Why Penske’s move and the opportunities it presents are something dealers need to be aware of.
Something very interesting quietly happened in late October that may or may not have caught your eye: Penske Corporation has now set up and is running Penske Dash, a free-floating car-sharing operation in the Washington, D.C. area.
The Penske Dash fleet includes Volkswagen Jettas and uses the Ridecell platform to enable free floating, one-way car-sharing. This allows customers to find a nearby car using their phone app, either on the street or in a parking spot, drive to where they need to go, and then leave it wherever they can legally park when done in the Arlington area. Very convenient.
To make sure it all goes smoothly, Penske has hired some serious car-sharing management muscle in the form of Paul De Jong, former President and CEO of Daimler’s Car2Go North American operation.
This may not sound interesting to most dealers, but the implications are enormous. Let’s first consider who Penske is — a huge automotive conglomerate with $32 billion in combined revenues. Its register of companies include: Penske Truck Rentals, Penske Truck Leasing, Penske Logistics, Penske Vehicle Services, as well as racing: the famous Team Penske with 16 Indy 500 victories to-date, Ilmor race engines, and the Detroit Grand Prix.
There’s also Penske Motor Group, owner of the world’s largest dealership, Longo Toyota in El Monte, California. Longo Toyota is set over a 50-acre site and shifts an astounding 25,000 cars a year. That number was back in 2006, and who knows how many units will leave their doors this year. I’m guessing here, but 30,000 to 35,000 would seem reasonable, or somewhere between a third and a half of the entire annual volume for Toyota in Ontario.
So when a sister company of the world’s largest dealership sets up an alternative to car ownership, it’s time to take notice. Let’s dive in and take a closer look:
It’s news to few that car-sharing is a capital intensive business. Cars need to be purchased, maintained and cleaned, and then moved to appropriate locations. Notice the connection? Dealers do all of this already, and in the same way, Penske Dash is leveraging current Penske operations to support their roll out and ongoing operations.
As stated: “We (Penske Dash) can take advantage of infrastructure through our joint venture partners at Penske Corporation and Penske Truck Leasing, particularly on the service and roadside assistance portion of the carsharing business.”
So when a sister company of the world’s largest dealership sets up an alternative to car ownership, it’s time to take notice.
While Penske has not explicitly said how Penske Dash will affect its dealer or automotive operations, there was this note from its management: “The entire company will learn a lot from what we’re going to experience in this business.”
Clearly, Penske is in car-sharing to see how Car as a Service (or Truck as a Service) business model opportunities can be applied to its current businesses, and then identify learnings needed to make it a success.
I know the folks at Ridecell, Penske Dash’s car-sharing platform provider, so I decided to contact Mark Thomas, Vice President for Marketing and Alliances, for the inside scoop on Penske Dash. While unable to talk a lot about the actual Penske deal, he did say this:
“We believe dealerships have a significant opportunity to use a Car as a Service platform to help sell more vehicles. For instance, dealers are able to modernize the test drive experience to allow customers (to) reserve and test drive a vehicle without seeing a salesperson. Additionally, service loaner vehicles could be scheduled and reserved using a car-sharing platform.”
More specifically, I asked Mark about Car as a Service profitability, and if dealers should be concerned. He responded:
“Ridecell exists because we deliver profitability to our business partners through Car as a Service. Dealers are in the best position to capitalize on the shared mobility revolution. They have access to vehicles, real-estate for parking vehicles, service bays, and knowledge about insuring vehicle fleets. There’s a real opportunity there for them.”
I was also curious to ask Mark who would use Car as a Service.
“We see strong adoption in particular from younger, urban drivers. Millennials seem to be more open to pay-as-you-go services, rather than owning,” he said.
He’s right. The Annual Mobility Study, of which Vision Mobility participates, found that 58 per cent of U.S. citizens aged 18 to 24 agreed with the statement “If I didn’t have to own a car, I wouldn’t” — up from around 25 per cent of those aged over 65. Simply put, nearly six in 10 young people would not own a car if there’s a better alternative.
Here’s the crux of the problem for dealers: if younger people find a better transportation solution to car ownership, six times in 10 they will take it. For dealers who don’t offer a solution to this, they’re ceding their next generation of customers, and those behind them, to someone else.
Clearly, traditional car ownership ideas are changing among younger people, and this is exactly what Penske has its eye on. I suspect that this is the start of a far greater shift for automotive retail, and one that all dealers should be keeping a very close eye on.
