails I received, this workshop on mobility as a service for dealers may have been one of the most- anticipated and best-attended workshops at this year’s convention. 

More broadly, the topic and its immediate implementation and application in dealer subscription models, car sharing and the like seemed to be front and center at the J.D. Power Auto Summit and the Automotive Forum.

As one dealer said to me after my workshop, “It’s not that dealers aren’t ready to adapt and add to their current one-customer/one-sale business. It’s that none of the new disruptive mobility-as-a-service models to date seem to make any bottom-line money. No one is interested in pursuing a new service to fund losses. Present to us one that can make money, and we are in.” 

Silicon Valley is historically great at identifying new customer needs that reduce friction and pain points, and funding the losses new business incur to satisfy these identified trends. 

At the same time though, the Valley seems blind to the fact that traditional business infrastructure sometimes could be best used to adapt new technologies to satisfy these needs. 

In the transportation sector, dealers may be the only large-scale ubiquitous vendors who currently have the facilities in place to handle the rolling stock for individual transportation (whatever form that ends up being). 

It may also very well be that the ultimate MaaS survivors, for sustainability, must either include providers with infrastructure to support these new models (vehicle service, maintenance, management, etc.), or try to entirely recreate this infrastructure at a very high cost. 

Dealers already have this critical infrastructure in place as they service current customers. And from what I’ve witnessed, dealers are ready, willing and very able to adapt and accommodate new ways of providing transportation in money-making ventures, whether its car sharing or ride sharing today (which also is a good source of traditional new-vehicle sales) or autonomous shared mobility tomorrow. 

Dealers have a natural advantage in profiting from any viable new mobility model. They are ready to jump on viable opportunities. So-called “dealer culture,” won’t stand in the way.

John F. Possumato is an attorney, the founder of Automotive Mobile Solutions and a graduate of the Wharton School of Business at the University of Pennsylvania.  He can be reached at [email protected]

 

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