LAS VEGAS — When it comes to factory-mandated image programs that require new-car dealers to invest billions of dollars to remodel their showrooms, Stephen W. Wade, outgoing chairman of the National Automobile Dealers Association, expressed hope that a new study released today would help restore reason and common sense.
“The goal of the study is to move the facilities investment decision onto a more rational, informed and fact-driven footing,” Wade said in remarks today at the NADA Convention and Expo in Las Vegas, which runs through Monday, Feb. 6.
Responding to dealer concerns, NADA commissioned the study last August that looked at the various factors – both positive and negative – that drive the return on investment in dealership facility upgrade programs.
The study was conducted by Glenn Mercer, a former McKinsey and Company partner and industry consultant who focused on objective analysis, rather than on advocating the position of one party over another. Mercer interviewed a broad range of industry participants.
The study uncovered three types of store upgrades:
(1) Expansion – adding a showroom or service bays to support growth in UIO, for example.
(2) Modernization – upgrading facilities to contemporary standards in tile, furniture and fixtures, etc.
(3) Standardization – designing the interior and exterior look to ensure that every store selling a given brand looks as much like the other stores as possible.
“In terms of dealership expansion, the study found that unreasonably high and frequently changing OEM volume forecasts, as well as outdated capacity formulas can lead to overbuilding and waste,” Wade said. “So better, more reasonable forecasting should make expansion investments easier for dealers to support.”
Concerning modernization, Wade said the study revealed that many dealers are skeptical of the need to invest such large sums of money because there is an absence of clear, quantified return on investment data.
“The study asks OEMs for more competition among vendors and more flexibility in OEM design standards, which would benefit auto makers and dealers alike,” Wade said.
The most contentious issue is standardization, which requires dealers to go “beyond common signage and colors, to requirements for virtually identical facades, greeting areas and more,” he said.
Wade said that NADA has shared the study’s findings with many manufacturers and all have been receptive.
“In the long run we must all remember that it’s how we treat our customers,” he said. “Providing a world class purchase and service experience is what counts.”
Click here for Wade’s full remarks.
The executive summary and full report are available at www.nada.org/facilitystudy.
The NADA Story
The NADA story began in 1917 when 30 auto dealers traveled to the nation’s capital to convince Congress not to impose a luxury tax on the automobile. They successfully argued that the automobile is a necessity of American life, not a luxury. From that experience was born the National Automobile Dealers Association. Today, NADA represents nearly 16,000 new-car and -truck dealerships with 32,500 franchises, both domestic and international. For more information, visit www.nada.org.