Finishing Line

Car-Care Future - Technologies Disrupt the Auto Industry

By Robert Roman

03/01/21

Recently, I thought about buying a new car. Historically, this meant driving over to the dealership and then getting dragged into the typical multi-step selling process with a host.

Luckily, my dealer now has an “express store.” Here, a car can be bought 100 percent online without ever having to visit the dealership — free home delivery within 100 miles.

At the express store, I self-learned about Hyundai’s Blue Link® app with features such as remote start/lock, climate control, maintenance alerts, find gas sites, car finder, etc.

I also learned the dealership had replaced its collage of after-market products including its car wash and detailing services with protection programs by insurer Zurich. This includes tire and wheel protection ($500), exterior and interior environmental protection ($800), and a vehicle protection program (VPP) that covers all towing costs, flat tires, and loner vehicle and offers discounts on service, parts, and accessories.

A trip to the dealership for service is also different. Instead of waiting in the lobby or taking a shuttle van to home or office, the dealer will come and pick up the car and then deliver it after service is completed. There is also the option of taking a free-of-charge Lyft ride back and forth. Also, every service vehicle now gets a free, detailed, interior COVID-19 disinfecting process and an exterior car wash.

The principal reason for this emphasis on customer experience is profitability. According to NADA, new-vehicle gross margin as a percentage of selling price has been trending downward since 2011 and shows no sign of letting up.

One of the reasons for this is disruptive technologies such as online used-car retailers Carvana, Vroom, and Shift. Dubbed the Amazon of automobiles, Carvana sold 177,549 vehicles and posted annual revenue of $3.94 billion in 2019, making it the third largest used-car retailer in the United States.

Mobility as a Service (MaaS) is another technology putting pressure on dealerships. MaaS is vehicles used by mobility service providers such as ride-sharing and e-hailing services and bike-, scooter-, and car-sharing services.

More people, especially those in dense urban areas, have found economic benefit in using on-demand car services over owninga personal car. According to analysts at McKinsey & Company, personal car ownership is predicted to decline by 20 percent or more over the next 10 years.

Pundits also expect significant decline in personal vehicle usage as more people choose optimal mobility solutions for each specific purpose.

Another disruptive technology on the horizon is autonomous vehicles (AVs), which pundits say will start to become a reality in about five years. AVs will be supportive of remote service centers that will allow OEM’s and mobility service providers to bypass the car dealership network in terms of sales and service.

Arguably, none of this would be good for car wash operators because personal vehicle ownership and personal vehicle usage are some of the industry’s demand drivers.

Pundits have suggested several scenarios for the automobile industry to deal with these issues that may be applicable to the car wash industry.

One scenario is the car wash industry’s current trajectory of consolidation within the supply chain where bigger players can remain viable by absorbing the smaller ones.

Another recommendation is to rein in fixed cost. For example, the express exterior format is often described as requiring an investment of between $3 million and $5 million. More recently, upwards of $5 million is more the norm, which is just about double the cost to build 10 years ago.

One has to wonder how long this trend can be sustained without considering more efficient stores with smaller dimensions.

Another scenario is to redefine the customer experience. Experience has shown this can be accomplished with innovative equipment solutions, enhanced chemistry, technology such as digital marketing platforms, and self-service customer service.

 

Bob Roman is president of RJR Enterprises — Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at bob@carwashplan.com



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