A glimpse down the road reveals dealers have as much opportunity as risk.
Automotive retail is a fascinating business. Not many people outside our industry understand that. It’s complex, vibrant and exhilarating. Get some of our industry in your blood and it’s the oxygen that we need to make each and every day a go. More and more outsiders are learning of the benefits of automotive retail.
The just released report from the Canadian Automobile Dealers Association, “Driving the Road Ahead: a view into the future of Canadian Automobile Retailing” is one example. All over the world pundits from outside our industry are predicting the dealer demise.
Those who understand the business, however, recognize that there are significant opportunities but also significant challenges as our auto retail world as we understand it is changing daily.
Our business tomorrow will be very different from our business today. How we adapt will dictate how successful we become. All aspects of our dealership will evolve in ways that will reshape our businesses going forward.
With 25,000,000+ vehicles on the road today and adding approximately 1,900,000 to 2,000,000 new vehicles every year, our car park is going to grow at faster rates than vehicles will be removed.
The car park will be largely internal combustion engine driven for the foreseeable future with EVs beginning to gradually penetrate the annual new vehicle sales volumes over the next decade.
Longer-term, our fixed operations will be impacted. Much is being said that electric vehicles will require much less service and maintenance. Early indications suggest that is true.
Our car park, however, is made up of mostly internal combustion engine vehicles that still have significant remaining useful life. This means that our roadways and service lanes will gradually see more electric vehicles however, for the foreseeable future there will be coexistence between the two. This does not spell doom and gloom for auto dealers. In fact, it spells opportunity.
The opportunity comes from the continuation of our core businesses, the expansion of those core businesses and the embracing of new opportunities. For the foreseeable future, our service lanes will continue to service internal combustion engine vehicles. Granted, as those vehicles improve, the service intervals become longer and the replace rather than repair impact takes effect. Thus, we will continue to see a downward movement in our fixed opportunities from our traditional fixed operations customers.
That statement is true if we assume that as new car dealers we simply rely on the servicing the vehicles during the warranty period. There’s a huge opportunity in segment two vehicles, mainly those over three years old and under seven years old.
Many customers vacate dealership service lanes at or towards the end of the initial warranty period. That does not need to happen. If we refocus and rebrand our shops we can take advantage of the segment two service opportunities that currently exist in the marketplace.
Segment two vehicles are out of warranty, are needed by their owners to facilitate employment and are in need of maintenance and repair to stay on the road. Remember that many segment two vehicles are still under long-term financing arrangements and the owners of those vehicles want to preserve their function and protect their value.
Part of protecting that value is to ensure that the vehicles are regularly maintained and repaired as required. New car dealers, however, are going to need to change consumer perception of high cost. Consumers are looking for affordability and transparency delivered fast and easy.
It may be that the business of the new car dealers on new vehicles may start to decline, but the opportunity in segment two vehicles is significant. Segment two could more than make up for the lost opportunity from new vehicles.
As electric vehicles are introduced they will require less service, less maintenance and fewer visits to dealerships. They will still require tires, brake repairs etc. but overall will require less maintenance. The fact remains, however, that consumers view these vehicles as complicated and will only allow those specifically trained on those vehicles to service their vehicles. They are more technology than mechanical.
That plays extremely well into the new vehicle dealer space. Today approximately one third of the vehicles on the road are serviced at new vehicle dealerships. With the introduction of electric vehicles by virtually all traditional automakers, I believe there is the opportunity to significantly increase the new car dealers share
of EV service opportunities.
Even though these vehicles will require less servicing, we will be able to increase volume and retention and as such I believe make up the difference in lost revenue per repair order.
There’s also the opportunity to share in the over the air repair options provided by auto makers to branded EVs sold from your dealership.
Time will tell how our service operations will be impacted, however, the time is right for new car dealers to take hold of the future and to reinvent their service operations to adapt to the new realities that we know are coming.
Dealerships of all shapes and sizes should expand their local reach within the automotive ecosystem by getting involved in other aspects of helping keep drivers on the road.
Collision centres will increase in significance over the next decade and present significant opportunity. Technology will make collision repair very complicated and expensive. Dealers do not have to do this all themselves. They can partner with other dealers to invest in or operate collision centres or take on collision franchise opportunities in their local markets. In this way, the dealer can participate in an increasing revenue stream and can also provide input to parts sales and service operations within their existing dealerships.
Dealers should strive to increase their share of driveway in their local markets. Many new initiatives will be introduced by brands and others that will present dealerships with expanded opportunities. This goes well beyond new vehicles. The future of serving the driving and riding public will offer many new opportunities for revenue growth. Dealers must remain tuned into the trends and lead the shift to new opportunities in local markets.
Yes, the times are changing quickly and our dealerships will need to pay attention and follow right along.
Successful dealers will see the opportunities and adapt their operations and offerings to take full advantage to service the driving and riding needs of all consumers in all Canadian markets.
