Sold-out CADA Summit 2018 a big success

The sold-out 2018 CADA Summit was a big hit. The annual gathering of dealers and industry leaders took place at the Metro Toronto Convention Centre on the eve of the opening of the Canadian International AutoShow.

The event kicked off with a detailed look at economic forces impacting Canada, and how they would impact the Canadian consumer. “I am thrilled to welcome you here today to the 6th annual CADA Summit,” said CADA Chairman Peter MacDonald, opening the event. “As automobile dealers we are constantly dealing with change,” said MacDonald, adding that he hoped dealers would leave with new ideas on how to adapt.

MacDonald thanked the event’s exclusive sponsor, TD Auto Finance, and gave the stage to moderator Michael Hatch, the CADA’s Chief Economist.

Up first was Craig Alexander, Senior Vice-President and Chief Economist, Conference Board of Canada.

Alexander provided what he described as a “whirlwind global economic overview.” Global growth last year was good, and the fundamentals for the Canadian economy were strong, with growth at three per cent last year.

“One of the biggest risks is the renegotiation of NAFTA,” said Alexander. “NAFTA is incredibly important to Canada.”

He took issue with some of the public statements from other economists who said that losing NAFTA might not be that big a deal for Canada. He said they are understating the risks. One concern is that it could discourage foreign investment in Canada and could lead to trade wars in various sectors.

“In our forecast, we assume that NAFTA stays in place,” said Alexander. “But trade negotiations are always hard to predict. But with this administration? Wow!” said Alexander, referring to the volatility of the Trump administration. “At some point I believe Trump will announce NAFTA is over and he’s ripping up the agreement,” said Alexander, adding that will likely just be a negotiating tactic.

Alexander said the recent pullback in the U.S. stock market was not unexpected given the “rip-roaring” gains in equities that weren’t sustainable. “The world economy is going to have to adjust to rising interest rates.”

In terms of Canadian consumers, Alexander said that while rising household debt levels are a concern, the issue is the costs of servicing that debt. “What really matters is your debt servicing costs. More of your income will be paid to service the debt,” he said. “Consumers are going to adjust. The share of the population that is really at risk is about eight per cent. It’s not the majority of Canadians.”

“I fervently believe that the franchise system of selling and servicing vehicles is the most cost-effective, and efficient way to mass market vehicles with OEMs that have large market shares.” Peter Welch, National Automobile Dealers Association

Trucks are hot

Continued strong demand for trucks, and the need for Canadians to replace aging vehicles, are good news for dealers, according to Dennis DesRosiers, President of DesRosiers Automotive Consultants.

DesRosiers said today’s market is all about trucks and the products on display at the Canadian International AutoShow reflect that trend. “With the exception of luxury vehicles, the hottest place in the market last year, almost every major segment was down,” said DesRosiers. “The action was on light trucks (with the exception of minivans), so load up on the trucks guys! Talk to your factories. Take every opportunity you can to build your inventory on that side of the marketplace.”

He also said with almost 11 million vehicles over a decade old on Canadian roads, buyers will be replacing those within the next few years. “We see no evidence of less ownership, and indeed the opposite is happening,” said DesRosiers, adding that: “The used vehicle front is a supply driven marketplace.”

DesRosiers said that while “all roads lead to electric,” he doesn’t anticipate electric vehicles to be a major factor in the market in the near-term.

Canadians bought more than two million vehicles last year for the first time ever, setting a new record for the fifth consecutive year.

Finance trends to watch

While dealers are adapting to change, so too are their lenders, according to Michael McGhee, Senior Vice President & Division Head, TD Auto Finance Canada in his remarks.

McGhee said the focus for TD Auto Finance this year is improvement. “More than ever we are preparing for the future,” said McGhee, adding they want to find the best way to work with and help dealers.

McGhee said TD Auto Finance has enjoyed participating in and being the CADA Summit’s exclusive sponsor since its inception. “Today we are among leaders,” said McGhee. “Leaders who can help shape the future of the industry.”

McGhee said the bank is also carefully watching three trends that gained momentum in 2017.

  1. Fraud: There’s been an increase in various types of fraud involving the auto industry, with used car lots becoming popular businesses for money laundering, increases in identity theft and fraudulent representations. Banks and dealers need to work more closely together to prevent fraud, he said.
  2. FinTech: McGhee said various FinTech companies have gone from “an idea to a solution” in a relatively short order. The bank is often approached by various FinTech startups, and TD recently made its first FinTech acquisition. He said dealers and lenders will need to work with some of these companies to benefit consumers.
  3. Increased regulatory interest: McGhee said the regulatory environment remains focused on consumer protection. “We are all feeling the increased scrutiny,” said McGhee. He said consumer protection agencies and government policy makers want to understand the impact of long-term loans and negative equity on the economy.

Welch: confident in dealer model

The current franchise dealership model is alive and well and will be strong for years to come, according to Peter Welch, President and CEO of the National Automobile Dealers Association (NADA). Welch shared his association’s perspective on today’s automotive industry, referencing a study commissioned by NADA that looked at the dealership of tomorrow.

“Traditional dealerships will continue to exist,” he said in his comments. In an interview, Welch expressed his confidence that dealers have a bright future. “I fervently believe that the franchise system of selling and servicing vehicles is the most cost-effective, and efficient way to mass market vehicles with OEMs that have large market shares,” he said. “Dealers are market makers, they arrange financing, they stock parts, they do service, in new cars, used cars — they have the whole enchilada there — and they are a crucial component of their local economy and their community.”

Welch does foresee continued pressure on margins for dealers, but said technology can be a “friend” to dealers by helping to reduce costs. He also expects to see more reliance on pricing transparency through e-commerce.

In terms of staffing, he sees a transition from traditional sales people to people acting more as product specialists or product advisors.

U.S. dealers also face other hurdles, such as low growth prospects at smaller dealerships and less OEM support (many have not seen a zone manager in years). There are also a number of other issues they will have to adapt to —
including the growing impact of the electrification of the vehicle.

EV adoption, however, will be constrained by several factors. In the U.S., Welch said many Americans don’t have a garage or dedicated parking space to charge an electric vehicle. He said EVs don’t always operate well in the cold or mountainous areas, and “with oil prices where they are, why would any consumer want to pay more for a vehicle that provides less convenience to them?”

As a result, and with so many challenges to work through, Welch said he simply doesn’t think we will see major changes in the next 10 years when it comes to the existing dealership model.

Insights from Ford’s Corporate Futurist

Sheryl Connelly, Manager of Global Consumer Trends and Futuring for Ford Motor Company, shared her experience as a futurist and provided dealers with a few key insights. “You have to think outside of yourself, not just your organization or your community, but outside your country,” she said.

Part of Connelly’s job is to identify global trends and to explore the potential implications they can have on the business. She does this by “cascading these insights on futuring to organizations throughout the company,” according to Ford. This includes areas such as design, product development and corporate strategy.

“My job as a futurist is not to predict the future, but to force people to have a more robust plan so that when these things (unexpected situations) happen, it doesn’t completely unravel your plans.”

Dealer Panel explores EVs, tech

CADA President & CEO John White moderated a dealer panel between Alberta’s Steven Landry, President & CEO of AutoCanada; Quebec’s Norman E. Hébert, Jr., President of Groupe Park Avenue; and Ontario’s Christopher Pfaff, President and CEO of Pfaff Automotive Partners. They explored topics from electric vehicles to dealer consolidation, public ownership, and customer retention and technology.

Pfaff said he sees a lot of challenges coming their way when it comes to EVs and the effect that zero-emissions vehicles will have on the service department. Even so, the dealers remain positive.

For his part, Landry said dealers will adapt. “Dealers are resilient so we will find a way to make money,” said Landry. “It’s going to be a ramp up to this situation, not a quick switch over.”

Hébert was also positive about the dealer’s role in the future. “We will do what we’ve done for decades. We’ll get better and the technology will help us.” He also said that the service part of the business and used cars are two sections that dealers still have control over. “We still have our hands on the wheel,” he said.

“We will do what we’ve done for decades. We’ll get better and the technology will help us.” Norman E. Hébert, Jr., Groupe Park Avenue

Google’s take on the auto buying journey

Consumer behaviour is changing, according to Tim Mueller, Automotive Retail Strategist at Google. He shared his company’s view of the auto buying journey and explored themes like evolution, adaptation and growth.

With 24/7 access to information, he said consumers now want more control and expect greater convenience in their purchasing journey. They are also more informed and aware of their options, and they have higher expectations overall.

“Extraordinary is the new ordinary,” said Mueller, adding that “industry after industry is being challenged by this change.”

He reminded dealers about the importance of adapting and accepting changes, along with the necessity of considering a consumer’s time (which he called the new currency), along with being transparent and ensuring the customer experience is the same across all platforms. “We’re not doing different things, we’re doing the same things differently,” said Mueller in quoting a comment from his colleague, Peter Leto, Head of Retail Sales at Google Automotive.

Ellis on Big Data

John Ellis, Global Technology Expert, Founder & Managing Director of Ellis & Associates, and the author of “The Zero Dollar Car,” delivered an energetic presentation. During his presentation, and later in the Q&A moderated by Niel Hiscox, Publisher of Canadian auto dealer, he dove into the subject of Big Data and how he expects it to have an impact on the business models of the world’s leading sectors — including transportation, telecommunications and insurance.

About Todd Phillips

Todd Phillips is the editorial director of Universus Media Group Inc. and the editor of Canadian auto dealer magazine. Todd can be reached at tphillips@universusmedia.com.

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