They all recognize that changes are on the horizon. Yet, car dealerships seem to believe that the decline of car ownership is a hype-filled vision of the future. On the other hand, Avis and Enterprise believe that the decline in car ownership is real and enduring. They are positioning themselves for a world where car ownership declines, and transportation flexibility, a.k.a. mobility, is key.
Both Enterprise and Avis have created options that address a more flexible, adaptable, variable approach to transportation. Crain’s Automotive News calls it the “reinvention of rental.” Reinvention of rental means providing new mobility options that are easy to use, seamless, creative and personal. This is how transportation convenience will be defined. Both of these brands aim to become “mobility” brands.
Avis sees a future where people will own fewer cars. Avis owns Zipcar and Zipcar Flex. Avis also has partnered with Waymo (Google’s venture) and Lyft.
Enterprise, in an interview with Crain’s Automotive News, decided over 20 years ago that automotive needs would be defined as vehicle access any time you want, for as long as you want, without ever having to own a car.
Although the automotive manufacturers are moving speedily into electric and autonomous vehicles as well as partnerships with tech companies, dealerships are taking a less aggressive path. This is not because they are blind to what is happening. A survey of 430 dealers, by Cox Automotive, indicates that “dealers’ eyes are wide open” to what is happening regarding mobility. However, that does not necessarily translate into action. Only 28% of the dealerships interviewed expect a decline in personal vehicle ownership, and only 10% of the dealers believe that automotive flexibility – mobility – will be a challenge to their business and business model.
For dealers in the Cox study, mobility is not something that will disrupt their business model. They do see subscription programs as something with viability. And, several automotive brands already offer subscriptions, even though the jury is out on customer acceptance and profitability.
When it comes to mobility, dealers say it will enhance and help grow their current business model. Avis and Enterprise say that the dealers are wrong. They are hanging on to the past instead of creating the future. While some of the rental companies are changing into mobility companies, car dealerships are hanging onto their legacy businesses. Avis believes that to compete in this changing transportation environment, all legacy trappings must be “stripped away.” These two views are divergent.
Interestingly, in an opinion piece, the retail editor of Crain’s Automotive News, Amy Wilson, faults the chairman of the National Automotive Dealers Association (NADA) for saying that there is just too much hype and hand-wringing when it comes to a decline in personal, car ownership. The NADA chairman told an audience that these predictions are based on “false or unproven pretenses.”
On the other hand, NADA reports that dealership operations are unprofitable. This may be the handwriting on the wall. New vehicle sales do not make money for the dealers. In order to survive, dealers depend on manufacturer incentives to drive sales and revenues. Service and parts generate higher margins than new vehicle sales. Auto dealers are focusing more on their service, parts and used car operations: yet these are profit centers that rely on car ownership.
When Uber CEO Dara Khosrowshahi says, “The great goal is getting rid of car ownership,” he means it. As John Gapper for Financial Times points out, “In terms of personal car ownership, companies that serve that market alone will eventually run out of road.” Dealerships must follow the lead of rental car companies: turn to face the changes and act on the challenges that are disrupting or ending their business models.
