The recent changes to the Clean Car Rebate were a reminder, if one were needed, that we live in an automotive world where things can change very quickly. Taxation, policies, competition, governments, and brands themselves, all have external influences on how you run your business. Many people are angry at the latest changes to the Clean Car Rebate. But should they really be?
We knew the programme was subject to change. It has been written on every VOSA for the last 12 months. We knew the likelihood that the cap would come down (it didn’t, or I should say, hasn’t yet), and we knew the CO2 bands would be tightened. So what are we really complaining about?
The purpose of this month’s blog is to illustrate a point. A lot of what changes, we can plan for, even if we don’t know the detail. However, the key is to actively plan, rather than react.
Some of the following ‘predictions’ are just educated guesses at best, and from the perspective of being a step outside of the day to day running of a business. However, the saying about failing to plan or planning to fail is important. Let’s look at changes that might well happen this year, and what these changes might mean for your businesses.
Clean Car Rebates: With the most recent changes announced and a relatively tight implementation timeframe one would hope that we would be free of further Clean Car changes. But National and Act are saying they would scrap the scheme. More likely the devil is in the detail, and ‘scrap’ is more likely to mean change parts and water down others. Of course, without a clear majority any one party’s ability to use this legislation as a key bargaining chip is diminished (or increased, depending on your party's standpoint). However, it is still likely that the pressure on polluting brands will increase and fees on polluters (or disincentives to buy polluters) will increase.
Agency Model: If you knew your brand was about to move to agency model, what would you do differently? If you knew a brand you represented was moving to agency in two years’ time, what would you do differently now? This might impact the future valuation of your business (a key sticking point for Merecedes-Benz dealers in Australia), or might affect who owns the customer data. There is a scary thought, that you might not own the customer data. These are very powerful questions, because legacy brands are eyeing up different ways to complete with inbound brands and the additional costs of electrification. But the types of changes that are likely to happen can be considered and how you could react should be planned,
Reduced Margins: This is more likely than a switch to agency. For some reason, the switch to electric seems to come with a margin realignment (reduced margin to you and me). Perhaps it is not as bad as you might hope, because the average selling price is higher, however, they wont always be. So if you had to plan for a one or two percent reduction in sales margin over the next 12-18 months, the question remains, what could and would you do about that?
New Brands: What would you do if you knew there were two or three significant (probably) Chinese brands about to enter the market? One or more of them might well be agency model, but perhaps one or two might be up for grabs. Would you want one in your portfolio, or would the risk of what could be, be greater than the risk of upsetting what you have right now?
Brand Cycles: All brands go through cycles. Right now there are two large Japanese brands that are really struggling versus a few years ago. Is this a short term blip (it usually is) or is it a sign of something more problematic or structural. What should you do about it? Wait it out or move on, or something in between?
Loss of aftersales revenue: Say a long slow goodbye to margins on fluids and the hours billed to change them. Have you sat down and looked at the margin on oil sales, and the hours (and parts margin) on changing the oil and a filter? That might decline by just 5% a year, or it might be 20% a year, but for sure you can model how much change and how fast. Given that you know it is happening what are you going to do about it? What mitigating plans can you put in place?
Reduced marketing support: Some brands have generous marketing support programmes. Others used to have, and no longer do. TradeMe is the first area to be tightened up, and then 60% support becomes 50% support, which then becomes 50% with a lot more strings attached or worse. If you have a firm grip on cost per sale and cost per lead, as well as lead volumes then you’ll know whether to reduce your spend or just make it more effective. But we would wager that few dealers really do have a firm grip of this, as often marketing departments are marginally understaffed. The doing gets done, but the analysis falls into a no mans land. If you marketing support reduced by 15% what would you do and how many leads would you be prepared to forgo?
There will be some common themes in your solutions and planning. Process, process, process might well become your new mantra, to ensure that your best people lead and train using the best processes.
Customer experience will be a new battleground, and customer retention will become more important than ever. Being across the data and having good management accounts will also be critical.
Here are Boost Auto’s suggestions to stimulate thought and actions to help protect and plan for an uncertain road ahead.
Create a SWOT. Remember strengths and weaknesses are things inside your control but opportunities and threats should be factors that are outside of your control. In other words you can plan for them but not influence whether they happen.
Consider a couple of different scenarios and plan for these also.
Bring your team together, take them out of the business and paint the picture of what could pan out. Then get them to plan for key scenarios. Your team will always surprise you (get an outside consultant to facilitate if you don’t feel able to set up the session).
Look for additional revenue streams. It could be wheels and tyres, smart repairs, canopies, screen repairs or panel and paint. It might be roof racks or finance penetration. There will always be revenue streams that you have not considered, or tried once before and it didn’t work, that are worth looking at again, or streams that are underperforming that need an action plan.
Don’t confuse the idea with the execution. Don’t be trapped with ‘we tried that once and it didn’t work.’ Why didn’t it work, what should you have done differently?
Score your brands on short term and long term potential. Schedule meetings with the local business heads to ensure any decisions are based on the full picture.
Review your management accounts. Do they include data to show the trends in the areas that are most at risk? If not change them so that they do.
Identify the brands that you want (legacy or new brands) and work out why you want them. Remember new brands take a long time to become profitable at the back end, and aftersales revenue is hard to replace. In other words, the grass isn't greener always, sometimes it is just different grass.
If you need a helping hand to think about a disruptive planning session get some help. We can think of a place to start.
What ever happens, remember, you can likely predict it, even if you can’t predict when it will happen.
Boost Auto is an automotive consultancy working in six main areas.
• Sales and Marketing effectiveness for brands and dealers
• Market Insights & Trends
• Business Planning and facilitation
• Operational Effectiveness
• Green fleet facilitation for large corporates
• Go To Market strategies for emerging brands
You can contact us at hello@boostauto.co.nz
Picture Credit:
Photo by Photo by Brett Jordan on Unsplash