Wednesday, December 7, 2016

2017: "What Can We Expect?"

In December of every year, things get pretty busy, not only in our dealerships, but in our home lives as well as the holiday season approaches. With the hustle and bustle of both, we seem to get more consumed with the everyday stuff and before we know it....Boom! comes 2017!

With that said and looking ahead to 2017, I believe this coming year will not only be prosperous, it will be a "break out" year for our industry. As I mentioned in the intro, I believe there are a lot of indicators out there to support my opinion, including some stats and analysis from some prominent industry experts.

Each year, as many "Smart Parts" Readers already know, I take the time each December to do my research on what the current year has revealed as well as what it means looking ahead to the new year. Consistent to the past few years, 2016 showed continued growth in auto sales, even though it looks like it will fall a little shy of the new vehicle sales records of 2015.

My first question, or should I say concern is...when will we reach the peak and start the downward slide? Many of us in the industry know that our business seems to go in seven to eight year cycles where we experience a down slide in vehicle sales. This "trickle down" of lower vehicle sales can be felt dealer wide and all of a sudden, the fixed operations becomes even more of a necessity in dealership profitability and survival.

Are we at that point in history again? Could we have already seen the peak of new and used vehicle sales in 2015 and now be looking at that dreaded period in time again? Most importantly, if true, are we ready to survive the pitfalls and struggles yet once again?

To find the answers to these and perhaps many other questions and concerns looking forward, I once again turned to a source that has consistently led our industry, celebrating 100 years of service in 2017 and that source is the National Automobile Dealers Association, (NADA)

In November of this year, NADA Chairman, Jeff Carlson wrote an article that is available to all on the website titled "The Next 100 Years of Evolution is Here". In his article, he expands on the future of our industry and how NADA "will continue to be proactive and forward looking in it's mission to advocate for the franchise system and provide dealers with the resources they need to succeed."

As part of NADA's commitment and on their behalf, Glenn Mercer, a highly regarded automotive consultant is currently conducting a thorough and researched look at what our industry has to look forward to by the year 2025. Not only will this study look at our end of the industry, it will also give us a perspective of what automotive retailing will look like from the dealer, consumer and manufacturers standpoint.

In Mercer's preliminary findings, he believes that we will see more evolution, but not revolution over the next 10 years with sales remaining consistent, while direct sales efforts will be focused on higher end vehicles. He also believes that private dealer ownership will continue to dominate in a slightly shrinking overall dealership total of approximately 16,500 by 2025.

Forecasts also indicate that light vehicle sales will be in the approximately 17-18 million with a continued decline in profit margins, much like today which will require dealers to focus, once again on the fixed operations to provide necessary revenue to survive and prosper. Mercer's research and perspectives are scheduled to be completed early in 2017. 

Chief Economist for NADA, Steven Szakaly predicts likewise as far as the projected light vehicle sales at 17.1 million units, thus predicting a "stable market" ahead and not a growing market. He also believes that the industry has "achieved record sales and pent up demand is effectively spent".

Szakaly continued with his economic outlook for 2017 as remaining strong with projected gross domestic product, (GDP) growth at 2.6 along with employment numbers increasing and gasoline prices remaining stable. He also added that increased infrastructure spending and certain tax cuts from an incoming administration could also mean a better long term outlook.

Some areas of concern he has though looking forward is rising interest rates, increased loan terms to an average of 68 months may lead to a slower, but still strong sales pace. This may also impact and increase new vehicle lease purchases and declining residuals and used car values.

Overall, the future is stable, with a potential for even higher growth pending any changes that may be implemented by the new administration. In my opinion, we just may "dodge a bullet" this time around as to our cyclical patterns of the past have proven.

So what does all of this have to do with us "Smart Parts" Managers?

Quite simply, once again, our dealers are going to look to us and all the fixed operations to "foot the bill" and to remain profitable overall. Fixed Coverage, or Service Absorption percentages are going to be the main topic in training from in-dealership all the way up to the NADA University level.

Here at ACG, we have already seen a drastic increase for training at all levels and most of training. The Parts Department has one of, if not the highest "net to gross" percentages in most dealerships today. As a dealer, if makes perfect sense to insure my Parts Department Managers and Staff have all the necessary training to maximize department profitability.

We experienced a very high training demand this year at ACG, with the highest increases in Parts Management Training. The demand was so much higher that it was felt all the way up to the NADA University level. I was fortunate enough to participate in the NADA University's first, but not last Parts Summit this past September to address this very issue of expanding parts training overall

Partnering up with NADA, along with other distinguished industry parts experts was definitely a great recipe for advancing the agenda and curriculum going forward. Opening this "round table" forum to new ideas was, as I mentioned in previous articles, one of the best ideas put forth by Chris Bavis and Mark Michalski, University Instructors at NADA.

The future looks very bright in my opinion for "Smart Parts" Readers and Managers! The upcoming year of 2017 could actually be a record year for training and overall fixed operations growth. With a steady sales forecast, projected strong economic growth and strong consumer confidence levels, 2017 could just be your "Best Year Ever!"....and ACG "Smart Parts" can help get you there!

Dave Piecuch is the Vice President of Automotive Consultants Group Inc. and is the Head Coach for Smart PartsTMThe only "Results Based" High Return Training, Coaching, and Consulting company in the world!  Dave can be reached at Cell 786-521-1720 or E-mail at Vist our Website at