This past week, most of the auto industry descended on Dallas for the National Automobile Dealers Association (NADA) Conference. It’s my favorite week of the year as I get to catch up with many industry colleagues and discover new, innovative technology companies that might be prospects for our investment funds.
I had a chance to moderate an NADA “Super Session” on Thursday with four incredible dealers, discussing their perspective on “The Future of Automotive Retail” and how they’re preparing for the big trends impacting the industry.
We had a packed room with 800+ dealers in attendance (they had to turn people away into an overflow room), and I took questions live from the audience (I put my mobile phone number up on the screen and the crowd texted me questions during the discussion).
I’ve had a chance to reflect back on the panel discussion and review all of the 58 questions sent to my phone. As I grouped and categorized these questions, all of which came from the dealers in the audience, I believe they represent a healthy summary of the industry issues and themes that are currently top of mind for auto dealers. So, I thought I would share these messages with you in this month’s Intel Report.
Here are the questions from the session:
Strategy & Focus
- What are the top three areas in a dealership that will need strong focus in the next 5 years?
- Do dealers see any new revenue opportunities outside the traditional profit centers?
- What do you think will be the long-term effects on dealers that still charge market adjustments far over sticker on new vehicles?
- Are OEMs most concerned about the inconsistent customer experience across the dealer network?
- Do you think the OEMs will push dealers to change the sales process at the dealerships? i.e., online or Single Point of Contact (SPOC) in-store?
- Who is your favorite OEM? Least favorite? Why?
Agency Model & Direct Selling
- What are the big concerns that you have regarding the future of the franchise system?
- How much of a concern do you have regarding future distribution models?
- What is the big difference between dealer agreements vs the agency model?
- What are your thoughts on the rise of “build to order” and digital retailing solutions, and how do you believe this shift impacts the traditional sales model?
- What are your thoughts on forced change to consumers to a build-to-order sales channel….taking control of the OEM-focused areas they believe will make the agency model work?
- What is the panel’s outlook for when new car inventory returns to 2019 levels? When will inventories go from 40 days to be at 90 days?
- When do you expect declining used vehicle prices to trough and why?
- What is the best advice for sourcing used cars?
- What brands/models could be most impacted from the Tesla price cut?
- Will the Tesla price cuts have an impact on industry incentives?
Finance & Insurance
- Do you see value in a centralized finance hub, to maximize efficiency across dealer groups?
- Are any of the speakers selling extended contracts on replaced parts that are out of OEM warranty?
- Who are your top 5 lenders besides OEMs?
Fixed Operations (Parts & Service)
- How are you maximizing profits in Fixed Ops, Parts, and Service?
- What are your thoughts on VR/Metaverse for Virtual Showrooms, Virtual Test Drives, and using this technology to train Technicians for new vehicle servicing?
Digital Retailing & Customer Experience
- Do any of you have the ability to allow consumers to completely buy a car online? How important do you think that is now and in the future?
- How do you see dealers bridging their ‘traditional’ and ‘digital’ sales models in the coming years, and how does that impact the website-to-showroom traffic pipeline? In other words, how can dealers take care of digital customers just as well as they do “live” ups in their showrooms?
- What made these companies (like Carvana, Vroom, etc.) such runaway hits with consumers, and what lessons can dealers take from their models?
- How do you make Dealerships the destination place like an Apple Store with EVs?
- What are the benefits of a one-person selling process? Does your process run from lead-to-sale? Or appointment-to-sale?
- What tools do you use for your one-person sales process?
- Will franchise dealers adopt the “Carvana” model of an end-to-end online vehicle purchase including financing with full visibility of inventory across all their lots? If not, why not, and what are the limitations?
- How worried are you about recent FTC Safeguard regulation changes and have you changed your operations because of it?
- With capital markets down what are good ways to mitigate fraud & risk? Specifically, with validating income and any other good advice to reduce fraud?
Electric Vehicles (EVs)
- With all the changes coming to the auto industry with electrification, how do you see the relationship between the dealership and their lenders changing as customers look for more convenience in the buying process of cars?
- EV appears to be exceeding all projections from 5 years ago. What is your take on EV adoption in the next 3 years?
- Do you anticipate a challenge in finding good Technicians for EVs?
- We’re talking about staying ahead of problems. Will putting charging stations in service bays tie up bays, causing efficiency problems down the road?
- Two of the panelists mentioned EV chargers that are mobile: Is that a proven concept somewhere or a pre-production concept?
AI & Automation
- Where do you see opportunity going forward to strip cost out of the process to sell a car, and streamline things as the customers are increasingly demanding while minimizing the reduction in profit per sale?
- Where do you see AI playing a role in the sales and service process?
- Do you find you’re having to drop vendors often because they are not evolving greater than others?
- What is the #1 question you want to ask your current vendors/business partners to help resolve in your business today to aid in revenue growth for you? Or streamline processes?
- What’s the most seamless online-to-in-store, end-to-end tool? (So, I can reduce my tech stack)
- Question for Liza: As a consolidator, do you use an “all or none” strategy for your group when evaluating vendors? Or do you allow individual stores to choose the best fit from the operator’s perspective?
- So, you want to cut vendors, how are you determining which ones deliver ROI?
- Drive deeper into the vendors we are currently using now: How does each person measure the vendors they use, and what percent is being used?
- You asked about websites and vendors being limited by OEM “certifications”: I see that as a short-term fix for the OEM…the future is TIER 1 only and our websites, inventory, don’t exist, etc. They will make it so it is perceived by consumers that it’s direct on the Tier 1 site. And our real estate will live within Tier 1.
- Is it difficult to change DMS software, even if you see more benefit from startups and new DMS vendors (than the legacy providers)?
- Does any OEM recommend that dealers use a better DMS software?
Employees and Human Capital Management
- How will dealer leadership teams change in the next 5 years?
- What are the 2 or 3 things you are training your managers/leaders for to make them better businesspeople?
- With the determination that we must get “back to basics” are the dealers looking not only to train their employees on this but are they also looking at changing their practices to become more engaging with their employees?
- You all said one of your biggest concerns is “your people”: investing in them. What are ways you will invest in them?
- With this new 2023 market, what are you doing to get your sales team bought in and “back to the basics”?
- Do you bring outside trainers in or continue with in-house training?
- Can you reduce people while increasing volume and maintaining experience? Will their skill set suffer if one person has responsibility for all?
- Our Dealerships are only as good as our people. How do we frame an auto career to attract the next generation into the auto business?
Whether you’re a dealer, an OEM, or a vendor, I think there’s value in reviewing and reflecting on these questions and giving some thought to how you would answer them.
I hope you enjoy this list as much as I enjoyed moderating the panel discussion. Thanks to NADA for hosting us last week.
It’s an exciting time to be in the automotive and mobility space, and I appreciate you being on this journey with us.
Until next month,
Steve Greenfield is General Partner of Automotive Ventures, which is raising the DealerFund to help auto dealerships navigate through the next decade of unprecedented change and participate financially in the AutoTech startups they help to grow.
Note: This article was originally published in the February 2023 Automotive Ventures Intel Report.