Authored by Nicholas Goodman
Auto Team America, a network consisting of Baker Tilly and 10 other CPA member firms, first sat down in 2011 to look at the trends, developments and key ideas that might shape retail automotive in the next decade and beyond. As a result, a whitepaper was released examining how fluctuations in our business would give rise to challenges, shifts and opportunities that retail automotive dealers should consider to better plan for their long-term goals. The first whitepaper, “Vision for 2025”, was released in 2011 and due to changing trends a revised version was released in 2014. As a result of an ever-changing marketplace, ATA has released a new 2030 Dealership Vision. In the following, the Baker Tilly dealership team highlights some of the similarities and stark differences between the 2025 and 2030 Vision papers — bringing to light the major trends and in some cases concerns that could impact dealership operations in the future.
Some things stay the same …
Technology continues to increase communications between dealers and consumers in the sales and service process and is expected to continue to impact dealership operations in a big way through 2030. Technology in the retail dealership space has allowed dealers to hone their lead development process making it more effective, but technology has also empowered the consumer, providing them with easy to access information about vehicles and their prices. Ultimately, this brings the consumer further down the sales funnel and closer to a purchasing decision even before setting foot on a showroom floor or test driving a vehicle. With this in mind, it is no surprise that when asked, dealer respondents indicated that making the sales process quicker and more efficient and customer communication technologies will continue to have the greatest impact on the dealership of 2030, as it was in 2025.
In 2014, 34 percent of respondents indicated that they will be retiring by 2025. For 2017, retiring dealers is up to 46 percent for the 2030 outlook. There was also an increase from 38 percent to 42 percent of dealers indicating they will be involved but transitioning to the lesser role. This leaves only 12 percent of current dealers expecting that they will be “going stronger than ever” in 2030.
Consolidation. While there were differing opinions regarding the nature of dealership consolidation changes in the 2025 Vision, it was a near unanimous agreement that dealership ownership was going to contract through consolidation. For well over two decades, the narrative of dealerships has been one of consolidation and it appears this will continue for the foreseeable future. Much of the recurring themes from the 2025 to 2030 papers can be attributed to this trend of consolidation including shrinking gross profit margins offset by lower cost structures and smaller staffing requirements resulting from the use of technology to be more efficient — both trends that appear to make dealerships valuable from a consolidator perspective. Conversely, it may be the new observation that by 2030 manufacturers influence over day to day operations will be expanded and costly facility requirements will force some dealers to sell. Either way, there is growing sentiment in the surveyed dealer respondents from 2014 to 2017 that the future of their dealership over the next decade will include less of the current dealers/majority owners.
But more things change …
Franchise laws will be repealed. Shockingly, Tesla was only briefly mentioned in the 2025 Vision report. In a short discussion regarding new entrances from automakers, the conclusion reached just three years ago regarding entrants was “Chinese and Indian brands are expected most, but one cannot discount the possibility of a technology player (e.g., Tesla) entering the market as well.” It is now apparent that Tesla should have been given some additional attention and not just as a technology player in the space. As the 2030 Vision describes, Tesla is one part innovative electric but also a threat to the franchise system as a whole. Although the number of vehicles sold under Tesla’s factory-direct model has been small in comparison to total new vehicles sold (and in fact less than 30 percent of the electric vehicles sold in 2016), surveyed dealer respondents believe that opening the door and demonstrating that Tesla’s factory-direct sales model can work and is something consumers desire is an area of concern and may lead to repeal of franchise protection laws.
Uber generated $495 million in sales in 2014 when ATA released the 2025 Vision report. In 2016, annual revenue increased to $6.5 billion for the ride-sharing pioneer. Not surprisingly, the idea of ride-sharing was relatively new in 2014 and there was no mention of it in the 2025 Vision paper.
Ride-sharing/vehicle-sharing will replace vehicle ownership. Today, the attention is not only on ride-sharing, but also vehicle-sharing, the latter being a challenge to automotive retailers. The potential size of the vehicle-sharing market is projected to be large enough for manufacturers to invest heavily in this emerging segment of the automotive industry. Volkswagen launched MOIA last year following in the footsteps of General Motor’s Maven, Mercedes-Benz’s Car2Go, BMW’s ReachNow and others. Although there are still lots of questions, mainly around the logistics of distribution and maintenance of the vehicles and how the acceptance of a sharing model by millennials will play out, the general consensus today is that ride-sharing and vehicle-sharing will replace vehicle ownership in meaningful levels by 2030.
Autonomous vehicles will rule the roads by 2030. The 2025 Vision did not address autonomous vehicles but it is a reality that cannot be ignored today and it is likely to impact the retail automotive industry in a big way long term. Although there are many variables and most agree that technology will continue to advance rapidly with self-driving cars being widespread by 2030, the real impact on the retail vehicle market will only occur if autonomous vehicles are matched to vehicle-sharing in a way that results in an increase of miles driven per passenger vehicle, ultimately reducing the number of vehicles on the road — a model that most respondents feel is unlikely to occur by 2030.
These are just a few of the influences and big ideas presented in the 2030 Dealership Vision whitepaper and we invite you read the full whitepaper, think about the future and continue to innovate.
For more information on this topic, or to learn how Baker Tilly dealership specialists can help, contact our team.
Baker Tilly is a proud founding member of ATA, a network of eleven CPA firms and several affiliate members that specialize in auto industry solutions that together, serve over 2,000 auto dealerships nationwide. We like to think of this group as our own “Twenty Group.” Representatives from ATA member firms meet regularly to share dealership specific information and solutions to most effectively meet the needs of automotive dealers.