Convergent Alliance | Dealership Of The Future…Will You Survive The Transformation?
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Dealership Of The Future…Will You Survive The Transformation?

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IF YOU SURVIVE THE TRANSFORMATION THIS MAY BE THE PICTURE OF YOUR DEALERSHIP IN 8 YEARS

 

 

Early this month both General Motors and Waymo made bold announcements defining timelines to launch their “Robo-Taxi” operations in specific markets. General Motors’ Cruise Automation self-driving unit received a $2.25 billion investment from Soft Bank. Additionally, they installed 18 new charging stations at a parking structure in San Francisco’s Embarcadero; one of the heaviest trafficked district in the City. Cruise Automation plans to launch thousands of “Robo-Taxis” in San Francisco in 2019. Waymo on the other hand also is getting ready to add 62,000 Chrysler Pacificas to their autonomous fleet and launch its “Robo-Taxi” service in Arizona early 2019 as well.

 

While General Motors and Waymo are leading the pack in the development of autonomous driving and ride hail concepts other manufacturers are either slowly inching forward or rather waiting to acquire technologies off the shelf once they are ready to enter the arena. Although earlier this year BMW I Ventures and Toyota AI invested $11.5 billion in May Mobility, a start up that develops driverless electric shuttles which are already being used to move workers between parking lots and offices in Downtown Detroit.

 

We have discussed earlier this year the cyclical downturn in auto retail starting in 2018. All of the indications in spite of a better than expected first half of the year are still pointing to a 5% decline compared to 2017. This trend will continue as a matter of repeated cycles in the industry. However this time there is no comeback. By the time we live through the next 5 years of declining sales, all of the above will start taking effect and change the trends of private ownership of vehicles. By the year 2024 US retail sales including fleet will wind up around 12.5MM and of that only 9.5MM will make up the retail portion.

 

There is significance to the above picture that we displayed from the parking structure on Embarcadero San Francisco. If your current dealership is at least on a 3 acre land that you own with a sizable service department and you intend to transition into the ride hail business, instead of a showroom, your dealership may have to be built as a charging/parking station for your fleet vehicles. However we have also discussed in our previous communications that in order for a retailer today to be a player in that arena they would have to have a sizable multiple location business which is no less than 50 rooftops. While at this juncture no one has a clear picture of the future distribution system and lifecycle of the autonomous fleet vehicles, one thing is eminent. Due to the intense service oriented nature of this transportation movement centralized controls of large size entities will become a common denominator to the business model. Additionally, it will only require perhaps 35% of the retail network today provided that disruptors do not dominate the business model, in order to service the fleet operations nationally. That would only translate to about 6,000 rooftops. If the average outlet per entity is assumed to be 100 roof tops, we would only have about 60 operating entities nationally.

 

Along the way, the most obscure circumstance of all is that all of the manufacturers while preparing to transition into the world of transformed mobility; are pretending as if the business is as usual. Their contact people in the front lines are either also kept in the dark, or they are trained to reassure their dealer body that all of this is still far down the road or that it would never affect their business model that exists today. Either way it is not the truth. Remember, it did not take much for General Motors and Chrysler to tell their dealers that the time was up when they declared bankruptcy in 2008.

 

As always, it is time to plan the future as early as 5 years down the road, can your profits in 5 years exceed your business value to cash out today? If so, enjoy the ride, otherwise we have an extremely creative approach and solutions to those of you who are not sure. Let’s talk. See you next month.

 

Arlan

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