Pub. 16 2017-2018 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 21 new jersey auto retailer W W W . N J C A R . O R G sellers, and a decreasing Do-It-Yourself market will help maintain gross profit percentages. The complexity of the systems involved will also keep out aftermarket manufacturers moving forward. While the future for the parts side of fixed operations looks mapped out, the same cannot be said of service. While nearly everyone expects service to be the most profitable department for dealer- ships, it remains to be seen what the future path forward means for service profitability. The past decade has seen a tremendous reduction in the amount of routine maintenance required. Dealers have gone from seeing a customer four times a year to twice, and sometimes just once. There are many vehicles on the road that can sense their operating environment and can report directly which services are required. There will be more transparency in the service transaction just as there has been on the vehicle sales side. This will create a hindrance to those services your shop might recommend above the manufacturer requirements based on your experiences. The upside to transparency is that it will reinforce the trust that the consumer places in the service advisor and shop. Having a stream of information being fed to the Service Depart- ment directly from the vehicle will also aid the write-up process. This will allow the dealership to not only have electronic commu- nication with the vehicle but also the customer. Much of the repair order will be pre-populated upon arrival at the dealership, which will free up time for the service advisors allowing the dealership more time to build a relationship with the customer. This manufacture-to-vehicle connection is already impacting service operations. Software updates that have filled our shops for the past few years are beginning to fade as manufacturers are sending the updates out over the air. While there have been some hiccups with this method, it will become more refined as the technology progresses. Manufacturers will continue improving vehicle monitoring sys- tems, including remote diagnostics, which will alert the driver of an error and automatically upload data files to the manufacturer and dealership. Such systems will not only directly encourage the use of the dealership service facilities, but it will also passively en- courage it as the diagnostic information is already there and ready for the customer, resulting in a more efficient service visit. Such systems will also develop to a point that, under warranty repairs, the required parts will be automatically sent to the dealership. But who will be installing those parts? That is one of the most worrisome prospects facing Service Departments. The develop- ment of our future technicians that are well-versed in ALL aspects of increasingly complex vehicles is a massive roadblock for the industry and an issue that needs to be resolved. Until the shortfall in qualified technicians is improved, dealers will be faced with increased demand for “module” replacements. As systems grow in complexity, the easier and more economic repair will be for complete systems to be swapped out as whole “modules” ( i.e. a drivetrain module, a front suspension module, an interior seat module, etc… ) These modules will then be returned to the manufacturer for rebuilding. We are already seeing this with most CVT transmission repairs. The big opportunities for the future are going to be in customer repair work. As the average vehicle’s age increases, the complexity of systems push out competitors and we will have new propulsion systems that will have limited repair expertise in the aftermarket. We also have a glut of off-lease vehicles coming soon that will need to be resold. Reconditioning pre-owned vehicles is going to jam up your shop for several years to come. So much so, that dealerships are looking towards separate reconditioning facilities to keep the flow of vehicles to the pre-owned lot steady. The nice thing about selling more certified vehicles is they keep a customer with an older, higher-mileage vehicle connected to your dealership. Rob Campbell is an analyst with the accounting firm WithumSmith+Brown, PC. He has conducted training sessions and worked as a consultant for many dealerships throughout the country. He can be reached at rcampbell@withum. com or 732.379.5274, x5550. The logistics are there for dealerships to turn their parts inventory every month, and some of you do that ( and more ), but manufacturer demands for dealers to keep more breadth in their managed part numbers will keep inventory turns in check.