How to maximize dealer profits in the world’s largest automotive market
Much has been written about China’s explosive automotive market and sensational overtaking of the US to become the world’s largest automotive market. In fact, according to the China Car Times, more cars were sold in China last year than in any other country at any time in history.
However, the sentiments for 2011 is not as rosy as the government put on brakes on the growth of the automotive industry, including limiting the number of new cars that can be put on the road of Beijing and putting an end to the sales tax reduction stimulation effort. There are serious implications to the bottom-line of the car dealerships and some reports even forecasted that 30-40 car dealers in Beijing will go out of business in the next 2 years.
Before such dramatic measures were taken, the car dealers have already started to feel the tremendous pressure on their profit margins. The hey days of 10-20% gross margins may be over. Despite the exponential growth of the car sales, the dealer network was growing at an even faster pace so competition has been intensifying at this time.
There is, however, still a lot of room for growth, particularly dealer groups who can extend their reach to the 2nd and 3rd tier cities. In fact, these markets have started to become the backbone of the automotive growth in China, and with less competition also comes less downward pressure on sales margins. The other huge growth potential will come from dealers broadening their revenue base to cover used car trading, F&I, accessories and merchandise, and becoming far more efficient.
Operational efficiency allows the car dealers to spend less for each sales lead, bring down the cost per prospect, gain better ROI for each marketing dollar spent, reduce the total transaction costs for each sale, earn more from each service customer, minimize fraud and leakages, achieve higher inventory turnover, make better forecasts and inventory management, drive down warranty wastes, increase customer loyalty and hence repeat business. Efficient dealers will rule the industry in the future.
How can a dealer become truly efficient? Our proposition is that the operator should become tech-savvy, adopt tech-based auto solutions as business enabling tools. Without the tools, you will face strong resistance from your people and so your objectives for efficiency cannot be achieved.
In our series, we will present our model for efficiency in each stage of the business process, starting with leads generation. We are very eager to show you how you can leverage on the latest technology for network marketing at relatively low costs to complement what you already have in your arsenal.
Throw us any comments if you have any. We love the challenges .