quintegia buzzavo eng

Leonardo Buzzavo - Moscow - 27.8.2008 1

Business Scenarios for Automotive Dealers in

Europe

Leonardo Buzzavo, University of Venice - Quintegia /

ItalyROAD Conference - Moscow, 27.8.2008

Leonardo Buzzavo - Moscow - 27.8.2008 2

Studying the automotive industry

Research team at the University of Venice

International research network

Since 1994

Leonardo Buzzavo - Moscow - 27.8.2008 3

Projects developed

Leonardo Buzzavo - Moscow - 27.8.2008 4

Automotive Dealer Day

Verona, 6th year, in May Information, strategies and tools for players

of automotive distribution

25 workshops (Italian + English) Area expo with 50 businesses 2,000 participants

Leonardo Buzzavo - Moscow - 27.8.2008 5

Now 100 years old in Europe and USA

USA: homogeneity and relative strength Japan: ‘original’ approach Europe: high internal differentiation

Other countries evolving– Brazil, and then Russia, India and China

Dealer networksworldwide

Leonardo Buzzavo - Moscow - 27.8.2008 66

Trend in dealers and sales Trend in dealers and sales outletsoutlets

0

20000

40000

60000

80000

100000

120000

Dealers Sales outlets Dealers Sales outlets

1997 2002 2007

-29%

-6%

-30%

-10%

= Change 1997-2007

Source: European Car Distribution Handbook / NADA

Leonardo Buzzavo - Moscow - 27.8.2008 7

Growing importance of Dealer Satisfaction

Total automotive performance is a combination of– Manufacturer performance– Dealer network performance

Dealer satisfaction has become as important as customer satisfaction

Manufacturers paying more attention

Monitoring activity developed by Quintegia in Italy since 2004

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2004 2005 2006 2007 2008

Dealers participating (questionnaires): now

>30%

20052004 2006 2007

Manufacturers purchasing report

(Italy)

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Overall ranking2008 - Top10

Italy

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Regulation for Dealer-Manufacturer Franchise

Contracts in EU Block Exemption Regulation (BER) created

in 1985– To discipline contracts and limit anti-competitive

practices to stimulate free market competition Renewed in 1995

– Small changes, mainly to favour multi-branding and opening of parts markets

Renewed in 2002– Greater changes, to stimulate more competition

E.g. freedom of additional outlets anywhere in Europe

Expiring in 2010

Leonardo Buzzavo - Moscow - 27.8.2008 11

Prospects for 2010

Industry situation:– Intra-brand and inter-brand competition is high– Price differentials have reduced over time

So, there is less need for Competition authority to adopt a “strong medicine”

We are likely to see– General regulation (common for all industries)– More delegation to authorities of national states– More different choices by individual manufacturers

Leonardo Buzzavo - Moscow - 27.8.2008 12

Market share of Top25 DealersMarket share of Top25 Dealers

Source: ICDP (2007), Quintegia

0

5

10

15

20

25

30

35

USA UK FRA GER SPA ITA NED

Mark

et

share

(%

)

2001 2003 2006

Leonardo Buzzavo - Moscow - 27.8.2008 13

Performance indicators:example of best practices

Vehicles sold with finance 50% Gross profit from sources other

than new+used cars 50% Ratio of used/new cars sold 1:1 Used car stock turn 10x Customer follow-up 100%

Dealers becoming more concerned with KPI (Key Performance Indicators) and benchmarks

Leonardo Buzzavo - Moscow - 27.8.2008 14

Automotive Dealers

Which main trends areinfluencing dealer evolution?

Leonardo Buzzavo - Moscow - 27.8.2008 15

Structural standards Operational standards Business Management

Variablemargins

- Conflicts between dealers and manufacturers- Development of businesses outside new cars

Dealer response / focus:

1. More manufacturer control

Leonardo Buzzavo - Moscow - 27.8.2008 16

Extended services Used cars Finance and insurance (F&I)

2. Broader business mix

- Find the right providers and establish business relationships- Develop competences and processes

Dealer response / focus:

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3. Multi-branding

To complete the portfolio of offering– Model mix

To reduce the overall risk of the company

- Exploit synergies across different brands

Dealer response / focus:

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4. Business management

Managing by numbers– Fast– Accurate– Relevant for decisions

- Develop adequate decision-support systems- Develop competences

Dealer response / focus:

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5. Customer focus

More attention to customer needs and segments

Greater focus on customer satisfaction and loyalty

- Develop appropriate databases- Develop customer research and information technology

Dealer response / focus:

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6. Organization / human resources

Managing larger and more complex organizations– multi-brand– multi-business– multi-site

- Human resource focus (selection / training / incentives)- Focus on lean processes (reducing waste)

Dealer response / focus:

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Key points and perspectives

When markets become saturated dealer-manufacturer conflicts become critical– Particularly when dealer density is high

Dealer business highly entrepreneurial– Manufacturer-owned dealers not a solution

Scale economies are lower than other industries– Limited advantages in buying power

Distribution is a capital-intensive industry– Importance of lean processes

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Change over time

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Leonardo Buzzavo, University of Venice - Quintegia /

ItalyROAD Conference - Moscow, 27.8.2008

Business Scenarios for Automotive Dealers in

Europe