ROSAUTODEALER Automotive Dealers Conference
Jan 18, 2015
ROSAUTODEALER
Automotive Dealers Conference
Who is NADA?Who is NADA?
NADA
•Founded in 1917Founded in 1917
•19,500 dealer members19,500 dealer members
•93% of all dealers are 93% of all dealers are members of NADAmembers of NADA
NADA Mission
Promote and Defend the Interests of U.S. Dealers
• Support our dealer members before Support our dealer members before the government, manufacturers and the government, manufacturers and the public the public
• Assist our members to be successful Assist our members to be successful with their dealerships with their dealerships
NADA Departments
1.1. Industry Relations Industry Relations (Manufacturers)(Manufacturers)
2. Public Affairs2. Public Affairs
3. Dealership Operations3. Dealership Operations
4. Government Affairs 4. Government Affairs
International Relations
• Understand the changes in the global automotive sector
• Work with dealer associations across the world
• Share “best practices”
Industry Relations Dialogue with OEM’s Dealer
Attitude Survey
Industry Relations Dialogue with OEM’s Dealer
Attitude Survey
Winter 2008 Survey Results
NADA PublicationsNADA Publications
Dealership OperationsDealership Operations
NADA assists dealers in day-to-day operations NADA assists dealers in day-to-day operations with various training programs and with various training programs and
publications (three primary departments)publications (three primary departments)
• NADA 20 GroupsNADA 20 Groups
• Dealer AcademyDealer Academy
• Management EducationManagement Education
NADA Affiliated OrganizationsNADA Affiliated Organizations
Dealer Insurance TrustDealer Insurance Trust Dealer Insurance TrustDealer Insurance Trust
Government AffairsGovernment Affairs
Engagement with policyEngagement with policy
makers/regulators is vital to makers/regulators is vital to protecting dealer interestsprotecting dealer interests
Fuel Economy – C0Fuel Economy – C0² Debate² Debate• Public becomes increasingly concerned about fuel Public becomes increasingly concerned about fuel
costs and global climate change prompting desire costs and global climate change prompting desire for increased fuel economyfor increased fuel economy
• 2007 law enacted requires a 40% improvement in 2007 law enacted requires a 40% improvement in fuel economy and 30% reduction C0fuel economy and 30% reduction C0² emissions ² emissions by by 2020 (35 mpg)2020 (35 mpg)
• April 2008 Dept. of Transportation proposes April 2008 Dept. of Transportation proposes implementation rulesimplementation rules
• NADA role before U.S. Congress and Executive NADA role before U.S. Congress and Executive Branch was to support “reasonable and attainable” Branch was to support “reasonable and attainable” increases in fuel economy standards (CAFÉ) increases in fuel economy standards (CAFÉ) preserving ability of manufacturers to provide a preserving ability of manufacturers to provide a product mix that meets the needs of customersproduct mix that meets the needs of customers
State Franchise LawsState Franchise LawsProtecting Dealers InterestsProtecting Dealers Interests
NADA NADA Protecting Dealer InterestsProtecting Dealer Interests
NADA works tirelessly to protect interests NADA works tirelessly to protect interests of our membersof our members
Manufactures tend to develop Manufactures tend to develop standards/programs that create standards/programs that create challengeschallenges
Often dealer input is not solicited before Often dealer input is not solicited before implementation of standards / programs implementation of standards / programs
Ford’s Blue Oval ProgramFord’s Blue Oval Program
Program designed to improve dealership Program designed to improve dealership CSI / FacilitiesCSI / Facilities
Dealers margins were reduced by 1% to Dealers margins were reduced by 1% to fund programfund program
At the time this program was unique and At the time this program was unique and created uproar with dealerscreated uproar with dealers
NADA Response to Ford Blue Oval NADA Response to Ford Blue Oval NADA worked with State Dealer Associations to develop NADA worked with State Dealer Associations to develop
strategy to counter program strategy to counter program
Lawsuits were filed in North Carolina and TexasLawsuits were filed in North Carolina and Texas
NADA argued program treated dealers unequally and NADA argued program treated dealers unequally and their was price discrimination their was price discrimination
Ultimately Ford dropped the bonus component Ultimately Ford dropped the bonus component
NADA viewed program as most intrusive program ever NADA viewed program as most intrusive program ever implemented implemented
Importance of NADA
Dealer Associations must continually add value Dealer Associations must continually add value for its members…for its members…
Active engagement with government/Active engagement with government/policy makers, manufacturers and the publicpolicy makers, manufacturers and the public
Assist dealers by providing training/programs that Assist dealers by providing training/programs that help day-to-day operations.help day-to-day operations.
Having a professional staff is vital to implementing Having a professional staff is vital to implementing programs for the dealersprograms for the dealers
U.S. Automotive U.S. Automotive MarketMarket
U.S. Auto Industry 2008U.S. Auto Industry 2008
• Industry will decline to by over 1M unitsIndustry will decline to by over 1M units
• Credit / Mortgage Crisis impacting auto sectorCredit / Mortgage Crisis impacting auto sector
• Fuel prices impacting consumers buying Fuel prices impacting consumers buying decisionsdecisions
• Detroit Three continue to downsize dealer Detroit Three continue to downsize dealer networks (being done in orderly manner)networks (being done in orderly manner)
• Fuel economy regulations challenging for Fuel economy regulations challenging for manufacturers and dealersmanufacturers and dealers
U.S. Automotive IndustryU.S. Automotive IndustryEconomic Impact Economic Impact
New car dealers account for almost New car dealers account for almost $700 billion of total retail sales$700 billion of total retail sales
20% of total retail sales are generated 20% of total retail sales are generated at new car dealershipsat new car dealerships
There are over 21,000 dealerships There are over 21,000 dealerships
New car dealerships provide over 1.1 New car dealerships provide over 1.1 million jobsmillion jobs
Source: NADA Industry Analysis
8.53 8.27 8.14 8.70 8.85 8.42 8.06 7.61 7.50 7.67 7.80 7.60 6.91
6.57 6.86 7.408.20 8.50 8.70 8.74 9.00 9.30 9.23 8.70 8.50
5.59
0
5
10
15
20
Mill
ones
de
Uni
dade
s
Cars Lt. Trucks
The U.S. MarketThe U.S. Market
15.1 15.116.9
15.517.117.4 16.616.8 16.916.8
16.116.5
12.5
Profitability of DealersProfitability of DealersProfitability of DealersProfitability of Dealers
-20%
0%
20%
40%
60%
80%
100%
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
New Used After Sales
Source: NADA Industry Analysis 22
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
May 2008 YTD May 2007 YTD
Total Net Profit % Sales
New Vehicles Net Profit
% of Sales
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
May-08 May-07
After SalesAfter Sales
Importance of After Sales in U.S.Importance of After Sales in U.S.
• After Sales represent 81% gross After Sales represent 81% gross profit (an increase of 4% from 2006)profit (an increase of 4% from 2006)
• 45% of service sales come from 45% of service sales come from “customer pay”“customer pay”
• 27% of part sales come “customer 27% of part sales come “customer pay”pay”
Service and Parts Service and Parts Gross Profit MarginsGross Profit Margins
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
0%
1%
2%
3%
4%
5%
6%
7%
8%
After Sales Gross Profit($)
Source: NADA Industry Analysis 27
Gross Profit as a % of Service and Parts Sales
Dollars
After Sales - Dealer ProfileAfter Sales - Dealer ProfileAverages in $USDAverages in $USD
Total Service and Parts Sales:Total Service and Parts Sales:$4,013,121$4,013,121
Gross Profit as % of S&P sales:Gross Profit as % of S&P sales: 46.18%46.18%
Net profit as % S&P sales:Net profit as % S&P sales: 6.95%6.95%
S&P sales per customer repair:S&P sales per customer repair: $212$212
S&P sales per warranty repair:S&P sales per warranty repair: $235$235
Number of Technicians:Number of Technicians: 1212
Number of Service Bays:Number of Service Bays: 1818
Retail Labor Rate:Retail Labor Rate: $85$85
Importance of Importance of Extended Service HoursExtended Service Hours
• Extended hours more convenient for Extended hours more convenient for customers helps to increase S&P customers helps to increase S&P volume, sales and profitability volume, sales and profitability
• Help to make Service Department Help to make Service Department more efficient more efficient
• NADA recommends that service NADA recommends that service remain open at least until 20:00 remain open at least until 20:00 hours hours
Evening
Weekend
Evening and
Weekend
No evening
/weekend
Service Department Service Department Hours of OperationHours of Operation
Used VehiclesUsed Vehicles
Used – An Excellent BusinessUsed – An Excellent Business
Much of a dealers day-to-day business is Much of a dealers day-to-day business is controlled by the manufacturercontrolled by the manufacturer
• Margins on new vehicles Margins on new vehicles
• Warranty reimbursement Warranty reimbursement
• Parts used on warranty repairs Parts used on warranty repairs
Used Vehicles represent the opportunity to Used Vehicles represent the opportunity to control your destiny as a dealer control your destiny as a dealer
Used Operating Profit % of Sales
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%May 2008 YTD May 2007 YTD
NADA Used Vehicle StudyNADA Used Vehicle StudyGross Profit based on age of vehilceGross Profit based on age of vehilce
$1,642
$3,032
$1,970
$2,056
$2,045
$1,787
$2,052
$1,930
Current Model
1 Year
2 year
3 Year
4 Year
5 year
6 year
7 and Older
6.4%
19.6%
15.8%
21.1%
13.0%
7.1%
4.7%
12.3%
Current Year
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
NADA Used Vehicle StudyNADA Used Vehicle Study% vehicles sold by age of unit % vehicles sold by age of unit
Source: NADA Industry Analysis
200 500 800 1,100 1,400 1,700
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
New Vehicle
Used Vehicle
Growth in Used Vehicle Gross ProfitGrowth in Used Vehicle Gross Profit
Used VehiclesUsed Vehicles • 27% of profit is derived from the sales of used 27% of profit is derived from the sales of used
vehicles vehicles
• No two used vehicles are the same – they offer No two used vehicles are the same – they offer opportunity to set your price and margin opportunity to set your price and margin
• Used is a good business for After SalesUsed is a good business for After Sales
Used Vehicles is the Dealers DomainUsed Vehicles is the Dealers Domain
Conclusions• After Sales and Used Vehicles are vital After Sales and Used Vehicles are vital
to the success and sustainability of the to the success and sustainability of the dealershipdealership
• Strategies and a Clear Vision that Strategies and a Clear Vision that outlines how to improve after sales and outlines how to improve after sales and used vehicles is a recipe for success used vehicles is a recipe for success long-termlong-term
Evolution of Service, Parts and Used is Evolution of Service, Parts and Used is Vital for the success of any dealership Vital for the success of any dealership
2009 NADA Convention2009 NADA ConventionNew OrleansNew Orleans
PartnershipPartnershipROAD and NADAROAD and NADA
92nd NADA Convention New Orleans
• Over 700 ExhibitorsOver 700 Exhibitors• Over 40 Dealer WorkshopsOver 40 Dealer Workshops• Over 35 Dealer/Manufacturer meetingsOver 35 Dealer/Manufacturer meetings• International Roundtable with 40 International Roundtable with 40
countries participating countries participating
ROAD and NADA have formed ROAD and NADA have formed partnership to offer workshops in partnership to offer workshops in
RussianRussian