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In a rapidly evolving automotive industry, disrupted by volatile interest rates, new market entrants, rising BEV sales and new retailing approaches like the agency model, the key to a dealership’s success lies in an often-overlooked area: aftersales.
While the glitz and glamour of new car sales often takes centre stage, it’s the aftersales department that holds the potential to drive consistent revenue and secure long-term profitability.
As René Tønder, an automotive futurist and strategist, emphasised during a recent webinar, “Margins on sales of new cars and used cars are likely to decrease over time. To compensate for this, car dealers need to become even more efficient in the aftersales department, as this is where the majority of their future income will come from.” This underscores the necessity for dealerships to develop an obsession with aftersales to ensure their success in the coming decade.
“To compensate for decreasing margins from the sales department, dealers need to become even more efficient in aftersales.”
The recipe for success to thrive in the future is simple. If dealerships can’t navigate factors beyond their control — such as market fluctuations, regulatory changes and new retailing approaches, then they must focus on what they can control and improve. This includes:
Market fluctuations are a significant factor that dealerships cannot control. Variations in new car sales due to economic conditions and volatile interest rates can significantly impact consumer purchasing power and financing options. During periods of economic downturn or when interest rates rise, consumers may delay purchasing new vehicles, leading to a decline in sales. This unpredictability makes it challenging for dealerships to maintain a steady revenue stream from new car sales.
René Tønder highlighted this issue, stating, “2023 was a pretty good year compared to the year before, but this year will be flat. Germany is probably in a recession again, or rather still, and overall the market dynamics are stable but flat.” This underscores the importance of finding alternative revenue streams.
Regulatory changes are another uncontrollable factor that can significantly impact profits in the automotive industry.
New laws and regulations from national or supranational governments, such as the European Union, can introduce new emissions standards, safety requirements, and other compliance measures. These regulations often require dealerships to invest in new technologies and training to meet the updated standards, which can be costly and time-consuming. For instance, stricter emissions standards may require the adoption of new equipment to service battery electric vehicles, while safety regulations might require additional certifications for technicians.
“While EVs are expected to reduce the need for certain types of maintenance compared to ICE vehicles, the overall effect on aftersales revenue is not as drastic as initially feared.”
The transition to battery electric vehicles (BEVs) is one of the most significant changes facing the automotive industry. But, while EVs are expected to reduce the need for certain types of maintenance compared to internal combustion engine (ICE) vehicles, the overall impact on aftersales is not as drastic as initially feared.
