Don Romano, President & CEO of Hyundai Auto Canada told dealers at the CADEX 2017 event that their best days lie ahead, despite all the buzz in the industry about disruption and disintermediation.
“It couldn’t be a better time to be in this industry,” said Romano, the opening keynote speaker at the sold-out 2017 CADEX event in Nova Scotia held by the Nova Scotia Automobile Dealers Association (NSADA) in April.
The CADEX event brought together auto dealers from across the province for a jam-packed half day conference with keynote speakers, panel sessions and presentations, followed by the association’s President’s Dinner event.
During his keynote, Romano took straight aim at emerging trends such as ridesharing, autonomous vehicles, electric vehicles, new sales and distribution models offered by companies like Tesla, and connected vehicles.
Romano said there is a lot of talk in the mainstream media, industry publications and among his peers about how these emerging forces will reshape the auto retail landscape.
“It sounds like the world is coming to an end,” said Romano. “There is a lot more hype out in the market than there is reality. There is a lot of fear out there, but most of it is banter.”
Romano said he doesn’t dispute that change is coming, but it’s really a question of the pace of change and the scope. The company’s research, for example, shows that ridesharing works for only a small percentage of the population.
As for autonomous cars, there will be more safety technology in cars to make them safer, but it will be a while before we see fully autonomous cars on our roads.
“We will be on Mars first,” said Romano, adding that besides the vehicle technology it will require coordination between insurers, regulators — and drivers. “We are not ready. Not yet.”
EVs not for everyone
Although his own company is about to unveil a new electric vehicle, he said there are still practical limitations in terms of range, charging infrastructure and pricing that will limit electric vehicles making a major impact in the market — at least in the short-term.
The best news Romano delivered for dealers, however, was his unflinching support for dealers and for the franchised dealer network. While dealers will need to work hard so that they don’t get transplanted by new market entrants, he said car dealers are well positioned.
“Car dealers are local, and they are in the community,” said Romano, adding that is a big advantage. “You earn the trust of the people you do business with.”
Romano stressed that the goal for dealers is to help improve the lives of customers by making things faster, more enjoyable and more efficient.
“Time is of the essence. Time is everything,” said Romano. “That’s an experience we need to focus on.”
Strong sales so far
Next up was Michael Hatch, the Chief Economist for the Canadian Automobile Dealers Association (CADA). He presented a review of 2016 vehicle sales in Canada, and in the province.
Despite predictions that 2017 could be a slow year, things are going well. “March blew everybody out of the water,” he said. “Right now we are in a very strong spot. Four per cent growth over last year is a great place to be.”
But the picture isn’t quite as rosy in Nova Scotia, as sales are down 7.2 per cent so far this year.
In terms of predictions, Hatch said new vehicle sales in Canada might hit the first ever 2 million mark, with decent sales growth nationally and a return to positive sales growth for Nova Scotia.
Although vehicle sales are down in the United States, the economic fundamentals in Canada are strong. “We are in a very strong place in Canada,” said Hatch.
Millennials speak up
Three students from the Automotive Business School of Canada (ABSC) took the stage to share their views about how Millennials buy and how they are influenced, in a panel moderated by the event emcee Niel Hiscox, publisher of Canadian auto dealer.
The three students were all in the fourth year of the degree program at the college: Daniel Montesanti, Laurence Desaulniers, and Maurice-Jordan Diegel.
“I’m a big review guy. I always go right to the Internet before I buy anything,” said Diegel.
Desaulniers, the lone woman on the panel, said that while she likes shopping online, she still likes visiting retail stores to buy products, such as buying makeup at Sephora, because it’s an enjoyable experience.
Among their many startling and eye-opening comments, was their contention that they would trust the opinion of a blogger or “16-year-old” vehicle reviewer as much as they would a review from a professional automotive journalist.
“People my age care more about Android Auto than about how much horsepower the car has,” said Diegel.
The Millennials said that in a dealership environment, it was important for them to be able to have a conversation with someone their own age.
“It’s extremely important to be able to talk to someone from your cohort,” said Diegel, who also took direct aim at the traditional commission-based salesperson approach.
“You have the piranhas on the floor that want to attack you,” said Diegel. “You have people so stuck in the traditional way. It doesn’t matter whether you are old or young, it’s the sales process. It all feels scripted and the whole experience is terrible.”
For his part, Montesanti said too much reliance on technology isn’t always the answer either.
When he visits a dealership, he doesn’t want them to already know about which vehicle he’s been searching for online. “I would like to restart the process. I might have something in mind when I’m doing the vehicle configurator. Someone might convince me otherwise,” said Montesanti.
When asked what they would change at dealerships, Montesanti said he would improve the customer service experience.
“As a service advisor I always put the customer ahead of what we are trying to sell them. No one likes to hear they need to spend money on their vehicle,” he said.
Not surprisingly, Diegel said: “Get rid of commissioned salespeople. Hire salaried salespeople. Have the right people on your sales floor that are not going to be pushed by hitting that target. It’s a great way to drive sales, but it drives a crappy customer experience.”
Dealership design trends
Monte Weis, President of Weis & Associates, shared his thoughts on design trends and technology in dealership design. His firm works with more than a dozen OEMs and his team visits as many as 1,000 dealerships a year across Canada, from designing facilities to performing audits.
“Agility is important,” said Weis. “Your facility is one of the biggest investments you will make.”
Weis said build costs are going up.
Facilities used to cost about $120 a square foot but now the baseline is up to about $200 a square foot, he said and the investment cycles are also getting shorter — down to eight to ten years when it used to be a 15-year cycle.
Weis said the upfront planning before starting a design or build is vital; if it’s too rushed, this is where the mistakes take place.
Picking the right team is also vital.
Weis said they see drawings all the time that don’t represent coordination between all the various designs and contractors. This can lead to catastrophic outcomes. “We have a general rule: a year to plan and a year to build,” he said, but added that more often they see six months to plan and 18 months of construction.
Weis said showrooms are nice, and necessary, but the drive-thru is a great opportunity for people to interact with vehicles.
He said showroom to drive-thru size can be approximately 50-50, while now it’s more like 80 per cent showroom and 20 per cent drive-thru.
Weis also advised dealers to build the conduits and power access for the digital screens and content that will soon be in their dealerships.
He said too often the facilities are built without this in mind, and they need to be retrofitted at a greater cost.
Women in automotive
In the women in automotive panel, three Nova Scotia women who work in the industry talked about their varied experiences.
“There are still not enough women,” said Amanda Morvan, GM, O’Regan’s KIA, in Dartmouth. “It’s a very demanding job.”
For her part, Rikki Higgins, Director of Sales, Automotive Business Solutions, said she hasn’t had any negative experiences in the industry. “I’d like to see more women in this industry. It’s fun, and well-paying,” said Higgins.
Lisa Landry, Vice-President, Landry Auto Group said there are many opportunities for women in auto retail.
“Historically it has been a man’s world,” she said. “The barriers and roadblocks aren’t there like they used to be. I know in our business, women have equality,” she said, adding that at her dealership women have been among the top performing salespeople.
Climate change and business
David Adams, President of the Global Automakers of Canada updated dealers about the impact of climate change and regulation on the industry. His organization represents 15 brands that sell and distribute vehicles in Canada.
Adams said global climate change agreements will impact OEMs who will need to adapt their technologies and product mix to help reduce emissions, and this will impact dealers.
Adams said the U.S. regulates emissions differently.
In Canada it’s a shared jurisdiction between the federal and provincial governments. He said Prime Minister Justin Trudeau made reducing emissions an election campaign issue and we can expect his government to be more aggressive in pushing new measures than the Harper government was.
“The Trump administration does not have a lot of time for the climate change file,” said Adams. This could have a big impact on easing the pressure on automakers to meet the Corporate Average Fuel Economy (CAFE) standards. “It’s going to be messy going forward.”
Canada could potentially diverge from the U.S. in its climate change process, he said.
The national view
The day closed with a state of the union chat between John White, President & CEO of the Canadian Automobile Dealers Association, and Niel Hiscox, publisher of Canadian auto dealer magazine.
When asked about the biggest change after his first year on the job, White’s answer was simple: “lobbying.”
He said he has discovered that it’s a much more personal process at the dealership level than his previous experience as an OEM leader.
White said the association is also going to be modernizing its approach, including updating its communications and website. “Our website sucks. It’s stale and old,” he said.
In terms of the concerns that dealers are at risk of being disintermediated by other forces affecting auto retail, White said he did have some concerns.
“From what I do see, and what I have seen around the world, there are some disturbing things going on,” he said. “There are some things that concern me — the question is to the degree.”
He said manufacturers are buying ridesharing companies and want to get involved in that business.
He is also seeing some OEMs expressing an interest in changing dealer sales and service agreements to give them the ability to sell directly. “For us as your national association, we believe there are issues out there that we continue to fight,” said White. “For us to continue to fight, the dealer franchise model is paramount.”
During his session, White discussed many of the files that the CADA is tracking for dealers. “These are things we really need to keep an eye out for on the future,” said White. “I don’t want to be alarmist but it’s one of those things that keep us awake at night at CADA.”
Gino Cozza, Head of Canadian Sales, TD Auto Finance, closed the event. “What a great day this was,” said Cozza. He thanked the dealers and conference organizers.
CADEX is supported by an exclusive sponsorship from TD Auto Finance.
