California is the largest vehicle market in the country and it has more retail dealerships than any state. Additionally, Honda, Toyota, Tesla, Fisker, Kia and Coda are just some of the manufacturers that are headquartered in California. And it is often said that as goes California, so goes the country, particularly in the automotive industry. So what is happening in California? Well, hybrid vehicle sales are up and, as hybrids are seen (but not heard) on the streets of California, concern has surfaced at the national level as to pedestrian safety. Meanwhile, vehicle manufacturers are seeing greater consumer demand for new technologies in vehicle connectivity and entertainment, which can lead to strategic partnerships with new technology companies and start ups. While retailers with a large California presence are using new technologies to boost sales and make their operations more efficient, thereby increasing profit in an era when manufacturers are squeezing them to sell more vehicles at a lower profit margin. All of this provides greater opportunity for new technology companies, entrepreneurs and start ups to gain entry into one of the largest and most robust industries in the nation. Here are the details:
The CNCDA reported earlier this month that the Toyota Prius was the top selling car in the California retail market in 2012. Not surprising, since J.D. Power reported on the Prius's booming sales back in September. Also, not surprising since the California Air Resources Board (CARB) imposed higher standards for its Zero Emissions Vehicle (ZEV) Program in 2012, as Car and Driver reported last year (it's a great article, by the way, and worth the read), causing an influx of Ultra Low Emissions Vehicles (ULEVs) and ZEVs into the California market, where the Prius already had a strong market hold.
Earlier this month, the National Highway Traffic Safety Administration (NHTSA) issued its Notice of Proposed Rule Making (NPRM) to impose new minimum sound requirements on ULEVs and ZEVs, as required by the bipartisan Pedestrian Safety Enhancement Act of 2010 (PSEA), which was supported by the Association of Global Automakers.
And in a recent survey by Booz & Co., 85% of OEMs responded that they expected to see new in-vehicle connectivity and entertainment technologies experience wide-spread adoption in the automotive industry, but only 38% of respondents stated that they intend to create their own platform for integrating digitization and connectivity themselves. PC World has even done a recent article on some interesting new vehicle systems that is worth the read.
Meanwhile, AutoNation, the country's largest automotive retailer, has reported profits running close to those reported before the recession, which profitability is partly attributed to its innovative use of technology and software to centralize its back-end operations and provide a more robust customer service and shopping experience.
And some manufacturers are now requiring dealers to track their on-line reputation as previously reported here and elsewhere.
What does all of this mean? Simple. The automotive industry is changing, embracing new technologies and ways of selling, both on the manufacturing and the retail sale ends of the business. Some of this change is spurred by government regulation, such as CARB's ZEV Program or NHTSA's rule making. Some of it is spurred by retailers' desires to become more efficient or the consumer's shopping and customer service expectations. Whatever their source, these changes create numerous opportunities for new technology companies and entrepreneurs to gain entry into a competitive marketplace.
But jumping in blind can lead to disastrous consequences if you are not prepared for the regulatory hurdles. It will come as no surpise to know that the automotive industry is highly regulated at both the state and federal level. And having represented dealers for 15 years, I've learned that it's true that dealers and manufacturers have a lot of influence with the regulators. I've also had the pleasure of representing startup new technology and e-commerce companies who have appreciated our efforts, and the benefits, of getting dealers and manufacturers on board early with a new product or service.
Many new technology companies and start ups have already gained a foothold in California, providing services to retailers, such as sale platforms, inventory control, advertising, analytics, market research and compliance services. For example, DrivingSales.com, Digital Air Strike, TrueCar, Cars.com, Compli, even Google, and others, to name just a few, provide services in at least one of those areas. But given the rapidity with which consumer expectations and regulations change in the California automotive industry, I predict that there will be ample room for growth in this sector in California for years to come.
And you can't beat the weather here.