REF­ER­ENCE MARK The chang­ing busi­ness model of auto shows

The chang­ing busi­ness model of auto shows

Motor Trend (USA) - - Contents - @markrechtin Mark Rechtin REF­ER­ENCE MARK

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.

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