Can we agree that the automotive industry hasnot experienced many disruptive events over the last two decades that would cause a corresponding reactive and disruptive change in the way retail sales are conducted? Looking back, there have been perhaps just two disruptive events in recent years to consider.
First there was the catastrophic collapse of the retail market in 2007. The drop in SAAR impacted industry-wide profitability and dried up the availability of lease vehicles for years to come. It also forced the closure of point locations as OEMs tried to make the franchise network more efficient. The response within our industry was the beginning of an inflated use of incentives to drive sales, a push to greater efficiency, and increased competition between stores for a scarce consumer. As an industry, we really did not significantly change the way vehicles were sold.
The second disruptive event was very brief and, looking back, it would no longer be viewed as a disruptive event. In 2015, Berkshire Hathaway acquired the Van Tuyl Automotive Group. Suddenly, there was a PR campaign addressing why “the” financial titan of our time would be entering the automotive industry.
As reported in “Automotive News” in 2015:“This is the beginning of a journey that will have no end,” Berkshire Hathaway Inc. CEO Warren Buffett said today in a statement.“Cecil and Larry [Van Tuyl] have given us the ideal platform with which to build an auto dealership business that will be thriving and growing 50 and 100 years from now. The fun has just started.”
The concern at the time was that this was the tipping point to a radical change in automotive retail. Thomas and I were present at J.D. Power Automotive Forum in New York when Buffet was being interviewed about the acquisition. The buzz was around substantial consolidation and a dramatic change in the way cars would be sold. It did not happen. Warren Buffett let the group run its business independently and was supposedly more attracted to the stability of the franchise business model and the profits gained in the F&I portion of the b
