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Dealerless Future for Driverless Cars

Dealerless Future for Driverless Cars
by Roger C. Lanctot on 08-14-2016 at 7:00 am

 The Chevrolet Volt was a technological marvel from its very launch. A so-called plug-in extended range electric vehicle that could be operated entirely on battery power as long as it was only driven short distances or for hundreds of miles on gasoline. But something happened on the way to the market that suggests deeper troubles in the automotive industry.

The maker of the Chevy Volt, General Motors, is a business-to-business operator. GM sells cars to dealers, not directly to customers. As a result, GM is dependent on dealers to properly market and sell its cars.

I remember my first visit to a Chevy dealer to look into purchasing a Volt and the dealer’s response. At the time, dealers were asking for more than the sticker price for a car that was in limited supply. Then, they were claiming that the car could not be leased, although GM had announced a generous lease plan.

It took a minute or two to realize that dealers were not pushing the Volt. Dealers saw the Volt as a threat to their internal combustion engine-based business – a business where regular service visits were a core value proposition for the longevity of their profitable operations.

Volt buyers were EV enthusiasts and fuel efficiency fanatics. Dealers could see that these customers were not going to be good for their business. Dealers responded by actively discouraging customers from buying Volts, used Volts as bait for a switch to an ICE vehicle, or ignored the Volt entirely.

The resulting lackluster sales results speak for themselves and the subsequent plunge in gas prices has only put an exclamation point on the experience – as did the failure of Cadillac’s own Volt version. But with Tesla Motors grabbing headlines with its ongoing sales success with far more expensive EV machines, the GMs and BMWs and Daimlers and Porsches of the world are determined to respond.

But all of these car companies rely on dealers and dealers rely on service and used car sales to remain profitable. The Volt experience highlights the degree to which dealers are out of step with crucial transformative elements of the current automotive landscape.

It also shows them as a barrier to progress on the road to electrification and automation. That path is being rapidly paved by new market entrants and disruptive players that may or may not turn to dealers. The failure of dealers to drive sales of EVs is likely to usher in a direct sales transformation of the auto industry.

Dealers are not only out of step. Dealers are in danger.

In an environment where consumers are looking for new ways to acquire wheels or, alternatively, are seeking to avoid owning cars entirely, dealers are rapidly becoming an anachronism. At the core of that market transformation is dealer intransigence on three core areas vital to car makers:

Recalls – Dealers – led by their national organization NADA – have resisted the efforts of the auto makers and the National Highway Traffic Safety Administration to emphasize the identification and correction of open recalls in new and used vehicles and among vehicles already on the road.

Software updates
– Dealers refuse to recognize and embrace the need for automated, dealer-less, over-the-air software updating of vehicles.

Electric vehicles
– Dealer commitment to marketing and selling electric vehicles remains, at best, suspect and, at worst, unreliable. The EV is antithetical to the dealer business model as currently conceived.

All of this matters because GM, BMW, Porsche and others are poised to bring their Tesla-mass-market-Model-3-killers to the market through what are likely to be unenthusiastic dealer networks. The least enthusiastic dealer network of all may well be Chevrolet’s, which may be why GM is planning such a limited run of Bolt EVs (25,000) while at the same time promoting Bolt EV leases through the Express Drive program with Lyft.

According to a report from Inside EVs, it will be possible to rent a 2017 Bolt EV for $99/week as part of Lyft’s Express Drive program with GM. Lyft drivers who take the Bolt offer and complete 65 drives/week pay nothing, according to the report.

What’s important to bear in mind here is that GM’s relationship with Lyft and GM’s Maven program can be viewed as the precursors of a direct sales program. Like every other manufacturer of internal combustion engine-based vehicles, GM knows that dealers have yet to find a way to capitalize on EV sales.

Even BMW has struggled to find success selling its i3 through dealers in spite of instituting a loaner program of gas-fueled vehicles for i3 owners in need of a vehicle for longer trips. EVs have been popping up in shared car fleets around the world – primarily for systems that require the users to return the cars to a charging station.

The Bolt’s planned 200M+ range should liberate the vehicle from its charging source for extended periods of time. But the Bolt won’t be liberated from the dealer network.

The Volt’s disappointing sales results raises questions regarding the long-term viability of existing new car dealer networks for handling the demands of new electrified and eventually self-driving vehicles. The Lyft and Maven opportunities for GM point to new sources of dealer disruption.

Apps like Beepi and services like Flexdrive threaten to disintermediate dealers completely. Car makers may look to these emerging solutions as new go-to market alternatives to increasingly sclerotic and intransigent dealer networks.

Dealers need to embrace and leverage new technologies from electrification and over-the-air software updates to car sharing and ride hailing and seek out new ways to enable alternative car ownership models and, most importantly of all, reduce the complexity of purchasing a car. Both Beepi and Flexdrive have reduced the car acquisition process to an app and the press of a button while eliminating the need for a dealer.

New car dealers have a lot to gain from mitigating the pain of vehicle acquisition and ownership. They also have a lot to gain from paying closer attention to the changing priorities of car makers.

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