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Top 3 Auto Industry Trends for Q1 2019

Automotive sales forecasts are leaving many dealers feeling less than optimistic about the future of dealership sales. In order to remain profitable in a flattening market, dealers must keep a pulse on everything that’s happening in the industry. In this post, automotiveMastermind dives into the automotive industry trends from Q1 2019 that dealers need to be aware of, including:

  • Dealership Lots Overflowing Due to Underwhelming Vehicle Sales
  • Divergent 2019 Retail Strategies from Tesla & Porsche
  • A Scarcity of Automotive Service Technicians

 

Underwhelming Vehicle Sales, Overflowing Lots

What:
As car retail sales slowed across the auto industry, the number of vehicles on dealers’ lots hit an all-time high this quarter. Even famously “recession-proof” brands such as Jeep have suffered, posting consecutive monthly sales declines.

Why:
NADA and others continue to sound alarms over vehicle affordability, which means not only sticker shock but also financing challenges for consumers. Dealers need to make sure their marketing and sales efforts include a data-based view of a prospect’s financial situation, ensuring they’re not investing resources on an offer a customer can’t afford or other unqualified leads.

That’s why Mastermind built a relationship with consumer credit experts TransUnion, so information can be built into the consumer relationship as early as possible. When combined with data-based marketing outreach that looks at every potential customer in the market to score and identify the bestprospects for a targeted and individualized marketing and sales campaign, this model of analytics-based selling is the fast lane to meeting month-end targets and moving vehicles off the lot.

Tesla and Porsche Take Different Retail Roads

What:
Two premium automakers announced very different strategies for their retail footprints as 2019 got underway. While Tesla made news saying it would roll back its already-sparse retail footprint, Porsche unveiled plans to invest in the customer experience at its dealerships to connect consumers even more closely to the brand.

In a blog post and SEC filing, Tesla said it was “shifting sales worldwide to online only,” and that “Over the next few months, we will be winding down many of our stores, with a small number of stores in high-traffic locations remaining as galleries, showcases and Tesla information centers.”

Meanwhile, Porsche was accelerating in the opposite direction, unveiling a “Destination Porsche” retail concept that makes its dealerships “not just a place to transact business, but a place that you would want to come in and soak up Porsche culture,” according to company COO Joe Lawrence. This includes holding motorsport-watching parties, hosting local Porsche owner group events and other related content. This announcement came after the ninth consecutive year of U.S. sales growth and seventh record sales year in a row. Porsche North America sales set a record of 57,202 vehicles.

Why:
Both Porsche and Tesla have passionate consumers, but the two companies have deeply divergent views of the dealership’s role in building and maintaining that relationship.

Porsche treats the dealership as a critical part of its customer relationship, winning its luxury segment in the 2019 J.D. Power Customer Service Index. Its intention with “Destination Porsche” is to make the dealership a place consumers want to be, making it the center of a rich customer experience that goes beyond sales or service, and builds opportunities for engagement to increase loyalty and amplify customer retention efforts.

Tesla, however, acts as if the dealership – or “store,” to avoid state dealership laws – is almost a necessary evil, stressing all Tesla sales take place online. Even though CEO Elon Musk wrote, “stores and Tesla product specialists and owner advisors will always be of critical importance to our long-term success,” his view of the dealership role is highly transactional: “Many potential Tesla owners will still want to talk to a Tesla representative in person or want a test drive from a Tesla representative,” he wrote, adding, “Stores also have a small number of Tesla vehicles available to drive away immediately for customers that want a car right then and there.”

Tesla appears to view the retail footprint as a cost center rather than a revenue generator. This was clear when it announced a change in plans not long after its initial store-closing announcement, saying it would “keep significantly more stores open than previously announced” but that “As a result of keeping significantly more stores open, Tesla will need to raise vehicle prices by about 3% on average worldwide.”

Tesla delivered its first car in 2008 and introduced its first mass-market model in 2012, while Porsche has been selling cars to consumers since 1948. To date, Tesla has been almost entirely in conquest mode and had little need to engage in retention marketing. As the company matures and its customers start reaching the end of their ownership cycles, it will be interesting to see whether Tesla’s model for minimizing the dealership role in the automotive industry is a sustainable bet and whether making a vehicle purchase “not much harder than ordering an Uber,” as Musk put it, is all that’s necessary to keep customers coming back.

Service Technicians Stay Scarce

What:
Auto Dealers are having a hard time hiring and keeping automotive service technicians. One estimate from NADA is that between retirements and career changes, dealers need to hire roughly 76,000 technicians a year just to keep up with demand. The U.S. Bureau of Labor Statistics predicts there will be 45,900 more service techs needed in a decade.

Dealers still appear to be attracting qualified technicians by offering more than other employers:
According to the Bureau of Labor Statistics, the median salary for a service technician at an auto dealer is $43,180, compared to $37,420 at collision shops or independent repairers or $33,640 at tire stores or parts & accessories shops.

Why:
The dealership service experience is critical for a customer’s overall satisfaction and customer retention. The right number of qualified, capable technicians is a huge part of that, without enough of them, customers wait longer for repairs, often resulting in customer dissatisfaction. Also, Under-qualified techs are also more likely to fail to complete a quality repair, leading to return visits that can cause harm to a customer’s satisfaction with the dealership.

It’s not news to dealers that service tech recruitment and retention is an important part of the business, but with a bleak hiring landscape stretching out a decade or more, there’s no better time than now to make a serious commitment not only to retaining the techs you have, but also to finding innovative ways of recruiting more to meet the needs of the future.

All of this should occur as part of a comprehensive overhaul of the service department’s place in the dealership, integrating the service drive as a sales driver and making analytics-based contact with a customer, a regular part of the service drive process.

 

How Can Mastermind Help?

Do you have questions about how car sales trends are changing the customer experience
process? Contact us today to learn more about how Market EyeQ can help your dealership identify, communicate with and close more buyers in your market.

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