Welcome to the CBT News original show, The Future of Automotive, with Steve Greenfield, Founder, and CEO of Automotive Ventures, an auto technology advisory firm that helps entrepreneurs raise money and maximize the value of their companies.
OEM-Dealer Relations Front and Center at 2023 NADA Show
We’re coming off the National Automobile Dealer Association (NADA) conference, which was back in Dallas for the first time since 1995. And from all indications, attendance was strong and Dallas did exceptionally well supporting the show.
There were many topics that seemed to be top of mind for dealers at the show, which included their relationships with their OEMs, direct-selling of new cars and the agency model, and facility upgrades related to the transition from internal-combustion engines to EVs.
I also had a number of discussions about the unbundling of vehicle options into subscription products and how that revenue might be shared between automakers and their dealers.
While many of us were at NADA, the news cycle continued its’ relentless pace across many of these industry themes.
J.D. Power reported that the U.S. auto industry is expected to suffer a decline in total dealership gross profits this year, but it is still expected to finish with the third-best profit level in history as the industry rebalances itself. Factors that will drag down prices and profitability this year include potential further interest rate hikes; increased supply leading to less dealership pricing power; and incremental production by automakers of lower, less profitable trims to meet demand.
General Motors announced that it will include its franchised dealers — and compensate them in some form — as part of its strategy around future software sales post-vehicle purchase. GM is contemplating a commission or some other financial structure but won’t go as far as to call it revenue sharing. GM has said it could generate as much as $25 billion in revenue from software and services by 2030.
Ford, under pressure for their plan to tie EV investments to new vehicle allocations, announced that they are now eliminating the annual sales cap of 25 electric vehicles for dealerships on the less-expensive tier of the brand’s EV certification program. The changes seem to be a bid to win over retailers who took issue with some of the certification program’s costs and requirements.
Although enrollment for the program closed last month, Ford says it will allow dealers on a case-by-case basis to change their tier, join or drop out based on the newly announced changes.
Ford’s sister brand Lincoln has its own EV certification program, which requires dealers to invest as much as $900,000 to sell future EVs. Lincoln announced that the window for dealers has already closed, with the next opportunity to enroll scheduled to be in 2026. Lincoln has said 356 dealers out of about 600 agreed to the program’s standards.
And news about OEMs who aim to evolve into software-first companies continued to hit the wire. Volkswagen’s CARIAD unit has hired 6,600 software engineers in the past two years and wants to add 1,700 more this year.
Software-enabled automotive revenue will top $700 billion by 2030, according to investment bank UBS, about a quarter of the car industry’s total sales. Automakers fear the fate of the original cellphone makers that sacrificed much of the value in the smartphone market to tech giants Google and Apple — companies that mastered the user experience with superior software.
If Google and Apple manage to become the default vehicle interface, then carmakers risk ceding hundreds of billions of dollars in revenue, because the tech giants could become the gateway for over-the-air updates and in-vehicle content.
And finally, we heard last week that China is poised to become the world’s No. 2 exporter of passenger vehicles, a milestone that could reshape the global auto industry and spark new tension with trading partners and rivals.
Overseas shipments of cars made in China have tripled since 2020 to reach more than 2.5 million last year. That’s only just behind Germany (by about 60,000 units), whose exports have fallen in recent years. China’s numbers are behind Japan but ahead of the U.S. and South Korea.
So there you have it. We’re only through a month of 2023, but we’ve crammed an awful amount of industry news and change into the first month of the year. This is shaping up to be a very important year that will influence the Future of Automotive for years to come.
Companies To Watch
Every week we highlight interesting companies in the automotive technology space to keep an eye on. If you read my monthly industry Intel Report, which you can subscribe to for free, I showcase a few companies each month, and we take the opportunity here on this segment to share some of those companies each week with you.
Today, we have two companies to watch: MOVE and It’sElectric.
Our first company to watch this week is MOVE.
MOVE is a patented digital ordering platform, that allows customers to directly send photos and texts of products they need to the businesses that sell them. Dealers have the ability to receive and communicate part orders through texts and pictures.
The reason that I love MOVE is that they provide a much better customer experience, making wait times on the phone – and email backlogs a thing of the past.
You can check out MOVE at www.Move2Order.com.
Our second company to watch this week is It’sElectric.
It’sElectric’s mission is to bring curbside EV charging to cities across the U.S. and advance the adoption of electric vehicles. Increased access to affordable public charging not only encourages the adoption of EVs but leads to cleaner air and healthier communities.
The reason that I love It’sElectric is that we’re going to need a massive number of new EV chargers deployed if we’re going to stay ahead of electric vehicle adoption. It’sElectric has the right solution at the right time.
You can check out It’sElectric at www.ItsElectric.us.
So that’s your quick wrap-up of the big deals in the automotive technology space over the past week.
If you’re an auto tech entrepreneur working on a solution that helps car dealerships, we want to hear from you. We are actively investing out of our new DealerFund.
If you’re a dealer who wants to invest in early-stage auto tech companies that benefit your business, let me know. We are still accepting new investors into the fund.
If you’re interested in joining our investment club to make direct investments into auto tech and mobility startups with small checks, let me know.
And don’t forget to check out my new book available on Amazon called “The Future of Automotive Retail.”
Thank you for tuning into CBT News for this week’s episode of The Future of Automotive, and we’ll see you next week!
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