Manufacturer Moves and Rise of EV

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Blackpurl is not only a great tool to solve your Business Management process concerns, but access to knowledge and critical thinking about our Industry. We recognise that, just like most industries, the majority of business owners in the Power Sports Industry are small to medium sized enterprises. This means a great proportion of Blackpurl users, and our business partners, are very hardworking people with little time to spend on that old “work on your business” paradigm. This puts you at a disadvantage when competing against the large Dealer Groups that have the resources to manage the fine detail of their businesses, and follow Industry Trends by undertaking external research and learning.

So, all of us at Blackpurl want to help even up that imbalance, and put you on a level playing field. To start that ball rolling we are starting an initiative of producing interesting articles for you to consider. We believe that using Blackpurl gives you more than a great tool, but access to thought leaders in the Industry. 

Looking to the Future

This first article has a bonus, normally we will talk about only one initiative or issue per article, but today we will cover two. By chance they both relate to each other.

1. Manufacturer Moves to Agency Agreements

2. The rise of Electric Vehicles

Both of these disrupters are at an early stage, but it would be prudent for all of us to examine how they will impact our businesses, and prepare for the structural changes they will bring to the Industry. For those of you who have lived and worked in this Industry for some time you will already know that the technological and business changes in this industry always start with the Automobile Manufacturers and their Dealers. Eventually these winds of change blow across Heavy Vehicles, then to the Power Sport products. 

With all of that said, we can all agree that these changes are underway already.

Let us deal with one at a time

Agency Agreements

What does this mean? Well, it is no surprise that the gross profit opportunity in new unit sales has been on a steady decline for at least a decade. There are many reasons, increase in competition between manufacturers, access to competitive pricing from other dealers, and the empowering of customers via online research just to name a few. This reduction in profit retention has hampered the Dealer’s ability to have a strong marketing budget, hold a large stock of demonstrators and new inventory. With reduced income, expenses have to be reduced. Business 101.  

Manufacturers are aware of this and are looking at ways to change the relationship between Dealers and themselves and ensure long term viability of both the manufacturer and dealer. Ultimately this will see the transition from our traditional Franchise relationship to an Agency Agreement. This has already begun with both Mercedes Benz and Honda well advanced with plans to move to an agency model relationship. It is only a matter of time for this trend to flow through our industry.

However, with every threat there is always an opportunity, and at Blackpurl we believe the forward-thinking businesses can prepare themselves to adapt and prosper in this new environment. There is a lot of detail to discuss, and we may need to follow up with future articles, but for now consider the following:

  • No more financial pressure for Dealers to fund floorplan stock as the manufacturer will own the inventory until retail transaction completed
  • Demonstrator units owned and supplied by manufacturer.
  • Marketing, distribution and administration cost reduction.
  • Reduced reliance on Dealer salesmen skills and subsequent high remuneration.

So where is the opportunity?

If you are not already focussed on after sales income, then it is time to start. Customers will still require service, warranty and accessories. But with this new model the customer bargaining leverage will be reduced and your ability to achieve a fair price for all after sales activities increases.

Better access to quality used stock. Most customers don’t like to sell privately and will still need to trade in their existing unit. Having a well-run and disciplined used sales process will be paramount for your success, and will more than replace the lost revenue on the new unit. However, we need to start thinking of used as a separate profit centre now, and getting our processes in place.

There is a lot to unpack here, and we can look at deeper detail at a later date, but start thinking how your business would be impacted when the Manufacturer representative starts this discussion in the future.

Electric Vehicles (EV)

By know there is no mystery around the advantages of electric vehicles, and how the rapid increase in technological advancements is making them look like a main stream alternative to internal combustion. There is no doubt EV’s will dominate personal mobility in the future.

So why will this impact Power Sports? Electric won’t work in our products you say?  Well, it already does, just not many examples yet. All we are doing is replacing the engine with electric motor, fuel tank with battery and adding some sophisticated electronic controls. As battery prices fall, we will definitely see electric jet skis, snowmobiles, outboard boat motors and motorcycles. Anyone who has experienced the Harley Davidson Livewire will understand how advanced we already are.

So where is the opportunity?

Well, whether it is a better opportunity or not, we will be selling Electric Power Sport products in the not-too-distant future, so let’s start considering the following:

  • Accessories and parts are still needed.
  • Servicing intervals will be much longer, and less revenue.
  • Proprietary technology will force customers to dealers as first port of call, but we will need to have the skills in our service people. This will put pressure on our non-franchise competitors and aftermarket shops.
  • Used Sale opportunity to increase due to hesitance to buy an EV that has not been refurbished. The competition from the private sale market will reduce.

But all opportunity requires a plan to ensure success. While we need much time to flesh out the details, at least think about the following actions:

  • Parts staff trained in electrical principles and how this will affect accessory fit up
  • Service Technicians. This is a BIG one. The requirement for technicians to have more and more sophisticated electrical and electronic knowledge has been underway for some time. Some industry participants believe the quality of our training for Apprentice Technicians is already below par. With EV, they will be dealing with main supply AC voltage, high DC voltage (400 V) in battery storage, normal 12 volt chassis electric systems and 5 V Hi/Lo CANBus communication. Do we have a plan to train for this?
  • EV refurbishment processes for used inventory (battery reconditioning, software upgrades etc)
  • Ability for the vehicle to communicate with your business systems via cloud technology. Think Tesla, the cars can already automatically contact service facilities without owner intervention.

There is a lot to consume here, and we are just suggesting  you start to think about these issues. They are not dramatic changes  at our doorstep yet, but if we do some planning, when they arrive we will turn them into opportunity.

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