During a presentation at J.D. Power’s Auto Revolution conference here last month, Paul Warburton — who is head of connected automotive and mobility at Fujitsu America — shared data from his company indicating that, “we’re going to be moving toward mega-cities.”
Specifically, a Fujitsu Megatrends report projects that nearly two-thirds of the global population will live in urban areas by 2050.
Such urbanization certainly would have an impact on how consumers buy, own and use vehicles and other modes of transportation.
But in the U.S., mobility needs can be quite different between large population centers on the coasts and smaller-to-midsize cities and rural areas in the heartland.
“I think when you get into mega-cities globally, certainly China and places like that where they’ve had such problems with air pollution — given the fastest rise of rural to urban and poverty to relative middle class in human history — I think their set of needs is very different than Des Moines, Iowa, stating maybe the obvious,” said Franklin McLarty, who is co-founder and co-chairman of the Southern United Auto Group, during an interview at the conference.
“Taking that to North America, I can see in Toronto, San Francisco, New York City, owning a car, from cost to efficiency, kind of looked at from any seat at the table is a very different phenomenon than owning a car where I lived the last several years before moving to New York: Dallas, Texas,” he said.
For instance, in Dallas, having a two-car garage doesn’t skyrocket the cost of a home, he said. And vehicle ownership is “still a very efficient means of transportation” in Dallas, despite the traffic, McLarty said.
In addition to his leadership of the aforementioned dealership group, McLarty is the co-founder and co-president of The Firmament Group that provides debt and equity capital solutions and is co-founder of the CapRocq real estate investment firm.
He was also a founding executive of the RML Automotive dealership group and was its chief executive officer from 2012 to 2015, before helping to launch Southern United in 2016.
At the Auto Revolution conference, he moderated a panel discussion on “Mobility in the Heartland.”
Prior to that panel, he shared some thoughts with Auto Remarketing about the specific mobility needs and trends in the heartland.
“What I see in the heartland and the interior of the U.S., is actually a broadening out of mobility options that you’ve seen in other industries for decades,” he said.
For example, consider your primary residence as you move through stages of life, McLarty said.
That might be a dorm during college, followed by an apartment, then a rental house. Eventually, you might buy a house and perhaps one day, have partial ownership in a vacation home.
The ownership and usage of housing varies, is cyclical and is on a spectrum of choice. That has not always been the case with transportation.
“In the United States, when you think about transportation, traditionally you’ve had public modes of transportation — which in the heartland and smaller markets, usually is not so efficient and developed — and you’ve had car ownership,” McLarty said.
“And that’s kind of been it. So, when I look at having Uber and ridesharing and things like that, I don’t see it as this existential threat of dealers and car ownership going away,” he said.
“I see it being much more like the housing options that you can move through and cycle through during different segments of life,” including the “empty-nesters” phase, where folks may want to downsize, McLarty said.
“So, I think instead of having to go purchase a personal vehicle every time you go through one of those cycles — from sports car to minivan and back again, maybe — you’ve got a lot more options now,” he said. “But I don’t think that shows the death of car ownership.
“I think it just shows that there’s a broadening out of options. And I think the dealers and OEMs are actually in a pretty good position to move nimbly and thoughtfully to cater to that business model shifting a bit.”
Dealers, he said, are “hyper-local” by nature and have to be flexible and adapt to the happenings in each individual market. Some 20 years ago, his group at the time was purchasing a lot of Big 3 dealerships, despite those brands being “out of favor” in much of the country, McLarty said. But his group was buying those stores in places like Alabama, Arkansas and Texas.
“It’s a pretty different business when 75% of what you’re selling is trucks, than if you look at some of the places that were driving that negative feeling — understandably so — in Miami and New York and D.C.,” he said. “But those guys aren’t even really in the same business 20 years ago that I was in, in a place like Huntsville, Alabama with a domestic franchise.
“So, I think at the end of the day, all business is local.”
Case in point, the example of electric vehicle adoption was brought up during the session McLarty moderated.
Cliff Banks, founder of The Banks Report and one of session’s panelists, pointed out that the coasts, particularly California, have different behaviors when it comes to buying EVs, for example.
“Forty-eight percent of Tesla’s sales come from California. The thing to watch, I think, on the electric vehicle adoption moving inland is how some of these states handle the tax question,” Banks said. “We’re already starting to see certain states talk about levying a fee on the EVs because they’re not getting the gas tax. So, they have to get a fee upfront from electric vehicle buyers to help pay for the highway maintenance.”
As many can attest, states can tend to vary when it comes to matter of tax, regulation and so forth.
In a similar way, the adoption of mobility services and alternative vehicle usage may vary from market to market, region to region.
As McLarty pointed out during the interview, what might make sense in New York or Washington, D.C., might not make sense in Kansas City, Mo.
“All dealerships are just very hyper-local at the end of the day. And I think that’s the dealer’s job, by the way. If you look at a major OEM operating globally, it’s not efficient or useful for them to be the market geniuses of Louisville, Kentucky,” McLarty said. “That’s why they have a local dealer that’s from that community, lives there, kids go to school there and gives them that knowledge base.”
He believes that app-based services like Uber or Lyft will be the mobility types where there is a “common thread nationally,” with some variance. Some smaller markets, for instance, may not have the same access to driver bases for an Uber or Lyft, he said.
“If you go to some of the big cities where Uber and Lyft are very prevalent and even some of the midsize cities, they have not only the demand but they also have the supply of the employee base that wants to do that. It’s not always the case in my hometown of Little Rock, Arkansas,” McLarty said. “But I think that’s going to be something that’s around in perpetuity.”