Automakers -- not auto retailers -- will bear the brunt of the changes brought on by such disruptors as autonomous vehicles, electrification and changes in car-ownership patterns, says National Automobile Dealers Association President Peter Welch.
Dealers are already positioned to adapt to the changes through their service expertise and understanding of fleet management, Welch told Automotive News last week.
"The question is: What does the manufacturer of tomorrow look like?" Welch said. "Apple does not manufacture its telephones, for example, so I think there'll be more disruption on the auto manufacturer's side than to the dealers."
Welch cites the trucking industry as part of the basis for his belief. NADA represents the truck industry through its American Truck Dealers division. There, about 98 percent of the truck dealers already operate a business-to-business model putting expensive trucks into large fleets, he said. Such a model would easily translate to auto retailers if autonomous vehicles lead to a drop in personal car ownership, Welch said.
"I see that model already there on the truck side," said Welch. "It can be picked up and put into the autonomous car side."
Dealers also can capture business in the "huge network of maintenance facilities" needed in the next 20 years to keep autonomous vehicle fleets running, Welch said.
"The tires will wear out. They're going to need brakes. They'll still need service from hailstorms and flooding," said Welch. "Our members would like nothing more than to see the 266 million vehicles replaced with electrification and autonomous cars. They see it as a tremendous marketing opportunity."
That's because the vehicles' sophisticated operating systems will require specialized service. Also, dealers are "market makers. They create secondary markets to stock, sell and service new and used products," Welch said.
"You look at [General Electric] and they make more money servicing [jet] engines than selling engines."
Welch also believes electrification of vehicles will coincide with the development of autonomous vehicles, because of the involved electrical systems the self-driving cars require.
"Take a look at every single autonomous vehicle out there being tested now," he said. "Every single one is using a hybrid or electric platform, and the reason is because they have much bigger and more robust electrical systems. So autonomous vehicles will help electrification; they go hand in hand."
When autonomous and electric vehicle development burgeons, the mix between fleet and retail will shift, Welch predicted. Currently, about 70 percent of light vehicles are sold as retail, with the rest going into fleet, he said.
"In that 30 percent, we already sell cars to Hertz, Avis and the taxi companies, so that's where all the disruption is already occurring and will continue to occur," said Welch. "The fleet side will grow to maybe 32/68, then 35/65 and so on. I don't think it's a binary choice. There'll still be people who want to own vehicles. We'll continue to serve both markets."
But the potential disruptors will impact the regulatory issues that NADA will have to address.
"There'll be lots of changes and lots of regulatory issues," Welch said. "We'll see rapid, rapid change and hit a tipping point in the next 10 to 15 years. We'll see the amount of fleet sales increase because we'll be providing large amounts of vehicles into mobility services."
He admits, "My crystal ball isn't clear enough to tell you exactly what will happen. But we just sent a team out to meet with Apple last week, so we're talking to all these guys."