REFERENCE MARK The changing business model of auto shows
The changing business model of auto shows
There have been a lot of think pieces written recently predicting the demise of the big-time auto show. Reasons include the rise of self-driving cars, car-sharing, and anonymous electric vehicles that could siphon the joy out of car ownership. Long term, these prognostications might be right. But for now, people still see the purchase of a car as special, and an auto show is the best place to see all the sheetmetal in one place.
Some automakers are leading a shift away from auto shows. At last fall’s Frankfurt Motor Show, Nissan, Peugeot, Fiat, Volvo, Jeep, Mitsubishi, and Infiniti all gave the Messe Frankfurt a pass. Likely it’s because German brands carry 60 percent domestic market share (no foreign brand has more than 3 percent share), and therefore the show was seen as a poor investment. Also, the show is a political swamp—where non-german automakers’ press conferences are relegated to distant halls and pegged against the home team’s preferred schedule.
Similarly, Porsche, Mercedes, and BMW have pulled out of the Detroit auto show, mostly because they do relatively little business in the Detroit metro area and it costs $100 per chair to get a union tradesman to set up a press conference. Other automakers walked away from Detroit because they had nothing new to announce, they hate being stuck in frigid Detroit in January, and the show directly competes against CES. The latter two reasons are why the show is considering moving its dates to October.
And for its media days, the Los Angeles Auto Show renamed itself Automobility LA (with an affiliated autonomous-car conference) because it wants to seem at the forefront of self-driving cars but also because its second-tier vehicle introductions failed to generate sufficient media buzz, and it needed to rebrand.
Some believe auto shows are on the decline because we’ll all be in selfdriving or shared cars within the next decade—which will make personal car purchasing obsolete. And for that reason, the L.A. show organizers look prescient. But as the fatal autonomous Uber vs. pedestrian accident in Tempe, Arizona, in March evidences, we might not be on that fast track to autonomy. (Revisit my column in the March issue for a refresher course on that topic.)
Let’s not forget the inherent business model of the regional auto show. It’s not about about concept cars; it’s about building dealership traffic with purchase intenders. Sure, there are pricing pressures on every automaker’s marketing budget. But there’s no ignoring the sizable downstream revenue that comes from consumers being able to view acres of sheetmetal without feeling pressured to buy.
The L.A. and New York auto shows have generated 1 million turnstile counts for decades. (Recessions slow attendance a bit, but there’s a rebound when the economy recovers.) And despite being held in the grip of winter, Chicago and Detroit are close behind in attendance. You know a car show is healthy when floor space has grown by 75,000 square feet in the past two years, as Chicago’s has. And hundreds of thousands of Chicagoans braved Snowmageddon to check out the new Chevy Silverado— which had been unveiled the month before in Detroit.
Some could argue, “Of course you’re
gonna love auto shows. Motor Trend sponsors about 20 of them.” And those folks would have a point. Motor Trend produces regional auto shows—from Milwaukee to Memphis, from Anaheim to Orlando—because it’s good business. Not only is attendance on the rise, but the percentage of folks deep into the “purchase funnel” who attend local auto shows is also really high, and it’s not wavering. Data from Foresight Research shows that nearly a halfmillion folks who attended auto shows last year moved much further into the buy-it-now headspace after attending. Can’t argue with results.
During a typical year, automakers sell between 15 million and 17 million vehicles in the U.S. When healthy, the car industry is a $600 billion retail business, year in, year out. There’s no sign of that diminishing.
Look, if auto shows were dying, we’d see the public voting with their shoe leather (as is the case with declining movie theater attendance). But for now, the turnstile counts remain strong. Yes, auto shows and automakers are adjusting their business model to account for the changing competitive landscape, internet shopping, social media, and virtual reality. What we’re seeing is that Americans still want to see the sheetmetal, sit in the seats, and kick the tires. n
We might not be on the fast track toward autonomy— or the decline of auto shows.