November 02, 2017

For many, autonomous vehicles are synonymous with ride sharing and hence reduced fleet size and negative implications for dealership sales and service.

Well, I see the world differently. I see autonomous vehicles opening new opportunities to expand ownership in underserved segments. I also see likely increases in vehicle usage intensity, even should heavy ride sharing usage emerge.

Let me explain my perspective, starting with the potential for increased vehicle ownership: First, while analysts suggest massive fleet reductions based on low vehicles utilization, they do not consider limits imposed by peak utilization and limited population density inherent in our social structure.

Autonomous vehicles will dramatically improve personal mobility for our rapidly growing population with diminished driving skills, extending vehicle ownership much longer. Furthermore, ride sharing provides the same freedom and productivity enjoyed by many Americans, to large numbers of the working poor who cannot afford a whole car. These segments greatly outnumber the low mileage, near urban households, who forego ownership, or at least reduce household fleet size.

Even as ride share takes hold, I expect usage intensity and miles driven per vehicle per year to rise with autonomous vehicles. This increase in total miles driven will ultimately lead to increased service visits and faster vehicle replacement.

In addition, ride sharing enables increased drive-time productivity for passengers. This will dramatically shift fly/drive and public/private transportation decisions and may even encourage longer commutes as the office moves to the car. More importantly, ride sharing has, by its very nature, significant “empty backhauls,” which increase the number of total miles driven per passenger mile, as vehicles find the next passenger.

These factors should increase total fleet miles driven annually, growing service needs for the US fleet. That is until, or unless, more significant structural changes take place in American work schedule and residential patterns.

Furthermore, autonomous vehicles can inherently address the distance convenience gaps which tilts service works toward more ubiquitous independent repair facilities. However, this does not mean that dealers can just sit back and wait for the increased service business to arrive.

Imagine your vehicle leaving your driveway or the mall at an appointed time to get serviced while you sleep or shop. This is the future of service! The competitive tide turns to those dealers who can manage more complex, consumer-responsive service operations. Not only does this require seamlessly managing multiple shifts, but encourages proactively finding nearby vehicles to service when bays are empty.

This requires new levels of integration between consumer engagement, telematics integration, shop load management and operation effectiveness. Those who invest first to create these capabilities with grow a service business that generates a return on fixed operations investment multiples over today’s vastly underutilized business model.

Undoubtedly increased ride share/fractional ownership will drive greater “fleet like” ownership. Not only will Uber and Lyft evolve into large fleet companies, but we will likely see thousands of private “fleet” owners investing to serve underserved markets, or seeking to cover ownership costs by leasing spare capacity.

I was recently struck by the entrepreneurism of one of my young developers in India, who bought a car, not for commuting, but for leasing to an Uber driver who drove him to work, then used the car to take fares during the day, before returning him home at night.

Welcome to the new era of vehicle ownership, Air B&B for cars! Dealers will all need to optimize their business models around fleet. I can easily imagine a world where passenger vehicles are up-fitted like commercial vehicles are today, based on different uses.

As a dealer, you will have the opportunity to sell vehicles based on Total Cost of Ownership, or even lease on a per mile basis, with all service included. Aligning service times to down time will be even more critical to these vehicles, because time in the bay takes away from time earning money. Managing utilization could be a key differentiator for OEMs and dealers.

If you are a franchise dealer, you can and should benefit from autonomous vehicles, if you recognize and embrace the underlying changes.