As we gear up for the annual NADA show in San Francisco at the end of this month, we’re pleased to welcome Rhett Ricart, Vice Chairman-Elect. Rhett is also President and CEO of Ricart Automotive and today, he speaks with Jim Fitzpatrick about his career in the auto industry and what we can expect from the upcoming NADA show.
Jim Fitzpatrick: Welcome to CBT, Rhett.
Rhett Ricart: Hey, thanks for having me on.
Jim Fitzpatrick: For the people that are not as familiar with your name yet out there, and I know that … Congratulations on being nominated here. I should say becoming vice-chairman of NADA. Tell us a little bit about how you got started in the industry and a little bit about your group.
Rhett Ricart: Well, mine was real easy, because my father was a 1953 Ford dealer, started off on his own, and then through the generations, we got oil in our blood, most of our family members. Early ’80s, after I got out of college, I didn’t work for my father. I spent two years in another business. Then as you’ll remember, the interest rates and the difficulty of the business, and he asked myself and my brother Fred to help out and keep the company running. We had about 29 employees back then. Then through the years, my brother Fred was the marketing genius, and I was the operational, and we kind of built our dealership into what it is now in our different businesses. Right now, we do about 17 thousand new and used cars, and do about a half a billion dollars in sales. That’s our motto. We have 10 family members in the business. Eight of them is kids, plus my partner Fred and I. Between 30 and 40 years [inaudible 00:01:38], so we’re pretty lucky.
Jim Fitzpatrick: What do you think the future holds for today’s family-owned auto group? There’s experts out there that say in the next generation or the next 25 years, the retail automotive industry will be just made up of about seven or eight huge conglomerates, and that the future isn’t that bright for today’s family-run dealership. What do you say to those people?
Rhett Ricart: Well, the NADA did a study back in 2016. It was a Glenn Mercer report, and he came back with the fact that it’s going to change some, but that the future looks bright for the automobile dealers, because this is an evolution, not a revolution. As I said before, we’ve been around for the last hundred years, so we’ve been through a couple wars, we’ve been through several wars, and a lot of different changes in oil. The future looks good for the automobile business. People still want to own a car, and they still want their own car to drive. It’s unquestionable.
Jim Fitzpatrick: What about the autonomous bug that’s out there that many people are talking about right now, how that will change the industry, you know, these autonomous vehicles? When will that really have an impact in our industry, from your perspective, and how much will that play a role moving ahead for dealers?
Rhett Ricart: Great question. That’s a great question. You know, the NADA has done continual studies on this, because we think it’s very important, because the dealers out there think that, “Oh my goodness gracious, autonomous vehicles, I won’t be a dealer anymore,” and that is just not true.
The autonomous vehicle is still a vehicle that’s going to need service, that’s still going to need to be presented to customers. And quite frankly, I’m excited about autonomous vehicles because the technology that goes into them, the safety as far as front collision avoidance and side and braking, et cetera, et cetera, are all things that we need in our cars to make them safe for our customers. That’s what people like. They like a vehicle that’s safe, and they want something that’s fuel efficient. But most of all, they want it affordable, and that’s the real key in this. The digestion speed for all this technology will be for our customers and what they can digest.
Jim Fitzpatrick: It looks like you’re headed to become chairman, which should be a very exciting year for you there in Washington, with the talks of tariffs these days that keep a lot of OEMs and dealers very on the edge of their seat, concerned about what that looks like. From your perspective, should we be concerned about tariffs? How much of a role will that play moving ahead in the upcoming year?
Rhett Ricart: Well, that’s another great question. It’s on everybody’s mind. It’s not only on the dealer’s mind, it’s on the manufacturer’s mind, and it’s also on our customers’ minds. The most important thing you have to remember is affordability. The manufacturers have to make it affordable to build that vehicle. At the same time, the dealers, we have to make it affordable for the customer to be able to purchase it. The tariffs are an issue because they’re kind of confusing on all the different type of steel or aluminum and where they’re made.
You have to remember, we’re in a global manufacturing environment now. It’s not like it was 30 years ago. There’s 21 million vehicles being built in India this year. India. You take a look at the manufacturing in the United States … 30 million units in China alone. In fact, China builds half the electric vehicles for the world. So this global economy, with all these tariffs and how they’re going to pan out, we are on top of that at the NADA. We need to make sure that our dealers know exactly the information they need to have for the different franchises they have and the type of risk they have.
Jim Fitzpatrick: Let’s switch gears a little bit and talk about digital retailing. This is something that I know a lot of retailers are paying attention to these days, the idea that a customer would do the entire sales process and purchase process online, and maybe look to the dealer to just deliver the vehicle to their home or office, or maybe just stop by the dealership and use the showroom as kind of a delivery center rather than realizing the entire sales process at the showroom level. What do you think the future is for guideline retailing? When do you think we’ll see the majority of vehicles being sold completely online?
Rhett Ricart: Well, what we saw back in 2000 with the internet. You either embraced it or you went backwards, right? You’re going to see automobile dealers need to embrace online delivery of vehicles, or you’re going to go backwards, because it’s coming, and it’s going to come at a speed that the customers feel comfortable with, not that you’re going to force down their throat. I said it’s almost like my three-year-old grandson. If I try to force vegetables down his throat he’s going to spit them back up. You’ve got to mix them in with his macaroni and cheese and he doesn’t know the difference, a little bit at a time. That’s like the online. Online’s a little bit at a time. You get your people and your customers used to using it, and therefore, over a period of time, they will. But it’s here, it’s now, and it’s for real. The successful dealers that embrace it will be successful in the future.
Jim Fitzpatrick: Let’s switch gears a little bit and talk about the NADA convention that’s coming up in the late January here, just about a month away. Can you talk to us a little bit about some of the things that’ll be taking place at this year’s show?
Rhett Ricart: Actually, yeah, the NADA convention. The show is a pretty special event. It’s special not only to the manufacturers, but also the vendors that have the different products, and the dealers, because it gives you a one-stop shop. You know, you don’t have to go out and read magazines all week long or all year long trying to figure out what’s real and what’s not real. They’re all there. You know, all the big players are going to be there for you. The workshops seem to be the most interesting. I suggest to everybody, if you find something you’re interested in, go early because they fill up quick. That’s because they’ve been proven to work. Dealers have gone to these workshops, picked up some good skillsets, and they’ve returned out later.
I believe many of the people in the industry … I’ve been in the industry 40 years, and I’ve seen some come and some stick. You’re going to see all the industry leaders there. You’re going to be there because there’s a vetting process the NADA has to make sure the real interesting people that run these workshops are going to have some really good product for dealers to go home with to use.
Jim Fitzpatrick: That’s exactly right, yeah. You mentioned the OEMs will be there. I just want to ask you about this. As you know, Peter Welch, the president of the NADA, had kind of an open letter in Automotive News this week, which was very interesting, and some great insight there. Talk to us about margin compression. I know it’s on the mind of every dealer these days. How do we make more money selling these vehicles to our consumers? I’m speaking specifically about new vehicles now. But how do we make more money? What’s the future of that? How do we work hand-in-hand with the OEMs to make more money and see an increase in profitability?
Rhett Ricart: When it comes to margin compression, it is real. Everyone knows it on this broadcast if they’re listening to it. If I said anything else, you’re going to know I’m from Hootyville somewhere, because it is real, okay?
Jim Fitzpatrick: It is.
Rhett Ricart: But there’s a few things we can do when we talk about margin compression, because our business model is going to have to go through an evolution on it. Our business model, we’re going to have to adapt and change it, and especially right now. The article you’re probably discussing with Mr. Welch was his thing about two-tiered pricing by manufacturers, which causes margin compression.
The issue that we have with two-tiered pricing is that it’s dangerous to our customers. It’s dangerous because the customers we’ve spent years and years and years getting to trust us, with the highest customer satisfaction in the industry’s history is today … Manufacturers measure us as dealers nine ways to the moon. Customers receive surveys, months and months following their service or sales experience. Dealers are scoring in the high 90 percentiles. We score higher than probably 99% of any retail industry in the world. At the same time, we see our margins being compressed and our business model evolutionizing.
Rhett Ricart: We’re going to have to do some hard thinking, and we need to have the manufacturers realize that two-tiered pricing is strangling our customers, because it’s putting the dealer in a very bad seat with our customers every day that we meet them and discuss it with them. And it creates animosity in the customers’ minds that dealers are going to try to take advantage of them. That is just not true.
Jim Fitzpatrick: Boy, that’s for sure. Thank you so much for all of your time today. One last question. As the head of a family-run auto group, and many of the people that are watching are also heads of family-run auto groups or managers of those groups, what are some of the things that keep you up at night as we move into 2019 and beyond?
Rhett Ricart: What keeps me up at night is how to keep these dealers, and to be able to keep the dealers’ business model intact, profitable, and sustaining, because it’s been proven for the past hundred years, there’s not a better distribution model of automobiles in the United States than through the dealer franchise model. If you don’t think so, then hopefully you weren’t a Saturn dealer or a Oldsmobile dealer or a Pontiac dealer that went through that, and all those customers, because of franchise laws, had a way to get their vehicle fixed and parts available for the future to protect their investment. The NADA has proven, and will continue to be, the advocate for not only the dealers, but also our education system to make sure dealers get better and better and better every day serving our customers.
Jim Fitzpatrick: I second that. Mr. Rhett Ricart, president of Ricart Automotive Group, thank you so much for joining us on CBT news. We very much appreciate all the time. Again, congratulations on becoming the vice-chairman of the NADA. I know it’s quite an honor for you. Hopefully we can talk to you when we’re out at the NADA convention late next month.
Rhett Ricart: Well, thank you very much. You know, myself and my family and especially all my colleagues and friends at the National Auto Dealers Association appreciate the opportunity to express, let everybody know we’re working hard every day for the automobile business and the automobile dealer. Thank you very much.
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