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The five biggest threats to your dealership

Updated: Oct 26, 2023

We've just passed the winter solstice, and there is a changing temperature coming to New Zealand’s automotive industry. Whether they are winds of change or winds of opportunity is down to you.

After a couple of record years, most owners and operators will tell that 2023 hasn't so far been as strong as 2022, despite restricted supply still supporting used values, and assisting in margin retention. But amidst the softening demand, there are big structural changes coming to the industry.

Turning Point No exit sign
Photo by Roger Bradshaw on Unsplash

Here are the five biggest threats to your business.

  1. The shift to the agency model. New Zealand doesn’t quite lead the world, but it does have an innovator, Honda with 20 years of ‘how to agency’ experience. Toyota executed Drive Happy effectively and positioned themselves as a consumer champion at the same time, and Mercedes-Benz has executed a plan. The next question is who is next (there are strong rumors) and which brands will follow. The agency isn’t bad news, in fact, we are on record as supporting agency with the right model for customer service and lowering dealer overheads. The threat to dealerships, however, is that new car margins have been exceptionally high, and record profit can mask operational challenges. The real question is not which brands will move to agency, but is your business strong enough to operate on much more modest new vehicle margins.

  2. The shift to NEV. China’s catch-all term, New Energy Vehicles, for electric and PHEV (and hydrogen) neatly captures and wraps up the shift from old to new. Electric is good for many reasons. However, it comes with a cost, volume challenges, margin shifts, personnel challenges, and reduces income streams. Costs, because your business needs chargers. Lots of them and in different locations (it might pay to have another look at solar) will need to use electricity during the day. So, it is peak rate power. You might have electrical load challenges at your dealership, which isn’t likely to be a low-cost fix. Volume challenges, because if you have a brand or brands that are laggards in the NEV space then you’ll be missing out. There are a few brands that have gone premium with their NEV offering (resulting in a product just doesn’t sell because it is too expensive, or they have just released a product that is above the rebate cap) and that’s going to hurt because it takes a long time to fix a model offering that is not right for the local market. Margin shifts, because brands often take a BEV vehicle as a reason to tweak margin structures. Personnel challenges, because you have old and new staff from sales, service reception to technicians to re-train. Demand will be high for technical training and trained HV-trained techs will be worth a premium when the inevitable shortage of HV techs comes. Challenges on income streams because oil volumes and margins (as well as hours sold pouring and draining oil) will decline.

  3. The shift away from utes. It might not look like a big shift today, but we know with certainty that the pressure is on them. They don’t work well in cities, they use old tech (relatively), there is scant BEV option and for some. a BEV option is not fit for purpose. Government policies globally are focussed on moving to cleaner energy, and all eyes are on a big category that has a large number of heavy polluting vehicles (as least in the eyes of government agencies). The fact that New Zealand and Australia has such a high proportion of its fleet as utes, tells you that in part this is the result of a taxation imbalance, rather than pure market demand. If your business relies heavily on ute sales margin, you can see that this position will change.

  4. Ownership vs Usage. GFV products are gaining ground. Mobility is a buzz word. Ten years ago, the only transport you rented by the hour was a trailer from the local service station. Now it is a kick scooter, an e-bike, or even a City Hop. Zilch, Mevo, and Sixt are all different approaches to ownership, with Zilch having a very clear focus on asset utilization (you really don’t want to know how poorly utilized your own car is). If you think this won’t affect your business, talk to the people who don’t come into your dealership to understand why. Owning a car is no longer a necessity for many, especially those that live in cities.

  5. Government Policy. It won’t surprise you that mobility trends are not New Zealand centric; Government policy here is being echoed around the world, and despite what any opposition party leader might say, the pressure to re-think our transport options in order to reduce transport emissions is very real. Sure the policies might be served on a different plate, but the ingredients will be largely the same. Lower polluting vehicles, less private car ownership, more public transport, more shared transport, more cycle lane and shared path options. If your view is that cycle lanes are just a pain, then you are missing the point.

We don’t believe that the future is gloomy. By identifying potential threats and challenges you can be better prepared to consider how much your business will be affected. From there you should be able to see how to mitigate and take advantage of these changes.

The cycle lanes are the metaphoric shift in the automotive world. You can either fight them, or get on your bike, peddle like hell and discover what opportunities lie ahead.

This blog first appeared in AutoTalk in March 2023 and has been updated.

Boost Auto is an automotive consultancy working in seven main areas.

• Market Insights & Trends

• Sales Training

• Sales and Marketing effectiveness for brands and dealers

• Green fleet facilitation for large corporates

• Go To Market strategies for emerging brands

• Business Planning and facilitation

• Operational Effectiveness

You can contact us at

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