Mobility Revolution Episode 1: Brian Allan – Dealers Need Rideshare Drivers

NATE:

Comin’ at you from Los Angeles, this is Mobility Revolution powered by HyreCar. We’re gonna take you on a journey through the unique business models and income opportunities that Mobility as a Service has to offer. From selling cars to sharing scooters, you’ll learn how you fit in to the Mobility Revolution.

Hey everyone, and welcome to the first episode of Mobility Revolution Powered by HyreCar. We’re your hosts, Nate Ryan…

REESE:

And I am Reese Moulton.

NATE:

Reese, this is a really exciting day, isn’t it?

REESE:

It really is, I’m pumped!

NATE:
Yeah we have a very special guest with us this week, Brian Allen, a long time automotive biz celebrity, coming straight out of retirement after over 30 years with the largest dealer group in the U.S., Galpin Motors. Brian teamed up with HyreCar to help educate dealers on how they can turn aged or idle inventory into new revenue streams. Brian, it’s really great to have you with us today.

BRIAN:

Well thank you, I’m kind of like The Walking Dead, is that what you’re saying? Out of retirement? So yes, the second half of my life…but yes indeed I did. You know, what I recognized is that in the news almost every day you hear about the death of a dealership. And it was really upsetting me, because dealerships are near and dear to my heart. In that they provided a good living for me and solved a lot of people’s transportation problems so, anything that I can do to help increase the perception and the longevity of dealerships…I figured, you know what? I’ll go back to work and see what I can do.

REESE:

Awesome. Awesome. Well, we’re stoked to have you on. Thanks again for coming in. But yeah, I tuned into your webinar last week with Northland Securities and you mentioned something about experiencing several pain points as a dealer during your time with Galpin. Do you think you could touch on maybe a few of those and maybe explain a couple of the early opportunities that you envisioned through Mobility as a Service while you were there?

Brian:

Certainly! So the great thing is, is that I come from the perspective of a dealer because I was one for over 30 years and the, what we know is, is that certainly there are processes at dealerships that are antiquated. You know it shouldn’t take six years, uh, six hours to buy a car. That was a Freudian Slip! But what I know is, there are pain points that I experienced as a dealer, that were manifested financially, and just to give you a few, dealers have to carry a lot of inventory. And that’s a pain point because in the day and age of virtual inventory and digital inventory, the car business is one that there’s still a lot of physical cars and with that comes some expense: real estate, bank financing, otherwise known as flooring, the dealers have to insure the cars while they’re on the lot, because while the risk may seem low there could be hail and all kinds of crazy stuff. But, cars on the lot are expensive. And the one unique thing that is typical of all dealerships, is they tend to stay idle until they’re sold. So there are dealerships with hundreds to thousands of cars. And as the rideshare and mobility movement has started to gain, obviously the hub attraction since Uber 2012, an opportunity has come where rideshare drivers need more vehicles than ever before because there more rideshare drivers. But something’s happened. There’s a lot of these drivers who don’t have a car. So I go back to the pain point and I say here I am, a dealer, that’s sitting with inventory and there are drivers that need a car. Now, the pain point is the dealer is paying all these expenses, the car’s not driving, the dealer’s incurring full depreciation, no offsetting revenue, but there’s a rideshare driver out there. Well, I take that and I say how can I put those two together and solve a problem for the rideshare driver and solve a problem for the dealer?

So the one pain point is to earn revenue off idol inventory and especially aged inventory. The other is, is that for dealers that want to get into rideshare, technology is important to let others know, rideshare drivers specifically, that they have inventory for them. And I came across HyreCar obviously, and I say, boy you’ve got amazing technology, and we can expand on that a little bit, because HyreCar started Peer to Peer, and still does do Peer to Peer…

REESE:

Right.

BRIAN:

But boy the dealers have this inventory, if we can figure out how it makes sense to let drivers know that this inventory is available, earn revenue on it, and then something more spectacular, sell these drivers cars. And right now, a pain point for dealers is, it’s tough to let the rideshare community know that dealers can help them buy a car.

REESE:

Got it.

BRIAN:

Kind of crazy.

NATE:

Um, so you and I recently just went to the E4 Mobility Summit, and you kind of just mentioned this already, how new mobility companies see the shift in mobility as sort of the death of the dealer. But it was great to see you up there on that panel cuz you have a drastically different view of how people are actually, or how dealers are making the shift to mobility. You mentioned that the rideshare industry is a good way for dealers to start leveraging this aged and idol inventory. But how do you envision dealers fully taking advantage of mobility as compared to the other mobility companies out there that think the dealer’s gonna die?

BRIAN:

Very good. Um, as you said I started with saying, gee, there’s so many pundits out there that say dealers are like dinosaurs, they’re the walking dead. Um, what I believe is, that if there’s anybody who is in a position to leverage the mobility movement, it is the dealership. And a few primary reasons: dealers all ready have the inventory, the resources, the people, and access to financing, and insurance. The others, if they try to enter the mobility industry, they have to start fresh, and it takes a lot of money. If you have to buy real estate in 2019 dollars, compared to the average dealer that owns real estate from probably 1970’s dollars and later, earlier, the dealer has a tremendous advantage. Also, if the dealer is sitting on an idle inventory, any dollar they get additional, is revenue, versus a third party, whether they’re a large rental agency or some new transportation company that comes in, they have to earn a lot of revenue just to overcome their new expenses. A dealership, their expenses are typically paid by the parts and service department, used car department, and to some degrees, the new car department. But the vast majority of their expenses are paid for. So if you take the position that a dealer can offer a vehicle at really no investment in uh, capital investment, I should say, well, they can undercut any larger, outside mega-company that’s trying to enter this mobility. And already we’ve seen some challenges with some people who have failed in mobility because the expenses to start today are extremely expensive. And again, the dealer has it so I think, as the shift happens and the dealers are educated that there are platforms like HyreCar, and HyreCar’s the only platform I know that does Peer-to-Peer and dealer small fleets and large fleets, but this is a turnkey solution that a dealer can turn on and let the rideshare community know that they can get vehicles. Nobody can beat a dealer.

NATE:

So you mentioned that dealers make a lot of profit off their, you know, parts and service business. With working with a company like HyreCar and rideshare drivers is there an advantage for dealers to be able to continue leveraging the parts and service departments of their business?

BRIAN:

Yeah, so. And I wouldn’t, just correct you a little bit. It’s not a lot of profit. One thing I do like to clarify: dealers actually at best, a good dealer, makes about 2% net margin. It’s a lot of volume, to sell, to make money. So there is a perception out there that dealers make money hands over fist and it’s not really accurate. But, parts and service is a large part of covering expenses of a dealership. And then used cars is second to that, and then new cars last. But, um, to go back to your point, rideshare drivers are the ultimate customer. If you think about it, they typically need an oil change every two months, maybe brake pads onde, twice a year. So dealers that embrace the rideshare community in part and service, have a wealth of opportunity and once again, they can be the most competitive because their capital investments are already been made and often paid for. So what do dealers need to do? They need to be open a little bit later at least once a week, we have some stores that are open 24 hours once or twice a week, to accomodate commercial and rideshare. We have some dealers that are making lounges for rideshare drivers to rest, get on the Internet to do a little bit of business. Most rideshare drivers have another gig going. In fact, Lyft just publicized in their S1, 90% of rideshare drivers, their rideshare drivers, are part time, and drive less than 20 hours a week. So they got a lot going on, and if they can, we can give them a little kind of wework office as a dealer, even better. 

NATE:

Yeah that’s a little different than the notion that rideshare drivers are actually putting, you know, what it is like, 200 to 400 miles per day.

BRIAN:

Right, right, and well, I know that from the data at HyreCar and my personal experience, that when rideshare started in 2012 with Uber, the typical rideshare driver was more of a disenfranchised taxi or limo driver. Today, we have retired law enforcement, semi-retired people in government service, postal workers, uh, teachers, people that are now working three or four hours a day, supplementing their income. And some are retired, living on a pension just want to get out of the house. A husband or the wife want to get away from each other. Kind of funny. But it’s a whole different dynamic…

NATE:

Yeah.

BRIAN:

…which works really well for dealers. Really well.

NATE:

Exactly.

REESE:

Right.

REESE:

I guess to kind of touch on that, so, I mean, it’s fairly obvious that dealers might be a bit hesitant to get involved with like, the ridesharing or the on-demand industry, because rideshare drivers have had that like negative stigma to them in the past. How would you say, uh, you know, that has changed over the last 5 or 6 years?

BRIAN:

So what I certainly know is, and this is a pretty interesting statistic, ah, Bloomberg just had reported in 2012, I take that back, 2013, Uber by themselves were doing 120,000 rides a day. Sounds like a lot. February 2019, just a little over 5 years later, Uber’s doing 15 million rides a day. 

REESE:

Wow.

BRIAN:

But that’s not even the best part. In Uber’s S1 filing for going public, they said their target is 30 million rides a day by 2022. So that’s just 3 years away. So what has happened to have the workforce to have that many rides a day. They’ve had to expand to part time workers and made it very convenient for these drivers to work a few hours a day and have their regular gig.

REESE:

Exactly.

BRIAN:

Whatever that is, the stigma has also gone away from being a rideshare driver. I know that I get in cars today, they have seat covers, steering wheel covers, Kleenex boxes, some are selling candies and bottled water, or even offering them complimentary.

NATE:

Yeah right, well now with all the rise of all these new services that actually allow you to, you know, put catered boxes into the vehicles already…

BRIAN:

Right.  

NATE:

…it’s really kind of elevating the whole experience. 

REESE:

Exactly.

BRIAN:

So, the driver, which goes back to, they’re more comfortable because they’re more proud 

REESE:

Yep.

BRIAN:

…to be doing what they’re doing. This isn’t just a taxi. And uh, I was in one in Vegas, a ride, an Uber, and the lady was a teacher. She started at 3:00 after her school ended at 2. And she had a scented mister that was in the cigarette lighter, and it felt like I was in a spa. I didn’t want to get out of the car. But, you know, I’ve seen Uber drivers and Lyft drivers putting Armor All on tires. 

REESE:

Yup.

BRIAN:

They’re cleaning the windows while they’re waiting for me to finish packing my luggage, to come down. It’s pretty neat. 

REESE:

Exactly. That five-star rating is extremely important to those guys. Absolutely. 

NATE:

So, that actually kind of brings up a good, good point. Um, dealers don’t quite understand who the rideshare driver is. And I know for you personally talking to all the different dealer groups out there, that, you know, convincing them that rideshare drivers are actually a good audience for them is very difficult because of that.

BRIAN:

Yeah, the perception’s, it’s tough to change perception. And there were banks and dealers that did try to jump on this early, 2012, 13, 14. Which seems like yesterday, but it’s still four years ago, five, longer. And there’s been that shift in the demographics. So, you know drivers, here’s the funny thing about dealerships: we look at miles on a car as a death sentence for a car’s value. And we have to change the narrative that actually miles mean money. And we kind of coined uh, an expression that parallels with that, and that is revenue is the new odometer. 

REESE:

Hmm.

BRIAN:

And we look at, and uh, actually I think Nate inspired that a little bit. 

REESE:

Love that.

BRIAN:

And it’s true though because if you think of any other industry, you want every room filled, right? As often as possible. If you run a restaurant you want all the tables filled. If you’re in a dealership, why wouldn’t you want someone to drive more miles because it’s gonna feed your parts and service department, and if you’re getting revenue from those miles, long as it exceeds the depreciation, well you’re in heaven. And, so, we found out through the averages of statistics that, you know, HyreCar’s been in business for over three years, so we have a lot of great data. And when I looked at it, it validated a lot of things that I felt were happening, and that is time was more of a depreciating factor than miles on a car. So I say to a dealer, you know, if they have a car on the lot for 90 days, and the odometer doesn’t change at all, what does it depreciate? Well I know, cuz I’m a dealer. I can give him the answer.

REESE:

Yep.

BRIAN:

It’s about 20% in 90 days. So you take a $20,000 car, it can depreciate as much as $4,000 without changing any odometer. 

REESE:

Wow.

BRIAN:

Now, you add 6,000 miles to that car in 90 days. The depreciation is about the same so you’re not earning revenue and the car’s still depreciating.

NATE:

So what is a model for the dealer that works cuz obviously, you know, losing four grand then having to wholesale the car is not something any dealer wants to do, right?

BRIAN:

But yet it happens every day and I was a perfect example. As a matter of fact, the comptroller would often say, “Here’s your losses on 90 days! You need to sell the cars before that!” By the way, in addition to the depreciation, dealers typically pay a large incentive to the salesperson to sell it. So they have a commission, and that doesn’t even include the marketing. So they’re spending hundreds of dollars a week, if not, in some cases, a day, to merchandise these cars. If you add all the costs, this why dealers struggle to make money. Because idle inventory is not a plus. So, I think to go back to your question, um, the solution really is getting the vehicle out on the street just like the airlines get their planes in the air. Airlines figured out a long time ago, that they’re losing money unless the plane is flying.

REESE;

Hmm hmm.

BRIAN:

That concept is difficult to initially digest to a dealer. And I say digest, cuz it’s like telling them they can eat pizza and lose weight. It just doesn’t make sense. So, when we start with the phrase miles mean money, at least they listen because they think I’m an idiot. And I go, remember I was a dealer, don’t shoot me, right? Let me walk you through this. And they realize, yeah, you’re right, I’m losing that money whether the car is driven or not. But then something else we figured out, most of these drivers want to buy a car, and they’ll buy the car they’re renting. So that ends up being an incredible motivation for dealers and once they see that really work, they put a lot more cars on the platform. Because they’re turning, and the renter becomes an owner, and then becomes their service and parts department client.  

REESE:

Gotcha. 

NATE:

Awesome. Um, so I guess, really, this kind of creates a new opportunity for dealers to create a new way to sell a car, right? And everytime you give a big keynote, you always mention an awesome graph that you put together. Uh, and what it shows is, the shift in vehicle sales from personal to fleet sales. Um, can you explain a little bit how you see that shift in the future moving?

BRIAN:

Sure, thank you. Uh, so what we know and a consensus of new vehicle manufacturers, banks, and large third party vendors, held a meeting at NADA. in 2019, they called it the Automotive News Retailers Seminar. And they showed data, that vehicle sales were gonna decline over 10 years, only about 15%, not a big drop. Not the end of the world. The car business survived the recession, where there was a 50% drop. But that wasn’t the story. The story was the shift in mix of fleet and retail of those overall sales. And that was the eye opener for dealers in the audience. The shift, where retail one to one sales, what you and I would go to a car dealership and buy a car, was gonna drop from 15.4 million to 8.9 by 2028. Now that itself is almost a 50% drop. That’s the one that’s worrisome.

REESE:

Hmm hmm.

BRIAN:

The counterbalance to that, is the fleet sales are projected to grow, and by the way, this is already happening, four months later, I’ll give you the numbers in a second, from January we’re already seeing this trend manifesting, but the sales by large fleet owners was going to grow significantly, but the dealers would not benefit from that, unless they got into the market of selling these fleets to either rideshare drivers and/or the larger companies themselves. 

NATE:

So I guess this is where the other mobility companies come into play, right? 

BRIAN:

Correct. So you have some pretty large investment houses out there that are talking about investing in a new version of some sort of vehicle exchange program. But again, they’ve got to spend a lot of money to duplicate the resources and the footprint the dealers and the OEMs already have. So, what that graph showed that was the eye-opener for the dealers is, the smart ones need to get in early for their markets to own the fleet and be an on-demand transportation provider. So, the narrative to the story that you were talking about what I share with the audience, is, dealers need to get in the whole ecosystem to provide a vehicle no matter how a consumer wants to consume transportation, whether they want to buy a car, finance it, lease it, rent it, or use it on demand and give it back, once or twice a week. And that’s where the dealer’s real pivot needs to occur for them to survive and adapt. 

REESE:

Got it. Ok. Well, that kind of leads me to another question or I guess it’s like a two part question. Um, I guess, so how big is that shift for the car dealer in order to get in to the on-demand service or the rideshare industry.

BRIAN:

So it’s more of a mental shift by far then a physical shift. 

REESE:

OK.

BRIAN:

Most dealerships have a loan or a rental car department already. Oddly that’s exactly what mobility is, it’s giving somebody another car to use that’s not theirs. And whether it’s for a day or an hour, dealers are really already doing it, but they’re not satisfying the demand from the rideshare community or the transportation on-demand community. And what that is, just to define for the audience, GrubHub, DoorDash, Amazon Flex. A lot of dealers think that, uh, mobility is just putting people in cars and driving them around through the Uber and Lyft app. No, actually a larger segment is food and package delivery. And the dealers are in the perfect position to provide vehicles, vans, fleet, even pick-up trucks. You know,  Home Depot, for a long time, you could rent a pick-up truck by the hour. Home Depot was in mobility before people knew what mobility was. 

REESE:

Exactly.

BRIAN:

So dealers are a natural to be in that.

NATE:

Right.

BRIAN:

Especially, any dealer that has a franchise that includes vans or pick-up trucks.

REESE:

Gotcha.

NATE:

Excellent. Um, Brian. You know, that, thank you so much. You know, everytime, everytime we get to hear you talk it’s always, you know, kind of a brain dump. Or a wisdom bomb as they would say. 

REESE:

It’s awesome. 

BRIAN:

Alright, well if you’d just tell my wife that I’d really appreciate it. 

REESE:

Absolutely!

NATE:

I’ll put in a good word for you! 

BRIAN:

Thank you very much.

NATE:

Yeah, it was great to have you on the show. Um, and join us next week as we have Joe Furnari, CEO of HyreCar, um, on Mobility Revolution, powered by HyreCar.

BRIAN:

Fabulous.

REESE:

Thanks, Brian. 

BRIAN:

Thank you, gentlemen. [/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

By | 2019-09-19T15:54:25+00:00 August 19th, 2019|4 Comments

4 Comments

  1. Rob August 20, 2019 at 2:05 pm - Reply

    Very informative. I learned things about dealers and car rentals I’d never thought about. I’m going to rethink starting back as a Lyft driver.

  2. Garybethell August 26, 2019 at 8:28 pm - Reply

    WHEN?

  3. Miresavage October 25, 2019 at 1:58 am - Reply

    Ballxhard

  4. LaVonda Hitchens October 25, 2019 at 4:17 pm - Reply

    im very happy

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