I just returned from spending three days at the National Automotive Dealers Association (NADA) Annual Conference in New Orleans. As always, the food and entertainment in New Orleans were excellent. But NADA was definitely the biggest show in town – and in many respects, the most entertaining.

Automotive retailing has been through some pretty significant changes in the past 10 – 15 years. But the business is on the cusp of further changes over the next few years that will dwarf those we’ve seen to date.

These changes have several drivers (not unlike some family cars!):

  • Markets
  • Demand Structure
  • Technology

The show was extraordinarily international. Nearly 150 attendees came from Brazil. Over two dozen came from Russia. Dozens more came from England, Germany, France, Italy, Australia, and many, many other countries. Dealers, of course, are key to automotive markets, and I believe they always will be.

The economies of scale needed for auto manufacturing dictate that there will never be more than 5 – 10 major global car manufacturers. But the thousands of dealers worldwide own the relationships with the customers and understand the specific, and sometimes unique, cultural, economic, and performance needs of their countries or regions. It is these dealers who will translate those needs into delivered automobiles to meet their markets’ demands.

The ways in which that demand will manifest itself are also changing. One result of these changes is that the demand for cars, relative to population, will likely drop significantly while the percentage of people driving cars substantially increases. Whether these changes create a net increase or decrease in the demand for automobiles remains to be seen, but the patterns of that demand will certainly change.

The idea that each adult person will purchase, maintain, and fuel their own car is beginning to fade. The emergence of such services as DriveNow in Munich and ZipCars means that many people who wish to use autos will simply rent them by the hour or minute rather than go to the expense and overhead of purchasing them or leasing them on a long-term basis.

As we see self-driving cars beginning to appear, more changes will take place. The first generation of self-driving cars will still require an adult driver to be present in the driver’s seat, so the ratio of cars to passengers will not likely change much. But, within the next decade or so, completely autonomous vehicles will profoundly affect this ratio.

Imagine this scenario, for example. One person goes to an office each day while their spouse works primarily from home. The car drives the office worker to work, then returns home in time to pick up the kids and drive them to each of their schools. After dropping off the children, the car returns to run the home-based spouse on a couple of errands. When those are completed, it goes back to the other spouse’s office to take them to a lunch meeting. On its return from there, it takes itself in for a scheduled maintenance appointment which is completed in time to pick the kids back up from school in the afternoon, and so on.

With these capabilities, it is easy to see how the family with two or three teenage drivers which, today, might have three or four cars; could easily get by with just one or two – especially with ZipCars or DriveNow also available. In fact, both models might be combined. People could reserve a ZipCar for a specific time or just ask for the nearest available car. Then, instead of the person going to get the car at a rental station, the car would drive itself to the person’s location.

At first, it might appear that these two factors, combined, would cause a great decrease in the number of cars needed to support a given population. But that perspective fails to account for the fact that, with the overhead of having to own an automobile or rent one on a daily basis eliminated, the barriers to entry to the use of cars would be dramatically lowered. Literally billions of people for whom the benefits of using a car are economically unavailable today, would find themselves able to purchase the use of one for brief periods far more cost effectively. And, as fully autonomous cars come onto the market, these people wouldn’t even have to know how to drive!

Autonomous vehicles depend on quite sophisticated technology being built into the automobiles as well as, to some extent, into roadway infrastructure. But information technology, especially of the kinds beginning to be deployed by auto dealers will have equally profound impacts on the business. And this is important, because car dealers are better positioned than any other entities to manage and profit from these new business models.

Dealers, uniquely, can combine their knowledge of local markets and demand patterns with fleet management, maintenance, and deployment capabilities. The smart dealers will do this either on their own or by partnering with companies providing the requisite logistics capabilities.

And many of the IT tools that will be needed are there for dealers to implement today. On the show floor, I saw advanced dealer management systems, innovative inbound and outbound marketing systems, and sophisticated maintenance and dealer prep planning and scheduling systems. These systems work in the cloud, utilize mobile communications, take advantage of Big Data and predictive analytics, and even use Artificial Intelligence.

Those who fail to adapt will quickly see their market share, growth, revenues, and profits eroded. But, progressive dealers who look forward not just a year or two, but 5 – 10 years, and who plan carefully, can implement the technologies and processes, and hire and train the right people to ensure that they meet not only the demands of today’s markets, but those of future markets for many years to come.