Dealers should disrupt their own businesses before they can be disrupted by “digital mercenaries” such as Uber, Hyundai Motor America CEO Dave Zuchowski told an audience of dealers Thursday.
In his remarks at the J.D. Power Automotive Summit, Zuchowski said a number of trends, including the rise of on-demand services, constant connection to smartphones and near-total transparency in shopping, are combining to upend how customers want to buy cars.
If dealers do not adjust, he warned, they could lose business to digital startups such as Beepi, Carvana and Vroom, which sell used cars over the Internet, and YourMechanic, which sends technicians to customers’ homes and offices.
“Your traditional profit centers are under siege on multiple fronts,” Zuchowski said, adding: “If we don’t respond more urgently, nontraditional entrepreneurs will continue to step into the void and replace what you do with their next big idea.”
Zuchowski said online used-car marketplaces already seem to be cutting into the number of cars that dealers can buy as trade-ins, which have historically been highly profitable when resold as used cars.
He advised dealers to offer transparent, no-haggle pricing, because less time discussing price means more time to explain technology and give test drives.
“We are virtually the only industry left that artificially inflates the cost of goods sold in order to offer bloated discounts,” said Zuchowski. (Hyundai is no exception, having spent roughly $2,000 per car in incentives so far in 2016, according to data from TrueCar Inc.)
So far, implementing these ideas at Hyundai has been a slog for Zuchowski, who was promoted to CEO of Hyundai Motor America at the beginning of 2014 after seven years as the company’s vice president of sales.
Zuchowski said he traveled the country last year discussing these ideas with dealers. Half were receptive, he said, but “the other half wanted to stone me to death.”