Dealer association looks forward

Australian Automotive Dealer Association chief executive David Blackhall has been pondering what’s to come in the industry in 2019.

Looking at economic prediction, wondering what the year ahead will mean for “automotive disruptor” Tesla, and referencing the franchisee power imbalance the AADA has described as being present in Australia, Blackhall says 2019 should prove interesting.

Citing a Bloomberg article by Noah Smith that discusses the challenges economists face and the various theories and methodologies they use to attempt to answer tough economic questions, Blackhall says he makes good arguments.

“[Smith] makes some strong points that might at least in part help to explain some of the economic turmoil we faced in 2018 and will likely continue to endure this year,” he says.

Smith refers primarily to techniques microeconomists have used since the 1980s to reliably answer questions, such as looking at world events and the economic cause and effect such as refugees and low-skilled immigration.

Another technique is using randomised controlled trials (RCT) to experiment with the economics of a policy on a large scale, but Smith acknowledges some questions remain too large to answer reliably.

“Like political ‘science’, economics is, at least partially, an inexact ‘science’, especially when it comes to explaining macro outcomes,” Blackhall says.

“Treasury modelling is important, [but] political leaders need copious helpings of common sense to manage today’s economic settings,” he explains.

Also on the AADA’s radar in 2019 is the dealer franchise agreement conditions under which dealership are required to run their businesses under.

With allies in the US in the form of the North American Dealer Association, the AADA says NADA president Peter Welch makes a pertinent argument in a blog that reflects changes that may become reality here in 2019.

“Welch asks some highly relevant questions and the AADA looks forward to learning more about NADA’s view when we meet with them in January in San Francisco,” he says.

Welch deplores on-going unfair stair-step incentive programs, particularly “overly complicated and short-term programs that favour larger and urban dealers – continues to erode brand loyalty, brand value, residual values and the consumer experience”.

He references the latest Cox Automotive Car Buyer Journey Study which indicates brand loyalty across all brands is at a 56% low, a stat he says should scare carmakers “with more than half of new-car buyers ready to jump to another ship”.

Welch also advises OEMs need to compensate dealers fairly on warranty and recall work carried out given “more than 50 million warranty and recall repair orders” were logged in 2018 and “most dealers are running their service bays at nearly full capacity”.

Most importantly however, Welch says with digital commerce eroding the relevance of a dealer and brand’s geographic territory, dealer compliance standards need to “measure sales effectiveness fairly and accurately”, but condemns that “many OEMs still rate their dealers’ effectiveness primarily on performance in an assigned market area.”

“Peter’s article underlines key points we at AADA have made in our push for an Automotive Code that is fairer for dealers in Australia,” Blackhall adds.

The AADA is also watching Tesla closely in 2019, with a few questions he jokes could see the rise in magic eight ball sales and improved demands for loans in the crystal ball market.

“Will Tesla finally achieve commercial scale this year?” Blackhall asks bluntly.

“Will the Initial Vehicle Quality/JD Power APEAL scores for Tesla vehicles achieve parity with the mainstream OEMs?” he wonders.

“How will Tesla’s tactical pricing response to the 50% reduction in the Federal Tax Credit impact sales forecasts?”

Blackhall also asks if it is fiscally justifiable and “morally acceptable for the Federal and State governments in the US to continue to hand around US$8000 in taxpayer-funded incentives to wealthy purchasers of Tesla vehicles?”

The AADA is calling to action if anybody in the automotive industry has firm answers to these questions, “We’d like to borrow your crystal ball,” Blackhall concludes.