When the 2019 leadership of the National Automobile Dealers Association was announced in October, incoming chairman Charlie Gilchrist said in a news release that dealers “are facing many challenges, but we will also have many opportunities as we journey throughout the year.”
Topping that list of challenges, Gilchrist said in an emailed Q&A with Auto Remarketing, is the struggle around new-vehicle affordability.
“It’s a huge issue. And we as an industry need to work on keeping these vehicles affordable for our customers. Affordability is everything for our customers, and so it will be a big part of everything we do at NADA,” Gilchrist said, as he prepares to take the helm of the association, which hosts its NADA Show 2019 convention this week in San Francisco.
Gilchrist, of Texas-based Gilchrist Automotive, was the 2018 vice chairman of NADA. Chosen be the vice chairman for next year is Rhett Ricart, of Ohio’s Ricart Automotive Group.
Asked what targets he would like NADA and the franchised dealer community to focus on in 2019, Gilchrist said: “The main thing that I want to do as chairman is to get every dealer involved in NADA.
“I want every dealer to know what NADA does for them every day, and I’m going to challenge every dealer to get involved,” he said. “And I want those dealers to challenge NADA, as well, because we’re all in this together.”
Other tasks top of mind, too
Of course, the challenges — and subsequent opportunities — don’t end with new-car affordability.
“We’re also facing a critical shortage of service technicians in the auto retail industry. We have to find the best people for every position in our dealerships, but we don’t have nearly enough service technicians now, let alone in the coming years when tens of thousands more will be retiring,” Gilchrist said in the Q&A, after his point on affordability.
“That is an enormous challenge, and we’ll be talking much more about that at the 2019 show and in the months ahead. Our workforce is our absolute best asset, but it’s aging, and we have to recruit, train and retain the best people if we want to continue providing our customers with the best experience,” he said.
“And we’re going to continue to be challenged to figure out the best way to embrace technology in the retail process, but I think that by doing so we’ll be able to speed up the retail process and earn us even more trust with our customers.”
Regarding the latter point on tech, some dealers and dealer groups have partnered with and/or invested in some of the tech-driven companies aiming to change the retail model.
For instance, AutoNation was the lead investor in an $146 million funding round for online car retailer Vroom, which officially announced the Series G round in December. AutoNation had announced its piece of the investment in late October, saying it obtained roughly a 7-percent ownership stake in Vroom after a $50 million strategic investment in the online car retailer.
With its $54 million investment, Lithia led the $140 million round of Series D financing in online marketplace Shift that was announced in September. Lithia and Shift also formed a strategic partnership, and Lithia president and chief executive Bryan DeBoer joined Shift’s board of directors. In October, Lithia said it had acquired more equity interest in the online marketplace.
In the vehicle subscription space, AutoNation announced a partnership in November with used-car subscription provider Fair to potentially provide the dealer group’s customers “an alternative to traditional ownership” and drive used-car velocity. Elsewhere, the list of dealers working with subscription service providers is quite extensive.
So, what is driving the decisions by the groups to work with these tech-driven companies aiming to change retail?
“Every dealer needs to be more creative to run more profitable businesses next year and in the years to come, because the margin compression in our new-vehicle departments is a serious issue. I don’t know the exact right way to do it, and I don’t know if anybody knows,” Gilchrist said. “I don’t know if subscriptions are the answer. But all of us are looking for avenues to keep our businesses strong and healthy, and provide the best customer experience we can at the same time.”
But like his predecessor, 2018 NADA chair Wes Lutz, Gilchrist also urges caution and thoughtfulness around some of the discussion of certain topics in mobility and vehicle tech.
Asking the right questions
In a speech to the Automotive Press Association in October, Lutz, while emphasizing his fondness for auto reporters, urged them to challenge some of the specific “narratives” around mobility and the supposed “end” of personal car ownership.
“I get it. You can’t go to an automotive or a tech conference these days without hearing about the end of personal vehicle ownership,” Lutz said in the remarks later provided by NADA and summarized in a news release.
“But I’m asking you: Question the hype, ask for proof, and find out what they’re not telling you. The future will work itself out regardless. I just want us to be informed in the meantime.”
So, Auto Remarketing posed this one to Gilchrist: What are some of the narratives that he would ask media folks like us to question?
“Absolutely. There are three main media narratives right now regarding the future of our industry that might sound right, but that in reality are built on false or unproven pretenses, and those are: that ride-hailing will replace personal vehicle ownership; that self-driving vehicles will be immeasurably safer than human drivers; and that dealers are reluctant to sell electric vehicles,” Gilchrist said.
“For example, the idea that ride-hailing will replace personal vehicle ownership has always been built on the premise that it’s a cheaper alternative to owning your own car or truck. At least that was always what we were told by proponents of ride-hailing and these companies themselves,” he said.
“But last year, the AAA Foundation for Traffic Safety released a study finding that the cost of relying on ride-hailing services as a primary mode of transportation in 20 of the biggest metro areas in the U.S. was, at minimum, more than twice as much as the cost of owning a personal vehicle. That statistic should be front and center in this conversation,” Gilchrist said.
“Similarly, the argument that self-driving vehicles will be safer than humans is built on the premise that humans aren’t good drivers. But there are 90 million miles driven in the U.S. for every motor vehicle death,” he continued.
“That’s 342 years of driving — 24 hours a day, seven days a week, 52 weeks a year — between traffic deaths. Humans are in fact phenomenal drivers,” Gilchrist said.
“So, the questions automotive reporters should be asking regulators, safety advocates and automakers right now are: What technologies are coming online in the next few years that will reduce driving fatalities, and that don’t require removing brake pedals and steering wheels, or humans, from vehicles?”
On used cars
Elsewhere in the Q&A, we touched on the pre-owned side of the market, where Gilchrist said he believes the momentum will remain.
“I think it’s going to be a more competitive business. As you see more dealers concentrating on used cars, then obviously it’s going to be a harder business for each dealer,” he said. “But we have the ability to expand and get better at it. Because it’s a huge market, and we probably don’t capture the share of that market that we should. So, I think it’s a natural place for dealers to turn to.”
Many publicly traded dealer groups are putting a big emphasis on used cars, including standalone used-car stores. Certified pre-owned sales, for instance, continue to be a strong resource for car dealers.
“I think all dealers, because of the margins in the new-vehicle departments depressing, are searching for additional revenue sources,” Gilchrist said.
“And obviously, used cars would be one of the areas to turn to,” he said. “The challenge is going to be figuring out how to increase the amount of used cars overall that are sold by franchised dealers.”