As we start 2022, dealers have navigated very successfully through 2 years of disruption, and they have a lot of reasons to be grateful to their management teams and staff for their flexibility and efforts. Of course, there is no going back to the 2019 normal, there are more headwinds with staff shortages, new car supply issues, a move to electric, adapting to digitisation, potentially an agency model but offset by exceptional profits on used cars.
These kinds of challenges have already been mastered by other market sectors and typically the players that adapted have done very well and others have been consolidated. Either way, it makes a lot of sense to focus on building cash & EBITDA in 2022. This will build a pot for future investments or maximise shareholder value. I’m reminded of the classic John Kotter’s business fable where the penguins come to realise that their iceberg is melting, they construct & execute a plan to become more nomadic in order to thrive again - and thrive again they do.
There are 3 areas to focus on in 2022 and are controllable & manageable - Staff/Skills Shortages, Aftersales and Used Cars. In this blog, we will go into more details on Aftersales.
Whilst the market is likely to be contracting in the longer term, there are & will be opportunities to buck the trend, some of which may not be invented yet. For 2022, the best advice is concentrating on the upsells, whether this is VHC or even proactive upsell of batteries for electronic keys etc. Some RWA customers have made considerable gains in 2020 on VHS execution with our data analytics Business Intelligence (BI) solutions, we see others that have not tackled this yet. Longer term, we would expect to see a further drive for efficiencies and diversification through acquisition into other associated areas such as tyre businesses etc.
In the next 3-5 years, Aftersales is likely to go through a period of unprecedented change driven by the Electric Vehicle (EV) penetration. We don’t know exactly what that will look like, but it will be very important not to get left behind.
The National Franchised Dealer Association (NFDA) has initiated a process for industry aftersales benchmarking in partnership with RWA Automotive. It is based on operational data, and it is offered as a free service to its members. Many of the most proactive dealer groups (totaling 400+ Workshops) have already contributed to the benchmarking with their 2021 figures with the following results:
- Parts & Service sales are showing a significant bounce back from 2020 with like for like increases of +17% & +12% respectively.
- On Vehicle Health Check (VHC), the proactive groups are checking 92% of all retail vehicles, with Red work sold equating to £130 per check and £32 for Amber.
This type of information is invaluable to dealer groups which want to drive their business in this era of change. This give them to confidence to be able to challenge existing internal practices but also not have unrealistic expectations too.
Other critical information that is collated on the survey is:
- EV Sales as a % of total
- EV Service Sales as a % of total
- Average Sales/Margin per EV throughput.
- More granular VHC information such as £ Identified & % sold
- Workshop Idle time as a %
- Number of Technician Vacancies per Workshop
- Number of Apprentice Vacancies per Workshop.
All of this information is presented back to each respondent with an anonymised comparison to their peers showing how they have performed. Each dealer group is given a quartile score, 1 being top 25%, 4 being bottom 25% etc.
This is not meant to replace other industry Benchmarks which are excellent at providing high level comparisons. However, in terms of moving the dial, this gives you the actionable metrics needed to protect and maximize the profitability of your Aftersales business.
To avail of this free service to the industry, please contact firstname.lastname@example.org
Sue Robinson, NFDA Chief Executive, commented:
“We are delighted to work with Real World Analytics to introduce the Aftersales Benchmarking, which will provide useful, operational insights to franchised dealers”.
John Hogan CEO of RWA Automotive commented:
“The NFDA have over 3,000 members with an under-utilised treasure trove of data. In partnership with the NFDA we have come up with a simple way to gather the data and present it back in an easy to understand format”.
John Hogan is CEO & Chief Data Scientist at RWA Automotive who helps dealer groups become more efficient with actionable drillable dashboards & reports. Visit here for more details about RWA.
The article is previously published in Auto Retail Bulletin January 2022 and March 2022 issue.
About RWA Automotive
RWA Automotive provides a cloud-based Business Intelligence (BI) solution that helps you become a complete data-driven dealer group. By bringing all your data into one place and delivering actionable insights to different levels in the business, everyone has the right information at the right time to do their job efficiently. The management will be presented with executive dashboards where they can drill down to the details for further investigation. Your managers in the outlets get reports such as DOCs delivered to them automatically so that they can action issues on the spot. The solution is designed to help you stay on top of your business with all the information you need at your fingertips.