Car dealerships of the future are hubs, not showrooms.
It’s 2022 and car loans are a thing of the past. Sure, Pen-Fed still has business in collectables and used exotics, and the buy-here-pay-here lots are still more than happy to loan you $18K at $50 per week for that 1995 Pontiac Tran Sport. But for regular new-car-shoppers like you and me, we’re no longer renting money to buy a product because instead…car dealerships of the future are selling a service.
How’s this Gonna Work?
Let’s try Ford.
Today, if I want to drive a new Mustang GT, first I’ll go to my local credit union and apply for 1.9% financing. Then, I’ll go into the dealership looking to make a deal on the manual, GT Premium Fastback that I’ve seen sitting out in front for the past five weeks. Surely, that $36,395 MSRP is laughable! Then, wrongly thinking having my own financing gives me leverage, I’ll make them an offer of $31.5K, which will be rejected. They’ll counter with $35K out the door + 0.9% financing, and I’ll brag on all the forums about the screaming deal I just got.
Four months later, I’ll wish I had gotten a new Escape. That upcoming family trip and all.
Then it will snow eleven feet. I bet a Raptor could jump all the snow banks!
Oh, maybe that Focus ST with Recaros is a better balance of fun and practicality!
Ah, but then that new job I just took means a 40 mile commute…time for a C-Max Hybrid…I guess.
But, but! My buddy’s truck went down, and we’ve got to get the boat to the camping spot this weekend. Argh, with this new house, maybe I should get a Super Duty?!
Hrm, so after nine months of Mustang ownership where I’ve failed to both exceed 85 mph and drift like Gittn Jr., I’ve also lusted after a Raptor, an ass-hauling wagon, an economical vehicle, a family vehicle, and a jumbo-truck.
If only there were some financial and business model to support my ever-changing vehicular needs…
Cab Companies Should Have Never Let Uber Happen
Uber and Lyft were mistakes. Both transportation-hailing-via-app companies set about filling an unmet need: cabs for the masses, in all cities, in a convenient fashion. Now, when cabbies cry foul and paid-for-local-legislators stump to restrict ride sharing, it’s really hard to feel bad for an entrenched industry that refused change, refused technology, and treated their customers with contempt.
In short, the cab industry made Uber. They made Uber by failing to evolve.
And car dealerships as we know them are making similar mistakes.
What Car Consumers Crave
- 85% of new cars are financed because we want installment payments. The business world calls this recurring monthly payments, and the tech world would call it Transportation as a Service (TaaS).
- New car buyers hold onto their car for almost six years, though only because that’s usually as long as our financing, and also because it takes that long for depreciation to level off.
- We’d like the transaction experience to be better, much better.
- Also, traffic sucks and is getting much worse, and track day events are expensive ever since insurance companies stopped covering them, so where are we to drive those high performance cars anyway?
- Wages are flat, and less of us have the yard and the garage, so maybe it’s time to just put to end the charade of two cars in every driveway.
So What is Ford (et al) Gonna’ Do?
They’re going to rent you, in perpetuity, every vehicle in their fleet. ZipCar meets Lyft/Uber meets leasing. That Mustang GT above that we almost bought for $35K, why that’s just $439/month for a totally reasonable 84 months. But instead, let’s call it $500/month. In the future, here’s what you get:
- Mon-Fri you get the C-Max Hybrid, Autonomous Edition. It will ferret you to and from your cubicle.
- Sat-Sun you get the Mustang. Actually, on Friday afternoon, the C-Max will head back to the station (formerly the dealership) on its own and the Mustang will be waiting for you in the parking lot when you leave work. So you get the ‘Stang from Friday night to Sunday night, and then the coupe will pony back to the stable with the C-Max returning.
- Of course, this will not be your Mustang or your C-Max; the cars will come from a shared pool, cleaned and maintained by the local service center/road-race track/off-road race track. If you live in a large enough metropolitan area, mostly you’ll still get to choose your favorite paint color.
- Also at the $500/month price point, on one-day-a-month, you get an alternative vehicle: Flex for a family outing, F150 for a home improvement project, or Transit for packing up all the stuff from your cubicle, after you too were automated.
- But wait, it doesn’t stop there: Pay more and get more! $1000/month and the Super Duty will drive you everyday. Or the Raptor. And you’ll get some track time at Ford’s local track facility, with cars/truck they maintain. Again, not your street/race car, but something from the pool.
- Car insurance no longer exists. That’s part of your monthly TaaS plan.
- For that matter, Uber and Lyft drivers no longer exist.
- Neither do long-haul truckers. Robo-semis replace 3.5M US jobs.
Transportation as a Service
It’s happening now. GM just gave $500M to Lyft to make Johnny Cab a reality. In addition to letting multiple people share car leases, Ford is also partnering with Google to get to some of that sweet, sweet anonymous tech delivered to your door, via subscription.
To car manufacturers, what’s better than selling 16.5M new cars in the US, every year? Why, also getting paid for 360M trips per year. GM thinks it can do both: keep selling self-driving SUVs to suburban moms while also getting young urbanites to subscribe to ChevroLyft (GM: you’re welcome).
The Silicon Valley Tech Casino, In Your Driveway
New startup wannabes and old-line business owners are all coached the same way: get that recurring monthly revenue. Financial markets, investors, and banks place a premium on subscription revenue businesses. To the chagrin of many profitable businesses, much of the financial world would rather see a company grow subscribers instead of turn a profit on every good sold.
The car industry is just catching up.
Maybe, Tech+Car+Rideshare Companies Are A Good Thing?
On one hand, it would be nice having access to lots of different vehicles, especially ones that show up where I am, not ones I have to find myself. A commuter car, a stuff hauler, a family car, a race car, and an off-roader all for one monthly installment? Sounds great.
On the other hand, my current cars are paid off. And when it comes time to replace them — if I want that new car tech — by 2022, I may no longer have a choice about buying them outright.
Transportation as a Service is coming.