AutoNation Makes A Play For Future Relevance

by dpollak on 11/03/2017 · 2 comments

I can’t help but regard AutoNation’s multi-year deal to service Waymo vehicles as a smart move for the company, and perhaps a telling sign for the rest of us.

My job has me traveling the country, speaking at dealer groups and other events and, more and more of late, talking about the future of the car business.

Inevitably, the conversations land on two factors—that the very nature of vehicle ownership is changing fast, and that fleets of self-driving cars don’t necessarily mesh well with the franchised dealer network’s current ways of doing business and making money. The term disintermediation comes up, time and time again.

But I try to make the point that if the car business evolves into the transportation business, dealers would do well to figure out, and pursue, how their roles may change and how they should adapt. I also make the point that pioneers tend to get the greenest fields in new lands of opportunity.

That’s what makes the AutoNation/Waymo partnership noteworthy.

AutoNation isn’t waiting to see how the evolution and impact of self-driving vehicles might play out. They want a seat at the table, and the Waymo partnership provides it.

Similarly, the partnership starts to answer a big question about self-driving vehicles: Who’s going to fix them? The manufacturers? Dealers? An off-shoot of already-centralized service facilities in operation by rental car companies and others?

I see a couple potential advantages for AutoNation:

  1. They’ll be among the first to understand how to fix self-driving cars. AutoNation now has an incentive to build the know-how to maintain and repair what are probably the most sophisticated, technology-centric vehicles on the road. The decision to sign up first for this learning curve underscores executive understanding that first mover advantage really matters.
  2. It validates AutoNation’s size and scale. Waymo recognizes it’ll need a means to keep its vehicles on the road, and AutoNation happens to have the largest owned network of dealerships where the maintenance and other repair work can occur. A dealer with two, three or even 10 stores would be unlikely to offer Waymo a cost- and process-efficient platform to achieve its goals.
  3. It creates a new, diversifying line of business. The Waymo partnership offers potential fixed operations profit for AutoNation’s dealerships from a fresh source. If done right, the profitability that comes from this work could mean more to AutoNation’s bottom line than many of the new vehicles it retails. What’s more, the partnership may provide sufficient return that enables AutoNation to capture a larger share of new/used vehicle sales, which would often even greater operational efficiency gains.

As I talk to industry media and observers about the future of the business, and the seeming rise of disintermediating threats from as-yet unknown players and technologies, I am always sure to make the point that “I wouldn’t bet against a dealer’s ability to adapt and thrive.”

That’s exactly what AutoNation appears to be doing with its Waymo partnership.

  • James Fisher

    My feelings based on the history of the auto business is that the manufacturers will try to either start a different franchise (Saturn) or try to do it themselves without the dealer base they have a love-hate relationship with.

    I commend Autonation for their forward thinking and proactivity regarding self driving vehicles.

    Maybe one day in the future, the manufacturers will consider the dealer, their customers and not the end users.

    It is the same as Dealers worrying more about their customers than their employees.

    Once again! Bravo to Autonation.

    Jim Fisher

  • You are missing the BIG picture. The action is going to be in the refurbishing/remanufacturing of the autonomous vehicles; as was the case with Marathon Mfg’s Checker Taxi. This will be industrial strength disassembly and reassembly process employed every 200,000-300,000 miles. Who will perform such tasks has not even been discussed. The vehicles WILL be designed to be disassembled/reassembled by the owners of the vehicle fleets. Who will perform this process; will it be the OEMs?, independents or AutoNation? Myestimate that after a ramp up of the autonomous installed base, more revenues will be generated from reman than from new vehicle sales

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