A Global Perspective on the Future of the Franchised Auto Dealer

An elite panel of Australian and international retail automotive industry leaders has discussed the potential pitfalls and possibilities for the franchised automotive industry as we head into the future.

The pre-convention session ‘A Global Perspective on the Future of the Franchised Auto Dealer’ kicked off events at the 2018 AADA National Dealer Convention at the Gold Coast Convention and Exhibition Centre on Monday afternoon.

Hosted by Charlie Vogelheim – “The Car Guy” – from San Francisco, the panel also included AADA CEO David Blackhall, NADA chairman Wes Lutz, CADA Director of International Affairs Alan Wang, and Glenn Mercer, one of the USA’s leading retail automotive researchers.

International customer relations expert Charles Mills, Deloitte Motor Industry Services partner Dale McCauley and ANCAP CEO James Goodwin completed the line-up for the 90-minute session.

Most of the panel agreed that the rate of change in the industry would be slower than hype suggests, with Mr Mercer pointing out that many predictions for radical change in the past have not come to pass. Mr McAuley said Dealers would have the opportunity to adopt trends, rather than be overtaken by them – although he did stress the need for Dealers to reinvent themselves, to “disrupt yourselves or you will be disrupted”.

Mr Mills said Dealers needed to move from the ‘vertical silo model’, in which each department of the dealership tried to extract the maximum amount from a customer per transaction, and instead ‘think horizontally’ to maximise the amount earned over the life of the entire customer relationship – because the disruptors are.

Today’s customers are wiser, Mr Mills said, and rely on recommendations from friends and family. “Are you getting recommendations?’ he asked, pointing out that close rates are between 35% and 48% for referred customers.

Mr Lutz drew many parallels between the Australian and American industries, including the importance of the respective Dealer associations, pressure from OEMs, consolidation, the impact of technology, and the reality that there would be winners and losers – with all the resultant opportunities.

He reiterated the view that change will be slower than forecast, and was confident Dealers would adapt.

One area of opportunity would come with the advance of technology. Mr Goodwin said this would result in Dealers having a greater role in explaining various features and functions, with test drives more important than ever.

Mr Mills agreed test drives were more important than ever, but pointed out that they are actually down – “Yet we know that if we get butts in seats, our close ratio goes up”.

When it came to autonomous vehicles, Mr Goodwin said consumers were driving change: they don’t like congestion and would prefer to be busy and productive instead of stuck in traffic. He said Manufacturers were potentially the biggest disruptors of the Dealer model. Mr Blackhall said Dealers must work in partnership with the OEMs but also called for greater transparency from Manufacturers towards their franchisees.

Mr Lutz said the move to electric vehicles was not a disruption, but an opportunity to sell more cars. There are 17 million cars on US roads, and Dealers would love to swap them out. He said there was a 10% drop in the serviceability of electric vehicles, but Mr McAuley said the service department presented the greatest area of opportunity for Dealers going forward.

The Chinese retail automotive industry is only two decades old, with Dealers there still in the high profit stage. As such, Mr Wang said CADA would pay close attention to the issues and challenges facing their Australian and American counterparts.

In China, where electrification is government-mandated, there was a 150% increase in EV sales in 2017, and dozens of Chinese tech companies were making electric vehicles.

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