2010 a game of two halves according to Deloitte Motor Industry Services reportDOWNLOAD
17 March 2011: The annual 2010 Deloitte Motor Industry Overview has highlighted how the motor industry experienced startlingly different results during 2010. Results from the first six months of the year benefitted from the flow on effect of the investment allowance, production slowdown and lower interest rate, with record sales across the industry. However according to the report’s author, Danny Rezek, Deloitte Motor Industry Services partner, the second half of 2010 was a different game. Incentives were gone and interest rates started to increase causing a net profit decline of 30% over the last six months of the year for the average dealer.
Mr Rezek highlighted that despite Australian motor vehicle sales for 2010 eclipsing the million mark for the third time in history, dealerships experienced a decline in profitability for new vehicle sales, due to leaner margins, a competitive market, and higher overhead expenses.
The report attributes a range of factors including the government stimulus package ending, rising interest rates, fewer tax incentives, lower levels of inventory and tightening of expenses which produced declining growth profit margins for new and used vehicles.
According to Mr Rezek, 2010 was a challenging period for the automotive industry. Average dealers suffered with a profit margin decline of 30% over the last six months, from a high of 2.5% to around 1.8% for the most recent six months.
“It is the top 5% of performers who actually plan to make a 5% net profit on sales and these dealers commit to this target in writing and it is often agreed by the management team,” said Mr Rezek.
“It is clear from the report that management across the motor industry must focus their monthly management meetings on factors such as the non financial KPI’s like service retention, showroom statistics and client satisfaction so that better actions and processes can take place,” said Mr Rezek.
“Also the better performing dealers in the report focus on the customer and create sustainable and valuable customer interactions, which often lead to repeat business. It appears that training and coaching of staff is critical during this time in order to keep the customer in the client relationship management funnel, added Mr Rezek.
Key highlights of the 2011 report were:
The report also detailed how successful dealers have had to change their work culture, cull inefficiencies, improve staff retention, tighten expenses and negotiate more competitive deals from suppliers.,
“The Global Financial Crisis has hit the industry hard and production has been dramatically pulled back to more realistic inventory levels across the industry. The gap between the average and Top 5% best performing dealers has widened, which highlights how these dealers do not become complacent during good times and have effective recruitment practices which incorporates staff development,” said Mr Rezek.
Deloitte Motor Industry Group launches ProfitFocus Smartphone application
The Deloitte MIS benchmark cards are a key tool in the motor industry as ProfitFocus are the market leaders in providing benchmarks. It identifies the Key Performance Indicators (KPIs) motor dealers should measure their performance against. The application is an interactive benchmarking tool for all dealer types e.g. cars, motorcycles and trucks. It also includes copies of all the benchmark cards published.
The ProfitFocus Smartphone application has been tailored towards iPhones and iPads because market research shows that iPhone currently holds the largest market share of mobile web and application usage.
“This Smartphone application will make it easier for dealers to benchmark their business regardless of their location as the application will allow dealers to enter actual data per department and measure their performance against benchmark. The benchmark type will be set by the user upon initial use,” concluded Mr Rezek.