🔒At 100, Hoffman Auto Group embraces a digital future

Jeffrey Hoffman has been through six business cycles during his career and while the pandemic may have been the most unique, it wasn’t the most challenging, he said.

“The most challenging was going back 30-plus years and the major downturn stemming from the collapse of the stock market in 1987 and then from there the collapse of the real estate market,” said the 70-year-old Hoffman, who is co-chair of the well-known central Connecticut car dealership, Hoffman Auto Group. “All businesses in New England were greatly affected by it.”

Hoffman started at his family’s privately-held business in 1972. His co-chair brother, I. Bradley Hoffman, joined a decade later. Together the Hoffman brothers have shepherded the business through ups and downs of various markets. They’ve also transformed the company over the years.

Hoffman Auto Group is marking its 100-year anniversary in 2021, having grown over the last century from a single car agency on Route 44 in New Hartford to a diversified automobile company with 10 dealerships (in East Hartford, New London, Waterbury and Avon/Simsbury), nine brands, two collision centers and even its own insurance agency.

But things haven’t always been easy.

During the early part of the pandemic, Hoffman Auto Group was forced by state decree to close its showrooms, although its collision and service centers were deemed essential businesses and remained open. It received more than $1 million in Paycheck Protection Program loans to help get it through the downturn.

And now supply chain issues are posing the biggest headaches. A microchip shortage has significantly slowed the production of new vehicles, leaving Hoffman and most other dealership lots less full.

Still, Hoffman Auto Group hasn’t stood still over the past 18 months. It recently launched Hoffman At Home, a new website that allows customers to buy their vehicles completely online. That’s the future of the industry, the brothers agree.

In January, the company also opened a new multimillion-dollar BMW dealership on the Cheshire/Waterbury line.

Hoffman Auto Group is also in the middle of a court battle with Tesla, over the electric-car giant’s efforts to open a service center in East Hartford. The Hoffmans have been at the forefront of auto dealership opposition to Tesla’s attempts to sell directly to consumers in Connecticut.

State law currently forbids the practice, but Tesla has lobbied lawmakers hard in recent years to try to relax Connecticut’s dealer franchise law.

Amid all that, Jeffrey and Bradley, 61, are grooming the fourth generation — their sons, respectively, Matthew and Jonathan and Zachary and Joshua — to eventually take over the family business. No retirement dates have been announced, at least publicly.

Jeffrey and Bradley recently sat down with the Hartford Business Journal to talk about the past, present and future of the Hoffman Auto Group and the industry in general.

They said the key to the Hoffman brand’s longevity has been establishing trust with consumers and other stakeholders.

Here’s what else they had to say.

Q: How important is the 100-year milestone?

Jeff: It’s an enormous deal for us. I don’t know in the state of Connecticut of another car company that can say they are 100 years old. Also, when you see what’s happened in the last 100 years, the changes that have occurred, you realize it’s unbelievable.

Q: How long do you guys intend to be in charge and what’s the plan for the next generation of leadership?

Brad: First of all, there are four members of the fourth generation in the company right now. Two of my sons, Zach and Josh, and two of Jeff’s sons, Matthew and Jonathan.

I look at Jeff and I as coaches or mentors preparing the next generation to take over the company. I really enjoy developing people. I think if I wasn’t doing this I’d be a teacher.

With our boys they aren’t new at this. They’ve been doing this awhile and they each have different roles in the company.

All four of them worked for someone else for at least a few years before they came on board. They each had other jobs before they jumped into the company.

Jeff: Brad and I had a brotherly agreement years ago that while something can be a birthright, the reality is our sons had to have their own experiences and successes, either in a different field or in the automobile business, but working in other places.

Brad: We also have a five-person leadership team in place at the company who are non-Hoffmans, along with our four sons, and together they will all run the company as we ride off into the sunset, whenever that day should happen.

Q: I noticed your company has its own insurance agency. How did that come about?

Brad: It’s a fairly new venture for us. We got into it maybe five years ago. There is a dealership group out west that had it and it’s a great support mechanism for people buying automobiles.

It offers a one-stop shop service but what’s evolved from it is we are actually selling home insurance, life insurance, etc. It happens to be in a dealership but it’s an insurance business supported by Allstate.

We also have employees who are purchasing insurance so it’s a nice benefit for them.

Q: Hoffman Auto opened a facility in Waterbury earlier this year. Is that the most recent expansion?

Brad: Yes, that’s our BMW facility. We originally opened it in Watertown but we moved it to our new dealership on I-84 on the Waterbury/Cheshire line.

It’s a spectacular site. I think one of the things that is really attractive to us is that it’s a great location with 120,000 people passing by everyday. But I think the other part is that we are central Connecticut guys so this moved the dealership closer to Hartford than the previous location.

From a servicing, oversight and management standpoint, it’s a better fit.

Q: How has the pandemic impacted the business? Has it changed the business on a permanent basis in any way?

Brad: One of the things I’m really proud of is we didn’t lose anyone to the pandemic. We were insane about safety at the workplace. We were always ahead of the [Centers for Disease Control] guidelines.

In terms of the impact on operations, we may look back at the pandemic as one of the most important things that helped our company. There were several initiatives that we wanted to get off the ground before the pandemic that were struggles because change management is not an easy thing. People are used to doing business the same way, especially if it’s been successful.

We really elevated our game during the pandemic in the digital platform. We launched Hoffman at Home, which essentially allows people to do the entire car-buying experience from their living rooms like you are ordering a pizza. Everything can be done from your phone or tablet; you don’t have to move.

This service has changed our whole culture.

Q: So, are online sales a big growth area?

Brad: It’s a massive opportunity for us. It’s what people want.

Hoffman at Home right now allows you to build a deal from A to Z at home. Or, you can start to build a deal at home and then come into the showroom to test drive the vehicle. It saves people significant time. You can go from [as long as] a 4.5-hour car-buying experience to as quick as 45 minutes.

On the sales side, it’s somewhat brand specific, but if you were to lump in everything, the majority of the sales are being initiated online. Some brands can be up to 80%.

Eventually, I think it will be 100% in five years. Most people will do most of the sale online and come to the showroom to test drive the car. The percentage of customers who totally build their deal online through Hoffman at Home is in the range of 25% depending on the brand.

What shocks me now is how people will spend $100,000 on a car and never touch it until it’s delivered.

Q: How is the microchip shortage impacting business?

Brad: It’s affecting us like every other car dealership, inventory is down. Everybody’s in the same boat. It’s going to be difficult for a while.

But [manufacturers] are squeezing out some product. If you take Audi as an indicator, they are showing production in the fourth quarter going up from the third quarter.

One of the positives of the shortage is it’s allowed us to become a much better operator of pre-owned vehicles.

We are selling a record number of pre-owned cars because we are finding all these avenues to acquire them via trade, not just auction.

People are selling their cars privately because they know the values have gone up.

We also have tremendous traffic in all of our service department drive-thrus.

New cars will be difficult for a while. A lot of people are extending their leases to wait out the shortage.

Jeff: No one can predict how long this will last. It’s impacting so many industries.

If you look at the national totals, they think in our industry, a sweet spot in volume is 17 million new cars and trucks a year and they think in 2021 we could be in the 14-million range.

When you are off 20% that’s a significant number.

Q: What do you see in the next 10 to 20 years in terms of the biggest changes to the business?

Brad: The challenges and opportunities for the next generation will be completely different from what we faced.

Clearly, electric vehicles will be a player and how you service customers will change.

Jeff: The No. 1 change will be the customer experience. When my brother and I started out in the business, the manufacturer would dictate what the customer would get as an experience and what you would buy.

Over the years that has changed with a greater emphasis on what the customer is looking for.

The way society is going in general is that people want to get as many things as possible from their phone without getting out of their chair.

Q: If more people are buying cars from their phones, will this change your real estate needs?

Brad: We have a lot of square footage. One thing we did recently is we took a big chunk of our Toyota building in Avon, in the service area, and turned it into a centralized call center for service appointments to try to improve customer response times. We have 10 full-time people working there.

It’s a centralized service center, so service phone calls or internet leads are no longer going to the dealerships anymore. What’s happened as a result is people’s calls are answered immediately by a person and it’s a proactive department, we are going after the business with follow-ups and appointment reminders.

That’s a good use of the space. Previously, we probably had $50,000 of too many parts taking up that space, sitting on the floor.

Jeff: There is a focus on investing more in service and parts and less on brick and mortar.

Q: You guys have been out front in your opposition to Tesla being allowed to sell directly to consumers in Connecticut? Why is that model not good and why is the dealership model better?

Brad: First of all, we think the Tesla is a good product. We have a problem with the business model itself. All the dealerships in Connecticut think it’s really anti-consumer to side step the dealerships and allow Tesla to sell directly to consumers.

It’s not that we don’t want Teslas sold in Connecticut. We are very pro electric vehicle. Virtually every car line we represent has an electric vehicle. We have charging stations in most of our dealerships. By 2030 up to 100% of the vehicles will be electric.

From a competitive standpoint we don’t think it’s good for the consumer to not have the dealership franchise system in place. Dealers are advocates for every customer with the manufacturer. We provide important consumer protections.

For example, SAAB was a very viable brand in the state and they just left [years ago]. They had all these customers here and we honored their warranties. We didn’t have to, and it cost us six figures-plus, but we did it anyway.

At the end of the day, we are the ones in the communities, giving our time, not just our money in helping the community.

This is a pretty passionate subject for us. Tesla is trying to circumvent the law.

Jeff: There is an employment aspect to this as well. Dealers employ over 16,000 people in the state. The franchise dealership model has been successful for 100 years. We don’t see a need to change it now.