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Steve Schmith, Automotive News: Hi, everyone, this is Steve Schmith with Automotive News. Welcome to episode three of the All Ears podcast, a 10-part series sponsored by Ally and produced by the Automotive News Content Studio. Designed to explore topics that are disrupting and reshaping the automotive industry, each episode features some of Ally's best thought leaders who share their perspectives and offer recommendations on how dealers and others in automotive retailing can navigate transformational changes underway. Our objective is to provide actionable insights that you can use immediately in running your business and offer perspectives to help inform your business decisions. In this episode, we're catching up with Ally Insurance Senior Vice President of Sales Gabe Garroni, who joined me during season one of the All Ears podcast to talk about the industry's push to virtual F&I. He's back, and in this episode, sharing his views on how dealers should be thinking about and preparing for electric vehicles. What does the push to vehicles powered by electricity mean for dealers' fixed ops businesses? What can dealers do to get customers and employees excited about EVs? And how can tapping into consumer social consciousness, and concerns for the environment, help create customer loyalty and benefit the bottom line? Here's my discussion with Gabe Garroni, Senior Vice President of Sales for Ally Insurance.
SS: Hi, Gabe. Welcome back to the All Ears podcast. It's great to have you back on the show,.
Gabe Garroni, Ally: Steve, it's great to be back. It tells me that I at least didn't totally ruin my opportunity to come back on our last discussion. So, always a pleasure talking to you.
SS: Well, I'm thrilled that you're back. And last time we caught up was in October. We talked about the future of F&I. Now we're going to talk about the future of fixed stops and the future of the service bay, particularly as this industry pushes towards electric vehicles. So, lots of conversation at the national level, at the state level, regarding infrastructure, clean energy, clean technologies, a commitment to an electric future. How do you see the landscape of EVs expanding and evolving over the next few years? And do you think customers are actually ready for and interested in these vehicles that are powered by electricity?
GG: Well, Steve, as always, you hit me, hit me right off the bat with with a great question, and I'm sure we could actually spend the entire episode talking about this, but I'll try to keep it succinct. The good news is I don't have to speculate too much because all of the OEMs are placing pretty big bets on the future of electric vehicles. We also saw just in the first quarter of 2021, a year-over-year increase of all electric vehicles, so electric vehicles, hybrids, plug in hybrid electric vehicles. Pretty significant increase if you compare it to Q1 of 2020. According to Cox Automotive Market Insights saw an 80 percent increase in electrified vehicle sales, and that's outpacing the rest of the industry. And I expect that trend to continue. To what extent does electric vehicle become the norm and outpace their internal combustion engine counterparts? That's probably more speculative. As far as customers being ready, obviously, customers are ready that they're buying electric vehicles at a pretty good clip. But I think there are other challenges to mass adoption. I do believe we're still in early market, right. So are somewhere in between the innovator and early adopter phase. Maybe closer to early adopters if you're looking at the Tesla community and probably closer to innovators, when you look at the rest of the OEMs that are that are just now catching up.
SS: Well, certainly the OEMs, followed by their suppliers, lead this push, but this value chain includes dealerships. So if I'm a dealer and I'm preparing for this electrified future and I not only have to entice customers, potential customers, excite my employees about the future of electric vehicles, how do I go about preparing for that?
GG: There's a few things that I would recommend dealers consider in preparing, but some are pretty obvious. The OEMs are going to obviously assist in ensuring their dealers are prepared for the vehicle evolution, just like any new vehicle model, whether it's new features on a traditional vehicle or now looking at a whole new drivetrain. Certainly that's that's a given. I would I would imagine a lot of employees are actually already very excited about the future of electric vehicles, myself included. I joined the automotive industry because I'm a bit of a car enthusiast myself. So I think that excitement is probably already there. But a few other things that that I think dealers can do immediately is get involved, get involved in some of the local electric vehicle clubs and associations. There's a lot of fandomship happening right now when it comes to this movement. There are very active groups. These groups are very knowledgeable. They're looking to be ambassadors of this movement. So look to be an ambassador and look for any opportunity to share in the experience, being able to drive the electric vehicles, really understand and get accustomed to the subtle differences in driving and possibly owning an electric vehicle versus a traditional car.
SS: So those are terrific ways to prepare for this culture and excite your employees. As a business manager, as a business owner in the dealer space, what are the opportunities that I have in front of me as I think about my business, my dealership, supporting electric vehicles and what are also some challenges that a dealer might need to be on the lookout for?
GG: There's there's some great opportunities for both from both a sales perspective and a fixed operations perspective, in my opinion. From a sales perspective, there's going to be a lot of buzz and excitement, certainly going to create a lot of interest and intrigue as some of these more traditional auto manufacturers that customers have loyalties to start to roll out electric versions of traditional vehicles and introduce new models. And so, driving customer traffic back to the dealership, there's a significant opportunity there. When it comes to fixed operations, and I know we'll get into some of the challenges and some of the concerns, but right off the bat, I think there's going to be an advantage to access to information, access to expertize really being that trusted source for taking care of needs for this particular vehicle. Unlike more than 100 years of experience with internal combustion engines, the competition for service and parts and repairs isn't going to be quite the same. I do believe dealers have a distinct advantage there, at least an early advantage. So I imagine retention numbers, absorption rates will improve on the front end when it comes to customers thinking, first and foremost, to come back to the dealer as opposed to all the other alternatives that may they may have today.
SS: To your point, we're going to talk about fixed ops, we're going to talk about talent in the course of our conversation. Right now, let's start that conversation in terms of changes to the dealership from a facilities perspective, the actual physical infrastructure of a dealership. What's going to change? Are we talking about some sort of massive installation of chargers? What's going to change in the service bay?
GG: Well you already beat me to it. I was going to recommend that dealers consider creating charging areas, and considered creating charging areas that are a welcoming environment and think about your dealership as a destination, now, different in ways than maybe we think about it today. Today, if you're thinking limited to the transaction, the sales transaction and just the repair facility, what about a communal type destination to encourage electric vehicle owners to come and use the charging stations there. There are many ways to monetize that particular opportunity. So I think that's going to be the most significant opportunity for change in the beginning. Other rationale for change isn't quite there, at least not immediately. There's still going to be a good I mean, if every every auto manufacturers stopped producing ICE vehicles, today it would probably be another 11 to 12 years before they were all off the road and we could cycle through and and move to electric vehicles. So there's still a need for the existing service operations, the way they are structured today. And repairs on electric vehicles might not necessarily be at the dealership or in a service bay. They may be at a customer's home. I know my personal experience, I would say that most of my repairs on my electric vehicle happen right here in my own home, in my garage. So that's another opportunity to adjust dealer operations and not have to commit too much to a new building or separate infrastructure needs.
SS: So if in these situations where repairs actually happen in the service department at the dealership, what do you think needs to change as we move towards selling and servicing more EVs? What tasks are going to stay the same? What's going to what's going to be different? I'm curious to your point of view on on those questions.
GG: There there's there's a lot of discussion around how electric vehicles have fewer moving parts than an internal combustion engine vehicle, and that is true. The maintenance and regular service needs are different. Regular oil changes, for example, is not necessary for an electric vehicle, but they are going to be other needs. There's filtration needs, tires are incredibly important for electric vehicles. Not just because tires have a faster wear pattern on electric vehicles. When you think about driving an electric vehicle and how quiet they are, you don't have the correct tires, you're going to hear road noise like maybe you haven't heard before. So being an expert on all the needs of an electric vehicle and how they are slightly different, even with the traditional components like brake pads, tires, cabin filtration, suspension needs, these are similar systems. But the needs for the electric vehicle owner, the demand and the discernment, right, to make the right decisions and help educate the customer certainly need to be there.
SS: Thanks for listening. We'll be right back with more.
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SS: Let's talk about actually doing the work, doing the repair, the maintenance, the service, I mean, this industry is already experiencing a skills gap with technicians in the service bay having a difficult time attracting individuals to build long term careers in as service technicians. How does electric vehicles change that? Does it make this career choice more exciting? Does it require a different type of talent? How does how does the push the electric vehicles change the approach to talent acquisition and retention in the service bay?
GG: I think it's very helpful, actually. There have been discussions I know we've been talking about here at Ally and really just trying to help change the the narrative on what it means to be a technician today in a car dealership. You know, to call them mechanics is a great disservice to what technicians are responsible for today. And I'm talking about traditional vehicles. The technical skills required, the work that is done, is far different than the imagery we might have of a mechanic. Right? Just just being covered in grease and what have you. But it's been difficult. It's been difficult to to attract talent away from other more established technical industries and skill sets. I think electric vehicles offer that opportunity to help create that shift in mindset in people coming up and thinking about their career choice. And electric vehicles again offer somebody an alternative to an already flooded IT-type market or technical specific market. It creates more opportunities. You know, if I if I'm an auto dealer or if I'm an association, I think it helps to really lean in to the fact that this business is changing rapidly and it could create some really exciting attraction for up and coming work talent that is looking to make that technical career shift.
SS: You know, it's interesting to me that that you say that I was speaking with a with somebody else on a on a Daily Drive podcast recently, and they used a metaphor around driving consumer interest, but I think the same metaphor applies to what we're talking about here. And that is for consumers to understand the benefits of EVs, they have to be able to understand that it's going to be as convenient as your cell phone. And when you think about the cell phone and the know how that goes into building that and maintaining it (batteries, software lines of code), that metaphor applies to the technical side, the service bay in terms of attracting that different type of talent, this is a cool industry, a good place to work in. Would you agree?
GG: Yeah, that's you're really hitting hitting me where I enjoy talking about this subject. I believe in order to attract customers and customer excitement, you start with attracting employee excitement, right? You attract enthusiasts. You know, when I when I go to the Genius Bar, for example, I know I'm working with a raving fan of this product and they seem to get more excited about helping me with my technical issues than I am. In many ways. We shouldn't look too far beyond the fact that it's still a mode of transportation, still a vehicle, but in some ways it's a little bit more. And that's where the ownership experience is going to be slightly different and there creates some more opportunities there.
SS: Well, let's play with or let's stick with the Genius Bar metaphor, because we all know that you sat there because you enjoyed your experience, but that also created long term customer loyalty. It's an experience that you remember. You remember how it made you feel. You're going to go back for more. And so sticking with this this line of conversation around customer experience and electric vehicles in the service bay, you know, the volume of repairs is forecasted to go down because of simply the way electric vehicles are built. But it appears to me, and I'd love your thoughts on that, that there are new ways to create that loyalty similar to what you just described. Would you agree?
GG: Absolutely. And I already touched on it earlier, but I think the idea of actually encouraging users to return or drivers, owners of to return for the simple charging needs. You know, you think about the the infrastructure challenge of charging networks and look at some of the early leaders in the industry. Tesla's advantage, for example, was their commitment, in my opinion, to be brave enough to to navigate these waters, this kind of this untapped market of electric vehicles, but also their charging network, so dealers could could tap into that. I think there's an advantage there. I also think that when it comes to the evolution of the market itself, as we get into the early majority, for example, problems with those vehicles are going to be maybe a little stressful. It might be a simple problem, but I believe customers will want to come back to the dealership and the dealer should find ways to encourage customers to come back, even for the smallest of issues. If they're going to be a quick fix, that's OK. Creating additional customer touch points is something that we're always looking to do in our industry. This is why, you know, whether it's it's regular lube oil filter changes, dealer customer engagement events, ongoing service needs. We want customers to return to dealers. And I do think electric vehicles actually expand the opportunity to do just that.
SS: So we're talking about the customer side of the electric vehicles and why customers and customer loyalty, et cetera, but when it comes to this topic of environmental impact, I have to believe there's also a benefit to talent attraction that says, "Hey, come work here, not only because you have a stable career, and because you're paid well and because you have benefits and because your job has an impact, but also because what you're doing is going to have a positive impact on the planet." To me, that is a new area of talent attraction retention for dealers, particularly in the service bay. Would you agree?
GG: I agree, one hundred percent, Steve, I think that and I think I mentioned before that the business does tend to attract enthusiasts already today. Right. Personally, as a car enthusiast, I got excited about working in the business. And that is one element. I also know that for for many auto dealers who are incredibly involved in their community, I find that auto dealers to be some of the most philanthropic of businesspeople, whether it be small, local, giving back efforts or larger campaigns. And I think this is just another element. Right. It's another element that can show and demonstrate that part of the electric vehicle movement is, yes, its impact on the environment. And that's not the only reason why individuals are getting excited about the cars. But that is an element. And I think dealerships do certainly have an opportunity to really examine their own attitudes towards environmental impact. Consider making additional changes that would not only demonstrate their commitment to the movement, but would in fact attract talent from really all ends of the dealership, whether it be in the service area, the sales area, administrative. We see research over and over again that that companies with strong advocacy who have a purpose, a very specific purpose for why they're in business, tend to attract like-minded talent. It improves retention rates and improves employee engagement. And as I mentioned earlier, when you've got excited and engaged employees, you're most likely going to have excited and engaged customers as well.
SS: Let's close with a look out into the future. Lots of folks are predicting we are heading towards a future that's electrified, autonomous and shared. Certainly what we've been talking about, the technologies that we see headlines about almost every single day are illustrating that we are indeed heading towards that future. What does that mean for dealerships if we're in an electric, autonomous, shared future and a business model that has historically been based on selling and servicing vehicles.
GG: That's a that's a real hefty question because I think a lot of it would be speculative. I think that for autonomous vehicles, and there's there's certainly some exciting elements. Tesla, obviously early with with full self-driving capabilities. We've seen Google and other other nontraditional auto manufacturers testing out this this capability. There's a lot that has to happen between now and fully autonomous. And it still is even uncertain if that's even going to happen with any traditional type of vehicle as we know it today. I think there's some companies that are certainly going to get behind autonomous vehicles and would need to for their own economics. You think of rental car companies, you think of Lyft, Uber and ride share companies who have a have a vested interest in autonomous vehicles without the cost of a driver, for example. Tesla, obviously, you know, as I as I mentioned, is the one manufacturer that's really pushing autonomous vehicle capabilities. But I think fully autonomous level five vehicles are still so far off. We think about just the infrastructure needs of charging stations. Then I think about our infrastructure of roads and tollways, and there's just so much that has to be solved for. So I would imagine there's going to be a lot of shifting between now and what we think of when we think of autonomous vehicles. Electrification, I believe that's going to occupy the majority of the next decade or two as we continue to roll that out and look for movement from early majority to late majority to laggards. And eventually everyone's driving an electric vehicle. That's some time off. I think the conversation is very exciting. But as far as planning for it from a business perspective, I don't think we're there yet.
SS: Gabe, as always, thank you for joining me on the All Ears podcast and sharing your perspective. It was terrific having you back on the show. And I appreciate you taking a few minutes and talking to us about the future of electrified transportation and the impact it will have on dealers.
GG: Well, I appreciate being back and I certainly love the topic. So anytime you need me, Steve, I'm available for you.
SS: That's episode three of the All Ears podcast. Join us next time when I speak with Michael Kane, Vice President of Consumer Credit Operations at Ally Financial, and we explore how the pandemic has shifted consumer expectations and behaviors when shopping for a vehicle. On behalf of Ally and the Automotive News Custom Content Studio, thanks for joining us.