Welcome to the 2019 National Automotive Dealers Association (NADA) Review. Edition 1

Transcription

1 Welcome to the 2019 National Automotive Dealers Association (NADA) Review Edition 1 February 2019

2 Contents Introduction 1 The state of the US retail automotive market 2 Key Performance Indicators for automotive retailers around the world 2 USA state of the industry NADA data 2018 mid-year update 3 The best ideas from NADA 20 Groups 4 Guided dealership tour Toyota Sunnyvale, San Francisco Bay Area 6 Google automotive presentation NADA Review Edition 2 8

3 Introduction The 2019 National Automotive Dealers Association (NADA) conference was hosted in San Francisco January 2019, and we were delighted to be in attendance. This annual event continues to be the largest retail automotive convention in the world with over 22,000 people attending from over 50 different countries. The theme of the conference was Focus on Innovation. An appropriate theme for the NADA event given San Francisco and the Bay area is a global leader in innovation with organisations such as Airbnb, Google, ebay and Facebook have headquartered there. As part of the Australian Automotive Dealers Association (AADA) Study tour, we were lucky to visit the HQ s of Google and ebay. Despite the focus on innovation the messaging was very much digital retail is just a tool, not a mission. As noted in the NADA Daily Magazine, buying a car simply is more complicated framed by a century of laws layered upon each other and a much bigger purchase than a pair of Cole Haan (shoes). So it s ok if the process takes longer than a pizza delivery. So it makes sense that digital retail is a tool, albeit an important one, but not the end-game. Highlighted in this edition are key takeaways from the conference and learnings from the Best ideas presentation from NADA 20 Groups, a guided dealership tour of Toyota Sunnyvale, Bay Area and presentation held by Google Automotive at Google HQ. We certainly learnt a lot and are more than happy to pass on our learnings to you. Happy reading. John Gavljak Partner Automotive 1

4 The state of the US retail automotive market In 2018, the US achieved a strong number of car and light truck sales of 17.2 million units an increase of 0.5%. Light trucks were popular in 2018 accounting for 69.2% of all light-vehicle sales while the car market share fell to its lowest point in US automotive sales history. According to NADA, aside from US stock market volatility, most other economic data (tight labour market, accelerating wage gains, high consumer confidence and low petrol prices) suggests that new vehicle sales will remain robust. For 2019, NADA expects new light-vehicle sales to fall slightly to 16.8 million units. Key Performance Indicators for automotive retailers around the world Off the back of our study tour to NADA, below are some international benchmark comparisons (for non-luxury dealers). Key Ratio Australia US UK Net profit % of sales 3 3.5% 4% (nat. average 2.6%) 3% Fixed absorption 55% minimum 100% 80% Used to new retail ratio 0.5 to to to 1 Used vehicle inventory New vehicle inventory * Labour hours per retail RO Service gross profit as % of sales 65 68% 68% -* Parts to labour ratio (national average) -* Parts gross profit % 23 25% 38% 22% *Data not made publicly available. Source: Pitcher Partners, NADA, ASE As we can see across mature markets for automotive retailers, similar results have been achieved. However, in the area of used vehicles it appears that Australia has room for significant improvement. 2

5 USD 16,794 TOTAL NEW-CAR DEALERSHIPS CALIFORNIA Highest dollar sales for all dealerships USD 59,119,125,130 ARIZONA Highest dollar sales per dealership USD 49,459,312 TOTAL DEALERSHIP SALES USD 503,859,356,600...per dealership USD 30, 002,343 USA state of the industry NADA data 2018 mid-year update SOLD USD 20,390 AVERAGE SELLING PRICE OF USED VEHICLES SOLD (by new-vehicle dealerships) USD 35,249 AVERAGE SELLING PRICE OF NEW VEHICLES SOLD 435 AVERAGE NEW VEHICLES SOLD PER DEALERSHIP Domestic 2,074,200 NEW-CAR INVENTORY 3,983,600 NEW-VEHICLE DAYS SUPPLY + 82 Domestic Import 1,909, Import TOTAL NEW VEHICLES SOLD THROUGH JAN-18 TO JUN-18 38% Percentage of dealerships operating on-site body shops Average age of vehicles on the road (Q1 2018, cars and light trucks) 8,574, YEARS Source: NADA 3

6 The best ideas from NADA 20 Groups Tim Gavin, 20 Group Consultant from the NADA 20 Group conducted a session at the 2019 NADA conference on the best ideas and practices from the top performing automotive retailers with key tips for every automotive retailer regardless of franchise, market or sales volume. His insights are as follows: 1 Marketing window sticker: We have your car Sticker is put on every new vehicle next to MSRP level Tells the customer there is more inventory Attention! If you don t see the vehicle you want, please let us know 7 Signage Service intervals Tyres Give the customer all the information Let the customer upsell themselves/options Always supply the most expensive option 2 Marketing window sticker: Benefits of lease Good Better Best 3 Benefits of leasing: Higher grade vehicle Closer to your budget Peace of mind No haggle on trade-in First responder discount program Create an ad using a photo of actual first responders local community focus 8 9 Smart phone service app When you deliver a new or pre-owned vehicle, have the salesperson (with customer s permission) install your dealership s service app on your customers phone Battery test At every service, test the customers battery 15% upsell in new batteries 4 5 Promote the discount program through traditional and social media Video appointment confirmation Send the customer a video of car - This is your car, this is me showing you your car! Subject line of A video of your car Recondition your wholesale units Beauty sells Light detail, inside and out Build the detailing cost into trade appraised New tech, new toolbox Offer to sell a new toolbox for $1 If you stay, after 18 months of service you get to keep it Colour coded folders in service Green folder = less than 75,000 and 5 years old (might be getting CSI) survey Black folder = regular customer to the service department Orange folder = pay attention to this customer (VIP) 6 Source pre-owned vehicles outside the auction Street purchases Dealership website Facebook Cold calling Other dealer s websites Lease turn-ins We pay cash for cars! Red folder = come back Risk - free inspection Not 16 point check but 81 point check No more shuttles Contract with Uber Uses a dealership credit card Promoted pick up spot near service drive Reduced expenses - USD 11,140 per month 4

7 The best ideas from NADA 20 Groups We sell tyres An inflatable tyre - 20 feet high POS display Materials Tyre racks with prices Cost-effective annual inventory Annual inventory conducted on a Sunday, neighbouring dealer supplies the talent Host dealer supplies breakfast and lunch Host dealer pays the inventory checkers Then switch roles the following month Watch the pennies Each month the department managers met as a group to review the OEM parts statement which contains all the programs, fees and mysterious charges 1 ST year savings - USD 152,550 Community donations: Cases of water Rather than donate money, donate cases of water with dealership logo Community events: Flu shots Team up with local pharmacy or health care provider Run event in your showroom on a non-busy day Oil filter with tech ad on label Place a stick-on oil filter saying, we are hiring techs - great pay, training and benefits When gets changed at another service outlet the technician will see it Dutch auction Pre-owned vehicle sales - vehicle is parked in the showroom for delivery Each Monday, the price is lowered by USD 250 5

8 Guided dealership tour Toyota Sunnyvale, San Francisco Bay Area Ranked the No. 1 Toyota dealership in customer satisfaction in a JD Power survey of Northern Californian dealers Fastest growing Toyota dealership in Northern California Part of a large private group (Price Simms Auto Group) 7 locations through the Bay Area New vehicle sales 60-65% of leads are from the internet, 35-40% off the floor In Used Vehicle sales the reverse is true customer wants to know Is the car still there? Want to see the physical car 4 of the dealerships are One price, no negotiation Hassle Free Zone The big part about auto dealerships is, you don t get another one, unless you re doing well in one. One of the owner s mantras Full return of vehicle (new and used) within 3 days if not satisfied One price on used, on trade no negotiations Hassle Free Zone Rules of internet leads Two-way communication to be established within the first 48 hours Earn the last right of refusal Just tell them what you can do, not what you can t do Benchmark Look for efficiency in transaction, everyday low-cost proposition 10% close on new car leads Offer delivery of vehicle to customers home only 6-8% of customers decide to get their car delivered direct to their home Internet enquiries are only dealt with by one person from start to finish, that is, through the whole process 12% close on used car leads The dealership is averaging 7.5% in closing on internet leads 6

9 Google automotive presentation THE 3 STAGES OF THE CAR BUYING PROCESS 1 INFLUENCE Out-of-market I notice you 2 CONSIDERATION In -market Which car is best? Is it right for me? Can I afford it? 3 PURCHASE In-dealer Where should I buy? Am I getting a deal? How can I make the most of my car? 2.9 car brands considered 57% of customers watched videos during the research process CONSUMERS MOVE ONLINE 2.4 dealer visits 1.4 test drives 65% research on their smartphones while at your dealership % Offline touch points used at any time until the final decision by all buyers Test drives 42% Dealer visits 45% 73% Of those who watched an online video actually did at least one follow-up action triggered by what was shown in the video Source: Google automotive presentation

10 2019 NADA Review Edition 2 In our next edition of the NADA Review, we will cover the following topics: Expense reduction: Best practices Leadership skills and used car strategies for champions From apprentice to visionary: How to innovate business and life 8

11 About Pitcher Partners Pitcher Partners is a full service accounting, auditing and business advisory firm with a strong reputation for providing quality advice to privatelyowned, corporate and public organisations. In Australia, Pitcher Partners has firms in Adelaide, Brisbane, Melbourne, Perth, Sydney and Newcastle. We collaboratively leverage from each other s networks and draw on the skills and expertise of 1,300+ staff, in order to service our clients. Pitcher Partners is a national association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is also an independent member of Baker Tilly International, one of the top ten largest networks in the world by fee income. Our strong relationship with other Baker Tilly International member firms, particularly in Asia Pacific, has allowed us to open many doors across borders for our clients. Our commercial services to dynamic businesses Financial essentials Accounting and Business Advisory Services Audit, Risk Management and Assurance Internal Audit Recovery, Turnarounds and Insolvency Tax advice and Compliance Planning and growth Business Consulting and Commercial Advice Business Performance Improvement Business Structuring Corporate Finance Corporate Governance International Business Advisory Investment Advisory Services Succession Planning Superannuation Services Tax Consulting Technology and IT Consulting Valuations Our private wealth services Estate Planning Family Office Management Investment Advisory Services Philanthropy Services Succession Planning Superannuation Strategies Tax Advice and Compliance Insurance Industry specialisations Automotive Education Retail Professional services Financial services Health and aged care Manufacturing Not-for-Profit Property and construction Government and the public sector Agriculture Food and beverage Hospitality Transport Our Sydney firm 280 Total Sydney staff 32 Sydney Partners $52m Revenue 2018 (AUD) Nationwide firms 1,300+ People nationally 122 Partners nationwide Baker Tilly International 746 Offices worldwide 10th Largest network of accounting firms globally 34,000+ Partners and staff globally $3.6bn Worldwide revenue 2018 (USD) 9 9

12 Get in touch... John Gavljak Partner Automotive john.gavljak@pitcher.com.au John Taouil Manager Automotive john.taouil@pitcher.com.au MELBOURNE SYDNEY PERTH PITCHER.COM.AU partners@pitcher.com.au sydneypartners@pitcher.com.au partners@pitcher-wa.com.au ADELAIDE partners@pitcher-sa.com.au BRISBANE partners@pitcherpartners.com.au NEWCASTLE newcastle@pitcher.com.au Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. NADA Report 2019 Series 1_040219_v2