Pub. 58 2017-2018 Issue 1

31 FALL 2017 The author’s personal bias is to predict slower rates of change than do most experts. If there is one lesson I have learned from hearing and reading numerous automotive forecasts over the years, it is that: while change is constant in this industry, it generally does not proceed as quickly as many observers and analysts expect (or hope). Dealers set up websites, hybrids make inroads, and aluminum displaces iron in cars – but almost always more slowly than predicted. There is in our industry such an enormous legacy of history, processes, and institutions—the sum total of over a century of formation and dissolution of OEMs, suppliers, dealers, garages, rules, regula- tions, inventions, habits, traditions, and more—that rapid change faces massive frictional drag. So you will see in this report, in many cases, agreement with other forecasts of change – but at a slower pace than they project. Methodology Our approach has been to synthesize the opinions and views of numerous automotive industry experts, not to thrust on the reader the particular perspectives of the author. This is because our sub- ject is so complex that I could not ever hope to have an integrated, deep, and broad view of all the moving parts, from F&I profits to autonomous vehicles’ evolution, from new-car margin trends to the potential for electric cars, from insights about dealer human resources to commentary on regulatory developments, and much more. So the forecasts here are in most cases my best estimate of what I think the consensus of informed opinion would come up with. In a few places, where our interviewees and written sources showed no clear consensus, I have inserted my own forecast. But again, readers are encouraged to take into account what is written here, and then come up with their own projections: we hope this report is valuable input to your planning process, but it cannot replace that process. In terms of the expertise we sought, we cast the net very wide. We talked to dealers both public and private, in both major markets and small rural communities; we interviewed investors who had purchased dealerships and those who had decided not to; we talked to IT companies and consultants; we spoke with people outside our industry who might have insight for us (e.g. other types of retailers); we spoke to truck dealers, attorneys, vendors to the industry, OEMs, state dealer association executives, and more. We visited in person high-tech dealers in Silicon Valley and small stores in traditional rural locations. And we read reports, writ- ten by academics, regulators, industry associations, consultants, journalists, think tanks, and more – roughly 150 in depth, and another 100 or so skimmed. There is no lack of opinion on the topics we tackled, though wisdom was harder to find. Our hard- est task was not the collection of views and data, but the sifting, sorting, and organizing of it all, until we coaxed it into some sort of coherent story which would yield useful insights. As a result of our very broad sweep of topics, this is a very long and complicated report. The Executive Summary boils it all down, as do the visual presentation versions of the work. But readers should be warned: in many areas (e.g. autonomous  DEALERSHIP OF TOMORROW — CONTINUED ON PAGE 32 Donald Cole or Mike Kimberly 1-800-232-5602 Inquiries@thecolegroup.com http://www.thecolegroup.com/colegroup/dealership.htm Are you protecting your customers, employees, and your business by conducting quality and thorough “BACKGROUND CHECKS?” What are fellow dealers doing to gain an advantage by identifying quality hires through effective screening? The Department of Labor says that reducing EMPLOYEE TURNOVER at the average dealership by 10% will yield 300K in annual gross profit. What are you doing to combat turnover? The Cole Group, based in Houston, has been in business since 1973 and is the officially ENDORSED TADA provider for all background check and pre-employment screening services via their Dealership Screening Program. Ask yourself what you are missing out on and what over 450 of your fellow Texas Dealers have known for years. If you don’t believe it, call and ask for references. Talk with your fellow dealers — you will be convinced. © The Dealership Screening Program