During a speech to members of the Automotive Press Association in Detroit, yesterday, Bill Underriner, chairman of the National Automobile Dealers’ Association, focused on two key issues currently affecting new car dealers. He said that “two-tier pricing and mandatory facility upgrades are symptoms of a bigger overall problem, which is manufacturer intrusion into dealers’ businesses.” He also said that “NADA wants the automakers to stop unfair practices.”
Several months ago, recognizing these growing issues among its members, NADA created a task force to focus on the issue of stair-step or two-tier pricing programs, in which manufacturers provide dealers with incentives specifically tied to sales goals.
However, given the nature of automotive retailing and the diversity among dealers, ranging from urban and multi-brand groups, to rural and stand-alone franchises, Underriner said that such practices tend to be “unsuccessful. The history of our industry is littered with automaker attempts to impose one-size-fits-all programs on dealers. These efforts at top-down control almost always fail,” he remarked.
He also said that besides the dealers themselves, there is an equal amount of diversity among consumers shopping for vehicles in local markets, citing that as another reason why manufacturer driven two-tier pricing incentives often fail.
“Distant corporations simply cannot understand or respond effectively to these differences. We know our customers’ preferences and local market conditions better than anyone – certainly far better than a corporation with headquarters thousands of miles away,” he declared.
Another contentious issue among auto retailers, particularly in the U.S., concerns factory image programs, which often require dealers to spend millions on refurbishing their stores to meet guidelines from OEMs, often with no key indicators of return on investment. The results of NADA’s first study into the matter, revealed at the association’s convention in Las Vegas early this year, showed that OEMs need to receive more dealer input earlier in the process, in order to achieve a program that’s well received by dealers.
A second phase of the program aims to showcase what dealerships will look like in the future. “We want to know whether we are investing in the kind of dealership that will be most competitive in 2020 and beyond,” Underriner said.
