If you’ve been reading the news lately, you could be excused for thinking automotive dealers across the board are reassessing their life choices and planning a change of career.
Stories on the rise of electric and driverless vehicles, online buyer subscription services and ride sharing have prompted a host of forecasts painting a dire picture for the future of the industry, including recent predictions that up to 50% of automotive dealerships globally would shut their doors by 2030.
There’s no question disruption is coming.It’s already under way.But it’s not coming at the breakneck pace some of those recent stories would have you believe.
In January, I attended the National Automotive Dealers Association (NADA) Conference in San Francisco.
It’s the biggest retail automotive convention in the world, with more than 22,000 people attending from more than 50 different countries.
The theme for this year’s conference was Focus on Innovation, and as part of the Australian Automotive Dealers Association (AADA) Study tour, I was lucky enough to tour the headquarters of Google and eBay and hear from some of the leading thinkers in that digital and disruptive space.
What was interesting was that despite the focus on innovation, the underlying message we were left with was that digital retail was very much a tool in a retailer’s toolkit – an important one, yes, but not the end game.
As noted in the NADA Daily Magazine, “… buying a car simply is more complicated … and a much bigger purchase than a pair of Cole Haans [shoes].
So it’s OK if the process takes longer than a pizza delivery.”
In other words, buyers understand and respect the fact that a car is a significant purchase.
It’s the same reason the test drive isn’t dead – people still value the experience and want that level of contact and insight from a dealer.
This has been underscored by the fact that while buyers in the US have the option to have their new car delivered to their home, just 8% of them had taken that up.
The remainder preferred to go to the dealership to pick up their keys and get the full introduction to their new vehicle in person.
Electric vehicles and ride share services are other disruptors frequently cited in industry forecasts.
Both are clearly in use in Australia, but neither are in a position to pose a serious threat to the industry in the foreseeable future.
We just don’t have the supporting infrastructure or population density in place to drive significant growth in either.
That’s not to say the industry isn’t facing challenges.
What we’re already seeing in 2019 is a number of smaller operators really struggling, and there have been a handful go into receivership since late 2018.
As the saying goes, when the tide goes out you all see who’s been swimming naked – and in a market downturn like the one we’re experiencing now, that’s exactly what happens.
The volume comes off, the tide goes out and those less efficient or poorly-managed operators tend to go to the wall.
Dealers are absolutely keeping an eye on those future disruptors, and what’s coming over the horizon.
But it’s important to remember that most car dealers are entrepreneurs by nature – so change doesn’t scare them, it’s just a matter of sorting out the white noise from what needs to be focused on.
When we talk to our clients, their concerns aren’t electric vehicles or subscription services – they’re about pressure from original equipment manufacturers, facility spends, customer service and getting the level of investment right.
In navigating a challenging market, there are steps that can be taken to ensure you stay on the road.
In 2019, used car profitability and expense management are immediate levers that can be pulled, as they’re areas under the control of dealers.
I genuinely do believe that for solid, well-managed operators there will be a future in the industry – but navigating the right path through changing market conditions will be important, both in the short and long term.
Talk to your adviser about ensuring you have the roadmap in place for the journey.