automotive industry webinar - deloitte us · 2020-05-15 · joe vitale automotive sector leader...

Automotive Industry WebinarCombating COVID-19 and bringing the business back to normal – lessons learned from China’s OEM experiences

16 April 2020

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Webcast Agenda

China Time Topic Speaker

20:00–20:05 Welcome and opening address

Joe Vitale

Automotive Sector Leader

Deloitte Global

20:05–20:20

Lessons learned from China Auto

makers’ response to COVID-19

Frank Li

Vice President of Geely Holding Group

Geely Auto

20:20–20:35

Yang Min

Data and Information System Director

SAIC Group

20:35–20:50How do OEMs support dealers to

combat COVID-19?

Pence Peng

Partner, Auto Dealership Practice

Deloitte China

20:50–21:00 Q&A


Welcome & Opening

Joe Vitale

Automotive Sector Leader

Deloitte Global


Webcast Speaker

Frank Li

Vice President of Geely Holding Group

Geely Auto

* No slides are shared *


Webcast Speaker

Yang Min

Data and Information System Director

SAIC Group

* No slides are shared *


Webcast Speaker

Pence Peng

Partner, Auto Dealership Practice

Deloitte China

How do OEMs support dealers to combat COVID-19?

© 2020，欲了解更多信息，请联系德勤管理咨询中国 8

What COVID-19 brought to us…

COVID-19 was affected the health of dealer network, especially give a punch to those bad performers.

Decrease of New Car Sales in Short Term

Consumers' purchase intention and purchasing capability have declined

Consumers have low willingness to go out and are inconvenient to purchase cars

Reduction of Aftersales Business

During the epidemic, the driving mileage is low, and the demand for maintenance and repair is weakened

The customer's willingness to back to the factory decreases for their own safety

Affected by the outbreak, the sales fell, and the aftersales of back to the factory will be further reduced in the next year

Difficulty in WS and Stock Management

Some dealers currently have high stock, which is difficult to deal with due to the impact of the outbreak

The duration of the outbreak is difficult to predict, and in order to meet the market supply and demand balance, flexible Wholesales plan is needed.

Dominant symptoms

Hidden effects

Possible termination of

operations of bad

performing

dealers/groups…

… as well as predictable

short-term impacts on

profitability of the whole

network


A combination of proactive “weapons” to win the battle

Impact Measures

Cash flow monitoring & steering

Dealer cost down plan

Profit model adjustment for small market

dealers

Profitability Risk：Profit Decline of The Whole Network

In mid-term, the market will fluctuate greatly in the future, supply and demand will be out of balance, and price competition will be further intensified

Meanwhile, the operation cost will be amplified due to uncertain trend of retail market

Liquidity Risk: The Risk of Capital Chain Break Increased

The cash inflow is reduced or reduced to zero, and the current cash balance is difficult to support loans and daily expenses

ROS forecasting and target re-assessment


Measures to mitigate Liquidity Risk (1/2) – overall strategy

2. Stress test 3. Response actions4. On-going monitoring

1. multi-channel risk info collection

Comprehensive info

source

• Retail and

marketing

performance

• P&L info

• Risk signals from

financing

company

• Dealer survey on

financial and

operation status

In terms of

recognized

potential capital

gap：

• Dealer cash flow

forecasting and

verification

• Worse case study

based on different

business recovery

assumptions

OutcomePotential capital

shortage dealersHigh risky dealers

Actions from OEM:

• Customized support

plans for each risky

dealers, cover resource

reallocation, speed-up

payment of rebate,

floor plan extension,

etc.

OEM/dealers actions

• Network business

recovery and

monitoring

• Consecutive cash flow

tracing

Actions from dealers

• Group support and fund

isolation

• Improvement of

business, focusing on

long-aging stock

clearance

Dealers business recovery

Content

Stress Test + On-going monitoring


Measures to mitigate Liquidity Risk (2/2) – OEM specific support plans

Capital

Occupation

Invisible Cost

The

manufacture’s

actual cost

increased

progressively

Cancel sales and wholesale target in February

Cancel the inspection of business standard temporarily

Lower Requirement for business

Provide the new car / parts wholesale floorplan support

Extend the repayment period Extend the interest-free period

Release financial burden

Speed up the past confirmed rebate payment

Fully prepay the current assessing rebate

Return dealer’s advance payment Accelerate the claim payment

Accelerate incentive/

bonus payment

Actions of releasing short-term cash flow

pressure

Cost transferred from dealer to OEM

Considering actions with different cost scale


Measures to improve dealer profitability

2. RoS target re-setting

3. Cost down measures

4. Small market profit model

1. RoS forecasting

• Business case

study based on

different market

trend assumption

to forecast

different RoS

results

• RoS target re-

setting

• Identify prioritized

improvement

areas

• KPIs target for

members of OEM

dealer profit

committees

• Issues analysis for

small market dealer

profit

• A set of actions

ranging from market

development, NV GP

improvement,

franchise cost

optimization, dealer

format re-planning

Content

We also need to pay attention on Profitability

• Cost down as one

of improvement

area, consider

majority of small-

scaled dealers

• Identify

Mkt./labor/financia

l cost efficiency as

potentials by

benchmarking

with competitors

• Joint efforts and

actions from all

BUs of OEM


Q & A

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automotive industry webinar - deloitte us · 2020-05-15 · joe vitale automotive sector leader...

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