Will dealers approve of Cox Automotive - Shift Partnership ?

[Cullen C]

The recent announcement by Cox Automotive to partner with Shift by essentially becoming the physical infrastructure for the startup makes me wonder how the rest of their dealer "partners" will respond:

http://markets.businessinsider.com/...motive-launch-national-partnership-1020466298

"Digital retailers need to recondition cars, store or marshal inventory and address other physical needs. "They want to do this with minimal investment in assets," Liniado explains, "and partnering with us helps them diminish their logistical overhead."

The article also explains that the partnership will not be limited to reconditioning and storage of vehicles but will extend to imaging and personnel needs as well.

Interesting times.

What do you think?

 

[Alex Snyder]

How do you feel about it Cullen?

 

[Cullen C]

How do you feel about it Cullen?

I think it will upset a lot of dealers. Cox/Manheim have provided recon services and storage for companies for years but this feels like a step beyond that. I think it Cox is being creative in trying to find new revenue but this could backfire.

 

[Steve Stauning]

I can't believe I agree with Cullen.



While, it's important for all industry vendors to embrace the coming/current changes in the retail and ownership models, this deal feels different. It might be nothing and dealers won't care, or it might give Shift the logistical support they need to grab share from traditional dealers in additional markets.

 

[Alex Snyder]

Last week we had Cliff Banks on RefreshFriday (watch it here) and we spoke a little about Cox's belief about the future. Mark O'Neil, COO of Cox Automotive, reportedly stated that Cox believes the future of automotive retail is in fleet transactions. He went on to say that over 50% of all automotive transactions will be fleet in the next 10 years and that Cox is transitioning to meet that change.

That outlook might help explain their desire to assist Shift.

 

[Cullen C]

Last week we had Cliff Banks on RefreshFriday (watch it here) and we spoke a little about Cox's belief about the future. Mark O'Neil, COO of Cox Automotive, reportedly stated that Cox believes the future of automotive retail is in fleet transactions. He went on to say that over 50% of all automotive transactions will be fleet in the next 10 years and that Cox is transitioning to meet that change.

That outlook might help explain their desire to assist Shift.

While I agree that a move to large fleets makes sense to support future mobility options I am not sure it means that we near a majority of transactions coming as fleet purchases. I can think of a couple of options for OEMs, the first would be the most seamless, allow dealers to be their fleet operators for new mobility options, similar to how some dealers offer OEM based rental options currently. They could also potentially ask captive finance groups to adjust their models to become fleet owners. These options only address alternative ways to dispose/utilize new car inventory. Used car inventory will continue to sold by dealers. They should offer supplemental mobility options such as subscription services but ultimately the market for individual ownership will remain due to the overwhelming advantage it provides in terms of affordability.

I think Manheim positioning itself as a reconditioning center is an interesting way to utilize their existing footprint and infrastructure but it absolutely infringes on the dealership model for profitability.

Still, I feel like this move is more than that. This is Cox essentially being an incubator for Shift. Allowing them to scale operations without the capital expenditure that would traditionally be a barrier of entry.

 

[Alex Snyder]

I am not sure it means that we near a majority of transactions coming as fleet purchases.

Yeah, we came to the conclusion the echo chamber is running a little deep at Cox these days.