AI IS all around us. In the automotive space, there would be a rare car retailer anywhere that does not have on the agenda the role of AI in the future of the dealership.

AI turns out to be the most committed member of staff a dealer could ever hire, especially in terms of contacting or liaising 24/7 with more customers at a level that no human sales staff could ever hope to match.

Think of a virtual assistant that accesses the dealership IT systems and reaches out in response to in-hours or out-of-hours leads, or reaches out proactively to service customers, and handles responses at a rate and with a persistence that no human can possibly match.

AI can march through the CRM and DMS, drumming up future sales and keeping in touch for required services that could otherwise slip away elsewhere.

It is the Energiser bunny that never throws in the towel and turns sales staff into sales heroes, enabling them to turn the 30 per cent of the online leads that fall through the cracks in the showroom floor into appointments and sales.

In this article, in the interests of helping dealers and OEMs understand AI’s potential, we publish an interview the corporate affairs manager of Cox Automotive Australia and New Zealand, Mike Costello, conducted in the US recently with the CEO and co-founder of Impel, Devin Daly.

This is an edited version of what Mr Daly said:

Q: How do we demystify AI? For a dealer using AI really well, what can it mean for a customer and how can we demystify it?

A: I think a good place to start is to think about what the customer experience looks like when you’re not using AI.

In the US, and I believe in Australia as well, a customer often goes to buy a vehicle, they fall in love with their vehicle, they fall in love with their sales rep. It’s the second largest purchase of their life. And yet after they buy the vehicle and drive off the lot, they almost never hear from that dealership again. If they do, it’s often HTML marketing content.

Devin Daly

So that is the state of play without AI. When you adopt AI, you instead have this 24/7 concierge that’s reaching out to the consumer, reminding them they might need service, nudging them, knowing they’re doing what’s right with the vehicle, which again just really enhances the customer experience, all the while improving lifetime value for a dealership.

Where is the US automotive market today in terms of the adoption of AI? And what are the main applications of AI being adopted by US dealerships?

Regarding US adoption, it’s accelerating rapidly. We believe this is the year of mass AI adoption.

Roughly today, 1/3 of dealerships use AI in the US in some capacity whether that’s marketing, advertising, accounting or conversational AI. More than 80 per cent of dealers surveyed plan to increase their AI budgets in 2025.

In terms of main applications, I would say sales response. There are a lot of challenges with having humans responding to a huge influx of inbound leads. They don’t respond overnight, they don’t do long-term follow up, a lot of times they don’t even answer the customer’s question. So AI can provide asynchronous sales follow up.

Second is instantaneous web chat. In the US market at least there are two forms of web chat solutions out there.

One is human staff, which results in 11-minute delays on average. Google just did a study; if your page doesn’t load in 1.1 seconds, you get de-prioritised. That’s how short people’s attention spans are today.

The second category is non-AI, a kind of glorified lead capture, which is really just using analogue scripted logic, and they basically make you submit your personal information before they’ll answer any questions.

AI has really allowed us to disrupt both of those types of different chat providers, providing instantaneous responses that really add value to the consumer.

The third big area we’re seeing AI be applied is for ongoing service outreach. Again, having that concierge-like experience reaching out to you, reminding you might need service, checking in, learning you have an oil change special that’s going on, letting you know if there’s a state inspection, etcetera.

If you think about the service life cycle, every year there’s probably about 50 touchpoints when you should be reaching out to that consumer. The average DMS in the US has 5000 leads. You start to do the math of how much outreach would be required to actively reach out to those folks and keep them loyal, coming back.

It is completely unmanageable using human staff and is a great task for artificial intelligence.

Do customers know that they’re talking to AI and do they care?

In the vast majority of cases, they do not know that it’s an AI. In the US market, we typically recommend that they name it like a staff member. Some dealers go so far as to put a picture on the ‘meet our staff’ page.

You would be shocked how often people honestly do funny things like ask the AI out for coffee or, in all seriousness, they will come into the dealership and they will ask ‘Hey, can I meet Michelle?’, which was the AI’s name.

Obviously in certain places there is required disclosure. So California, there’s a bot disclosure law, which we obviously adhere to and we will denote that you’re communicating with an AI agent.

The consumers love it though. You would be surprised not only how often they believe it’s a human and indicate that, but there’s often cases where a human will jump in and the consumers will actually ask: ‘hey, can I go back to talking to Michelle?’

They sometimes actually think the human is a bot and vice versa. In most cases, consumers don’t know, and they absolutely enjoy the experience of engaging with the AI.

Is there a degree of reluctance from dealers to embrace AI because of a fear it might take jobs?

Some dealerships can be scared that AI is going to take jobs. The reality is, any time there’s a major innovation, people are worried about job loss or job dislocation. In reality, things like the printing press, the automobile, and the assembly line ended up actually creating incremental jobs or labour opportunities.

What I would say is in the last year, we’re seeing large public dealer groups and large OEMs that are adopting AI, so I think that feeling is dissipating. And it’s our firm belief that if you don’t embrace it, it’s like dealerships that resisted the internet in the ‘90s or the early 2000s. You will be passed by.

Some dealer groups are seeing double the closing rates vs. dealerships in their group that are not embracing AI.

We firmly believe that in the next five years, there’s going to be an AI and automation evolution in our space. Dealership gross margins are 3-5 per cent, yet they’re massively human capital intensive.

It’s our firm belief that in the next five years, we’re going to see dealerships go from massive human capital intensity towards AI and automation to cope with unprecedented volatility and low gross margins.

In the US, are automotive OEMs who use franchise dealers adopting AI? And more importantly, I suppose, are they driving the adoption of AI within their networks?

Absolutely. I would say leading OEMs are not just experimenting with AI, they’re embedding it across their operations and mandating dealer adoption. I would say a couple things there.

Many OEMs in the US have invested in consumer data platforms (CDP), a centralised repository for consumer data, and they spent a lot of money and time and energy, and they failed to really figure out how to drive tier three dealership value from those CDPs.

Mike Costello

AI is the perfect activation of a CDP in that, number one, it allows for very long tail personalisation, leveraging those consumer profiles. But number two, we capture a lot of incoming information and data from consumers when they’re engaging with the AI that can be used to actually further hone those consumer profiles within the CDP.

The other area is dealerships realise that a lot of times the tier 3 communications are very brand non-compliant. You know, an OEM spends so much money on creating an incredible brand experience at the tier one level, but the tier three execution is very lacklustre.

Not using the OEM mystery shop guidelines, misspelling vehicle features, and more –  OEMs see an opportunity instead to establish those brand-compliant AI communication protocols at the tier one level and then cascade them down for tier three communication.

What is your advice for dealers who are not quite sure about implementing AI?

I think it’s really important to start with clear, measurable use cases. You treat AI as an enabler, not a replacement for staff. Start where AI can immediately reduce friction and remove organisational drag by offloading menial, repetitive tasks.

So things like lead follow up, service appointments, appointment scheduling, answering repetitive customer inquiries, these are areas where AI is already proven and success there will build confidence with incremental use.

Secondly, I would say it’s critically important that you choose a trusted partner that’s got a lot of automotive experience. In and outside of auto, there’s increasing evidence that verticalised AI will win out due to training with specific vertical data or industry-specific use cases. So, identifying a vertical specific provider, ensure they integrate with your existing tech stack, your CRM, your DMS.

Lastly, definitely have a focus on security. You want to work with an enterprise-grade provider. AI is not something you could just plug into ChatGPT and run wild. Unbridled AI is subject to hallucinating or lying about your business. It will not drive business outcomes. So, identifying somebody that is enterprise-grade and has those security measures in place is really critical.

Footnote: Impel is an industry leading AI platform that powers aspects of Cox Automotive Australia’s LeadDriver customer lead-management software.