LIVING IN DENIAL
An automotive retail development company.
Convergent Alliance, Automotive retail development company, dealership remodel, dealership assembly, dealership profits, dealership software, automotive industry, dealership construction
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LIVING IN DENIAL

  |   Business

What transpires behind closed doors…here is a sneak peek.

I realized that in corporate environments day to day operations are business as usual and no one really knows what transpires behind closed doors. Occasionally I attend some manufacturer meetings and talk to some corporate employees regarding the future of their particular brand. Without an exception you will find them talking about product, marketing and market share plans and objectives beyond year 2025 or 2030. No one ever questions or even brings up the fact that most major manufacturers are investing billions of dollars in autonomous driving technologies, ride share and ride hail concepts at an alarming rate. This of course will dramatically change the vehicle distribution and transportation concepts once the infrastructure starts taking shape.

 

At this point it is not clear what the vehicle distribution system of the future will look like and what transitional evolutions it will go through. But one thing is quite eminent that the retail industry which delivered over $995 billion last year with 1.1 million employees and a total payroll of $13.9 billion is about to transform beyond comprehension, which is the reason why most retailers continue to live in denial to think that it will never happen.

 

In order to slow walk you through the process, I wanted to provide some more statistics that further confirms the transformation. According to HIS as of the end of 2016, there are 253 million light vehicles on the road in the U.S. and it has increased on an average of 1.5% per year for the last two decades with the exception of 2009 and 2011. As an example in 2016 industry delivered 17.5 MM cars but only scrapped 11.5 MM aged vehicles. It is clear that industry analysts and urban development experts have become exceedingly concerned about the congestion, time waste and environmental impact of this metal pile on our roads. Therefore the solution will inevitably focus on maximizing the use of each means of transportation available. As of last year, 425 million people in the U.S. used rental cars, ride hail or taxi services and the usage was as follows:

 

 

Based on the consumer trends with increased popularity of ride hail and ride share; manufacturers participation of the app and the development of specific human driven accessible shared car fleets and autonomous driving developments, in 5 years 5-7 million people are expected to give up their private cars especially in metro markets.

 

This trend will purely be driven by economics and convenience. I also would like to share the cost of transportation today by category:

 

 

With Increased convenience of ride hailing apps and the anticipated application of autonomous driving in 5 years, the cost of ownership alone will exceed the cost of ride hail and lure consumers into giving up their privately owned vehicles. In a different chart below I wanted to display the expected distribution of light vehicle sales between segments in 2017 and the following 15 years:

 

 

I believe all of this makes you wonder, how connected are the frontline corporate employees with behind the scenes activities towards this evolution when they talk about product planning and market share. Make no mistake, future of cars will not hold moving massive amounts of metal anymore, rather it will be based on efficiency and utilizations. As to the economics, it is easy, sophisticated autonomous vehicles, along with fleet business, auto manufacturers will adjust their margins to make up for the loss of sales. As retailers though, you might have a tough hill to climb. I am all ears and waiting to hear from you for creative solutions.

 

See you next month.

 

Arlan

 

arlan@tarhangroup.com