| |
|
 |
| |
Can it really be 2005 already?
Is it just me, or does is seem like Y2K happened only yesterday? Can it really be 2005 already?
That can only mean that it?s that time of year, again, when media folks, experts and pundits put on their Nostradamus hats and try to predict the future. They?ll be telling us what?s ahead for 2005, in terms of investments, interest rates, housing sales, market trends, etc. Not until 2005 is over will we realize that most of these predictions were, to varying degrees, wrong.
The Star?s Wheels? editor, Mark, has suggested that I enter the fray with some sage predictions on what I envision in the ?dealer world? for 2005.
- In the first 10 days of January, the media will be negatively reporting that Canadian vehicle sales ?plunged? in 2004. In fact, from January to November, 2004, total new-vehicle sales are down just 4.3% from the same period in 2003 (total 2004 results were not available at press time). New motor vehicle sales in Canada, in 2004, are expected to produce the 4th best year ever for auto sales in Canada. The real industry experts, new-car manufacturers and dealers, will view 2004 as a good volume year.
- Media ?experts? will predict further automotive ?doom and gloom? in 2005.
- I actually think that 2005 could be a growth year. A year ago, it was reported that roughly 45% of all vehicles on Canadian roads are nine or more years old. This figure is up one-third from a decade ago. I predict that this ?pent up demand" will be one of the many factors that will contribute to 2005 being a very good year for new and used vehicle sales in Canada.
- Dealer profit margins on new vehicles will continue to shrink to even more ridiculously low levels. Customers will continue to believe that dealers make obscene profits. After discounting, dealers usually average a 5% markup. From this small profit, we have to pay sales commissions, insurance, taxes, hydro, heat, inventory costs, building maintenance, etc. (many of these costs are, as you know, out of control).
- Dealer sales of used vehicles will continue to grow as a result of increasing consumer nervousness about buying privately from strangers. Purchasers will drive higher dealership sales of used vehicles, as they realize that these cars offer better consumer protection and many also come with ?certified used? programs (with solid warranties) from our manufacturers.
- Special interest groups will continue to spread the ?high sales profit? misconception, to the public, about our industry. These, for-profit groups, will again, succeed in convincing the public to pay their ?consulting/membership fees?, thereby introducing an additional profit taker into the vehicle purchase transaction.
- Manufacturers will keep chasing the holy grail of market share. No manufacturer will want to concede a single percentage point of its cars sold in Canada, to a competitor.
- Manufacturers will continue to express a keen desire to get out of the consumer incentives game, altogether. Several manufacturers may even try to do so ? at their peril. They will quickly realize that eliminating consumer incentives is a one-way ticket to lost market share, and they will promptly re-instate those incentives.
- Vehicle manufacturers will continue to hold the line on increasing the manufacturers? suggested retail price (MSRP). But, behind the scenes, they will again raise the dealer cost prices, further reducing our profit margins and giving us even less room to negotiate. The residual effect of these ?hidden? increases on consumers will be higher transaction prices.
- Car buyers will continue to shy away from actually purchasing vehicles on the Internet. People still need to touch, feel, smell and drive a vehicle, before they make a purchase. Computers cannot replace people for everything; with the incredible choices of options and models, consumers will still need a qualified sales rep to explain the myriad of details that are involved in purchasing a vehicle.
- Consumers will continue to expect, and get, MORE for LESS from manufacturers and dealers. There have never been more new vehicles, incentives, manufacturing capacity and focus by dealers, who want to keep their existing customers, and to find new ones.
- Finally, consumers will, at long last, reach the point where they cherish their new car dealers. They will give us warm hugs and invite us home for dinner and drinks. Wait a minute ? my Nostradamus hat just fell off!
Best wishes for 2005!
Ken Shaw Jr. is President of the Toronto Automobile Dealers Association and is a new-car dealer in Toronto. E-mail comments to president@tada.ca
|
|
|
 |
|
|
| |
 |
|
Home Page
