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


Studying the automotive industry

Research team at the University of Venice

International research network

Since 1994


Projects developed


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


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


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


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


2004 2005 2006 2007 2008

Dealers participating (questionnaires): now

>30%

20052004 2006 2007

Manufacturers purchasing report

(Italy)


Overall ranking2008 - Top10

Italy


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


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


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


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


Automotive Dealers

Which main trends areinfluencing dealer evolution?


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


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



3. Multi-branding

To complete the portfolio of offering– Model mix

To reduce the overall risk of the company

- Exploit synergies across different brands



4. Business management

Managing by numbers– Fast– Accurate– Relevant for decisions

- Develop adequate decision-support systems- Develop competences



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



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)



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


Change over time


Leonardo Buzzavo, University of Venice - Quintegia /

ItalyROAD Conference - Moscow, 27.8.2008

Business Scenarios for Automotive Dealers in

Europe

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