Dealers Can Keep Service Booming
How to win the service drive battle against independents and other competitors.
July 27, 2023
Sponsored by Urban Science
This is the third in a series of articles analyzing the results from this year’s Urban Science Dealership Transformation Index™ survey, conducted alongside The Harris Poll, on auto-buyer perceptions about the impact of electric vehicles on the automobile dealership model.
Rising interest rates and economic uncertainty have led U.S. car and truck owners to keep their vehicles for an average of more than 12 years, a record high. Although that’s led to fewer car sales and profits for U.S. dealers, a dealers’ service and parts business boom offset that downturn.
Although metrics show that service activity at U.S. franchised dealerships decreased in recent months, it reached a record high in March 2023. And activity since then remains higher than in like-2022.
It is widely known that sales teams needed to switch strategies to accommodate shoppers’ new preferences, including digital sales and battery-electric-vehicle knowledge. Service and other fixed ops staff also must respond to customers’ hunger for more digital communications including online F&I services such as payment plan options. They also need to reduce service and transaction times, become adept at servicing BEVs and offer more personalized amenities such as pick-up and delivery of vehicles.
That’s especially important, because dealerships need to gain market share from the independent repair shops that the public perceives as less expensive and more efficient.
Consider the Urban Science/Harris Poll survey that found fewer vehicle owners believe dealership service departments have unique value not found at average repair shops. Of those surveyed this year, only 35% believe dealers have better value propositions, compared with 42% in 2022. In addition, those committed to using service departments at the dealerships where they purchased their cars declined from 44% in 2022 to 39% in 2023.
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In addition, an increasing number of car owners believe general repair shops are “better” than traditional car dealerships.
Here’s the Urban Science/Harris Poll survey breakdown: Although 75% of respondents believe car dealerships are better at installing original parts from the manufacturers and 69% of respondents report car dealerships have higher-quality tools and diagnostic equipment, 60% of car owners think general repair shops provide more value for the service received. And more than half of respondents (54%) prefer general repair shops for scheduled maintenance.
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Surprisingly, an increasing number of car dealers agree with those sentiments. Although 81% of dealers surveyed either strongly believe or somewhat believe they can compete on price with general repair shops, that figure represents a significant decline from 89% in 2022. Those dealers who believe they are keeping pace with the service demands required by BEVs and think good service departments are keys to vehicle sales also decreased.
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Why is this wholesale overhaul vital? As we mentioned in our earlier reports detailing these survey results, consumers across all age groups have increasingly positive views of dealerships. That is especially true of younger generations, the up-and-coming buyers, starting with millennials (age 27 to 42). That means there’s a pathway for dealers to gain Fixed Ops traction if they can take steps to close the perception gap about the quality and cost of their repair and maintenance services.
But there are many roadblocks to dealership service departments embracing the needed changes to grow and maintain business and satisfy modern customers’ preferences. Among them:
There is a shortage of technicians to repair and service vehicles with internal-combustion engines and trained to service BEVs. The U.S. Bureau of Labor Statistics (BLS) projects that each year until 2031, 73,300 technicians will be needed to fill vacancies. Most of the more than half a million job openings in the sector are due to technicians retiring or otherwise leaving the workforce. The number of working adults (those ages 15 to 65) will shrink almost 1% by 2030, according to BLS.
Dealerships during the past few years have made major investments ranging from $500,000 to over $1 million per dealership for training, equipment and more to prepare to sell and service BEVs. That expense has come at a time when the U.S. economy wobbles toward what some predict might be a recession. And because BEVs cost, on average, $5,000 to $10,000 more than ICE vehicles, they make up a small percentage of sales. As we mentioned in a previous report, only 17% of consumer survey respondents report they will be “EV-only” ready by 2030, meaning they won’t consider ICE vehicles.
Dealers expect a slump in service and parts revenues. Analysts note ICE vehicles generate 60% more aftermarket spending than BEVs. That’s due to the need to replace oil and other fluids, brake wear (it is higher in ICE vehicles), and parts specific to ICE vehicles.
Conclusion
Although the shift from ICE vehicles to BEVs will significantly impact dealership service departments, there are low- and no-cost strategies dealers can use to ensure customer loyalty.
Eight out of 10 buyer respondents say cash incentives as low as $35 can bring them into the dealership for maintenance, warranty work and buying considerations.
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And some of the no-cost ways to boost loyalty and customer satisfaction include:
Greet customers warmly. Just under half (47%) of survey respondents noted they received such a welcome.
Provide a detailed receipt. More than half (55%) of respondents reported such a courtesy, up 6% from the previous survey.
Follow up on service provided. This could be a telephone call, email or other communication. Only 34% of respondents noted they were offered follow-up conversations.
Conduct a vehicle walk-around and explain the work completed. Only 33% of respondents say such a discussion was offered.
According to survey respondents, information on new vehicle offers, trade-in value of current vehicles and even introduction to staff were almost nonexistent (see chart for more information).
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