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5 October 2017  •  By: Perry Robb

New Cars – No Servicing Required?

This week I called over to see how the new Fastlane body shop site at Elstree was progressing.

Whilst the site isn’t officially due to open for a couple of months, it’s ‘nearly there’, and wow what a site and what a location – probably the finest and most advanced body shop in the whole of the U.K.

Looking around the new facilities, I noticed that the senior management team had arranged for numerous ‘electric vehicle charge points’ to be placed around the site.

“Probably more than we need currently”, said Alex Andrea, Fastlane’s MD. “But we’re planning ahead as we know demand will be significant in the coming years!”

This got me thinking.

Alex was spot on. There is likely to be a tsunami of electric powered vehicles coming from virtually every major car manufacturer in the world, and this by its very nature may force both the manufacturers and their retailers to rethink how they sell their wares – and make money from it in the process.

Up until I retired a few years ago, car retailing hadn’t really change since the arrival of the combustion engine over 100 years ago:

A customer visited a garage or several garages to look at various makes or models of cars; settled for the car or dealership they liked; bought their car at that garage; got it serviced there; and bought parts and accessories there also. And so, the process would be repeated.

The Internet has changed things somewhat, as the consumer is now able to research online all the specification and technical data for their new car, and also in the sourcing of specific used cars.

Whereas, historically a customer would visit a showroom on up to 5 or 6 occasions, to collect brochures, arrange test drives, try out different models, look at colours, bring the wife and kids, etc. Nowadays, as customers have access to so much information on the web, they tend to be a lot more informed and consequently the dealer generally only gets one or two face-to-face opportunities to impress and convert the customer before the purchase is made.

The manufacturer’s relationship with its dealer network also tends to be cyclical.

If the manufacturer is having a profitable run, making plenty of money, they tend to insist that the dealer network invests heavily in either new corporate identity, or worse still larger premises.

Both requirements are aimed at ‘ creating a better customer journey’ or making the dealership a ‘destination centre’.

All very creditable, but easily blown apart by poor customer handling at the initial point of contact by the dealership personnel.

And furthermore, new CI and larger premises inevitably add to the existing overhead of the business.

So, what’s this all got to do with electric cars did I hear you say?

Well, the one thing electric cars will not require is regular servicing. Take Tesla for example, their cars do not require servicing in the general sense of phrase. All they need is an annual or biannual look at the brakes and tyres – and they sanction their body shops (e.g. Fastlane) to perform this function because it’s very simple, straightforward work. Other electronic updates on the car can be carried out by the manufacturer simply dialling into the vehicles computer or downloading updates like you do on your smartphone.

Now, this promises to be very good news for us, the punters. Not only will we enjoy very low ‘fuel’ bills as your car runs on electricity – not petrol nor diesel, but also extremely small servicing costs as you don’t have to take it back to the dealership for regular expensive maintenance checks.

And that’s precisely what got me thinking:

Servicing or aftersales as it’s called contributes significantly towards the profitability of each and every car dealership in the country.

Indeed, when I started in the industry, the equation in volume franchises was that the aftersales department would cover about 80 – 100% of the overhead of the business, and the sales department would cover the rest and make it your profit.

This dependency on profit generated from aftersales has changed over the years, and indeed, also varies between volume and prestige franchises.

In my experience, volume businesses work harder generating more aftersales because they often don’t have much upfront profit per new unit they sell.

The opposite can be the case with prestige franchises with often significant new car margins making it easier for the business to be reasonably profitable.

Dealerships have broadened their aftersales scope of work over the years by offering such things as 2 or 3 year service plans, insurance cover for tyres, valets, extended warranties, wheel refurbishment etc., and indeed even in my day, in some of the largest Porsche businesses, the aftersales departments contributed in the region of £1 million towards the bottom line!

So, there you have it.

Dealerships getting bigger and more prestigious, and if the future is as we expect going electric, then our aftersales departments are set to change beyond all recognition because they will be faced with the prospect of less and less business.

So, expect plenty of head scratching from most garage owners and dealer groups, and also expect lots of innovation as well if most of their garage businesses aren’t to start going backwards: annual servicing packages tied to new car warranties; ingenious ‘electronic’ service requirements; increased pressure to generate additional income from insurance-based products etc.

Theoretically, we could also see reductions in technical staffing levels because there just won’t be sufficient work for them, and who knows, it could also force the large groups to pressurize manufacturers to let them set up multi franchise sales sites to spread their costs and ensure profitability.

We’ll see what happen, but hopefully by the time all these new cars arrive the UK, the bright sparks who run this country will have made some inroads into providing us with a proper charging infrastructure to keep them going!

 

Who turned the lights off??