Living in San Francisco, Michia Rohrssen hears from his tech buddies all the time about how dealerships are going away and how everything will soon be transacted online, but his new startup — Prodigy — is directly opposed to that idea, he told Auto Finance News.
“I firmly believe that dealers aren’t’ going anywhere, but if you look at the number of dealerships in the U.S. it is shrinking, especially the number of owners is shrinking — they’re consolidating,” said Rohrssen, chief executive of Prodigy. “We’re going to continue to have this trend where maybe a dealer cut it 20 years ago when margins were three times as high and business was frankly a lot easier because you were selling to your local community and now you have to be really competitive. What you’re going to see is dealers adapt to technology and adopt new ways to serve their customers better and those dealers will be able to survive the various changes in the industry.”
His platform plugs into a dealer’s existing CRM to connect with lenders so that the transaction can be done electronically in the store. Because it works over top existing systems, Prodigy connects to 1,300 lenders, all three credit bureaus, and every OEM Rohrssen said.
The similarly new startup Honcker does the same thing but users browse inventory cars in an app from home, while Prodigy only works in the dealership. Online sales might be in Prodigy’s future, but as of now that segment still only makes up 1% or 2% of sales, he said.
Even if online sales pick up as they are expected to in the future, dealers have a huge monetary incentive to stay in the game, Rohrssen said. Dealership taxes represent $205 billion in revenue to the U.S. economy each year, which is more than the GDP of 143 countries, he added, citing statistics from the Alliance of Automobile Manufacturers.
“There are a lot of things that are in dealerships favor to stay around and continue to be that source where people go to buy a car from, but I do think the model has to change a little bit,” he said. “A shift to less of the old sales guy stereotype who is trying to bend you over and really rack up the deal, and you’re going to see more customer advocates and trusted advisors of the dealership.”