Car dealerships are lagging behind consumers on digital

LAS VEGAS — The pandemic accelerated consumers' adoption of digital solutions, from online shopping to payment apps. A growing number of customers have expressed a desire to buy and finance a car or truck completely online. Dealerships and lenders moved in that direction amid COVID-19, but they have not fully embraced end-to-end digital solutions.

At this month's American Financial Services Association's Vehicle Finance Conference & Expo, a group of speakers discussed the need for digital programs and highlighted where the sales and financing of vehicles is headed. Here are edited excerpts.

On whether the direct-to-consumer vehicle sales approach used by Tesla and others will replace dealerships:

"The challenge is going be service. The Tesla buying experience is awesome — the Tesla service experience has really fallen down. And without the dealer network to be able to support those vehicles afterwards … it's very, very important.

"And I think the legacy OEMs, as they release new EVs, may very well try to influence what that consumer experience looks like for the purchase of the vehicle. They're going to need their dealer network to be able to service these vehicles."

On how EVs will affect dealerships and the service department:

"It varies by OEM, but at the end of the warranty period today on ICE engines, there's a 70 percent defection rate. Consumers [no longer] service that vehicle at that franchised dealership. I don't think it's going to be an option for consumers in the future. They're not going to be able to run that [EV] — that's very complex — into a Jiffy Lube. They're not going to have the technicians, they're not going to have the lifts, they're not going to have the tools to be able to work on those cars. ... So I think that defection rate's going to drop."

On the desire of consumers to do more vehicle shopping and financing online:

"We know that going to a dealership is still a very exciting thing to do because people want to touch the car, they want to feel the car. But of course, there are the other bits that are not so nice — those high-friction points.

"That's why they spend about 15 hours surfing the Web, going into CarGurus.com, going to YouTube and looking at peer-reviewed cars and all that stuff. They don't see, really, why they have to do the financing at the dealership, why they have to do all these things offline. And even though many of the websites and the OEMs and dealers are promising to do a lot more online, it's still kind of lagging."

On whether dealers are ready to do more digital transactions:

"We have to have digital platforms that ... are able to deliver. And so far, what we see with digital retailing tools is really very dealer-centric. That might be good for some players in the industry — not necessarily for consumers. They want to come to the dealership to pick up their car or maybe get it delivered.

"We are allowing for these end-to-end transactions from the comfort of anyone's home. So there is a way to do it. The future is going to be direct-to-consumer. So put it out there, build it, tap into it. Let the dealers focus on whoever is going to want to have the red carpet treatment at their dealerships. And for the rest of them, just give them peace."

On the changes the pandemic brought to mobility:

"We saw massive migrations during COVID. The way people shop, the way people receive their goods — are all different now. There's a lot of different disruptive tech that's coming into it, from AI to blockchain to the [Internet of Things], and everything else that we heard about the connected car and how they're trying to sell value-added apps.

"The way I see it, if I was in the vehicle finance space, I'd be a little bit concerned. We heard about it with 'vehicle as a service.' I'm going to want to summon my mobility on demand, and I'm going to want instant gratification now. It's wildly inefficient for me to own components and metals and rare earths that sit idly 95 percent of the time."

On what mobility 2.0 looks like:

"We're talking about multi-modal integration, full mobility ecosystem. It means if I'm a consumer, I'm going to want to summon my mobility on demand via an app, and I'm going to be used to a specific level of service that goes along with that. ...

"The whole model of having partnerships with other mobility providers — and whether that's data providers, whether that's connected cars, whether that's collaborations like we're seeing between Hyundai and Sony — it's going to take kind of the entire ecosystem to bring about the efficiencies that you're going to see in new mobility."

On defining the new economy of movement:

"[It's] this pay-as-you-go economy when you have connected things. They can pay as you go if they have identities. And we expect that to become a multi-trillion-dollar peer-to-peer transaction economy within the next five to 10 years or so."

On the problem with a decentralized ecosystem:

"We have this problem in decentralized ecosystems of establishing the identity and trust on the other side of that transaction, on the other side of that computer. ...

"And that is a huge problem in a decentralized ecosystem. And when we began talking about not humans dealing with humans, but vehicles dealing with infrastructure, things dealing with things, IoT acting as agents transacting with other devices, it becomes a much bigger issue."

On the solution for that lack of trust:

"The blockchain is what we think the solution is — a distributed ledger where things have identities and can be trusted and you can trace the provenance of data back to the originator.

"You don't have to worry about somebody interfering in the middle, having access to a root directory either making a mistake or something malicious — substituting data between the endpoints of the data value chain."