The future of our dealer business, part 2

In our last post, “Be afraid, be very afraid,” I wrote about my fears for the next 12-18 months in the car business. I suggested specific steps to make sure the decline in sales and traditional media spending has minimal impact on your billing.

Today’s article is about the longer term future for the car business and how it might impact us.

Two trends are converging quickly. Together, they’ll fundamentally change the way Americans think about how they use a car.

The first is the real change in how Americans, especially those raised in the UBER era, think about car ownership. When I was a young driver, owning a car was about the biggest deal ever. For the 5 years before I even had a license, each year I was checking out the new cars and making my fantasy list. For today’s younger person, ride-sharing has been a reality for a long time now and sharing ownership isn’t far behind.

There are tons of articles you can find online about the companies that are testing new ownership models. Some brands have a subscription model that allows you to switch between different cars based on your needs. So, you could drive a Porsche 911 on a weekend getaway or their SUV during the school week, all for a monthly fee. BMW has a Seattle and Portland, Oregon test of a company called Reachnow. Imagine being able to summon a BMW and driver a la UBER or Lyft, but you’d also be able to grab a car you drive for an hour at lunch to run errands. Oh… and their website says the cost of that 1-hour errand trip? Only $15. By the way, there doesn’t seem to be any mention of the local BMW dealers on the Reachnow website. Are they going around the dealers, directly to consumers? I’m guessing they are.

If you think about it, owning a car is a highly inefficient use of capital. Most people’s biggest investment is their home, and most days, I’m in my home 12-14 hours. Our second largest investment is our cars, but how many hours do you use it? Many days, my car only goes to the office and back. I have this huge asset that’s used only 1/24th of the day. The rest of the time, it sits in an office parking lot or the garage at home. In more and more places, you’ll be able to use a car-sharing subscription to only pay for what you need. And, most articles I’ve read say that will significantly reduce the amount consumers spend monthly for cars.

Combine that with Trend #2: driverless cars. If you think driverless cars won’t happen for another 10 years, think again. You’ll see them frequently the next time you’re in Las Vegas, since LYFT has a huge test going on there. (The test cars have someone in the driver’s seat. I’m guessing that’s only to make control freaks like me a little less nervous.) My UBER driver pointed one out to me and told me how to recognize them, and the next day, I was amazed at how frequently I saw them. The technology exists now. They’re on the road. Google’s autonomous car company, Waymo, has already logged 10 Million road miles testing the technology. Are they safe? Probable way safer than me driving, that’s for sure.

So, suppose we combine a “pay for what you use model” with a driverless car. I’ll order a car to take me to work at a certain time. I’ll use my commute to return a few emails or catch up on my reading. If I need a car at lunch, I’ll summon it up, and at night on the drive home, I’ll either relax or be part of a conference call with a client. My commute will be an extension of my work day, and that will all likely cost significantly less than what’s being paid now.

How does all this impact car dealers? That’s the multi-billion-dollar question. One way is easy to guess. Americans will own fewer cars, so dealers will be selling fewer cars. But, will dealers be players in the car-sharing subscription model? That’s the biggest question. Or, will the car dealership as we know it today even exist in the future?

Here’s a thought-provoking report from the auto expert at KMPG. It’s worth reading.
https://advisory.kpmg.us/articles/2018/will-this-be-the-end-of-car-dealerships-as-we-know-them.html?utm_source=google&utm_medium=cpc&mid=m-00002776&utm_campaign=c-00056380&cid=c-00056380&gclid=CjwKCAjw3qDeBRBkEiwAsqeO7tjD1WqHw6vWCNYSsiZCn1Z-wBye8z-O3N7_-8ERhyZiRf1_C3duLBoCSHsQAvD_BwE

The HEADLINE?

Will this be the end of car dealerships as we know them?
Online shopping, ride-sharing services, collision avoidance technology, and self-driving cars will lead to a sharp drop in dealers’ sales and profits.

The challenges this article lays out won’t impact the TV business in the next few months. However, it certainly suggests that the car dealer model that is the foundation for much of our local business is very likely to look different in the next few years, which will have a huge impact on our business.

Each week when I write these articles, I want to be sure to not just raise problems but also suggest solutions. That’s why my last article had 8 steps we can take to protect our 2019 dealer revenue 

The answer to the bigger issue about the future of car dealerships and car ownership is more complicated. I’ll write more about what I think we should be doing in my next post.

PS: When you see the US October and November auto sales numbers, I’m guessing they’ll show an increase. What’s behind those sales numbers? Replacement cars for the thousands of cars that were lost in Hurricane Michael. That’s likely to inflate sales volume reports for at least 90 days. It will also increase auction prices for used cars, as demand will be up. If you’re not in a post-hurricane zone, sales are likely to continue to be down.

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