Finding Success For The 8th Straight Year

February 6, 2017

Nextup’s Dusty Kuykendall, a former Goldman Sachs banker, takes us through his perspective of what he sees ahead for the automotive industry.

When operating any business, it’s easy to get caught up in the day-to-day activities. But now, it’s becoming more important to take the time to learn what is going on in the industry around us and ask the tough questions.

For instance, where is the Automotive Market headed?

Why it Matters to Nextup

This little piece of information is not only vital to everything that goes on in a dealership but also within businesses like ours, that cater to dealerships. When we think about increasing staff, developing products or changing our marketing spend, we do so with some level of expectation about the future and where we intend to be.

OEMs will continue to push their dealers to carry more inventory, increase service ROs and extended warranty sales. But I’m curious to know whether they mandate these expectations, with a deeper understanding of their dealers’ needs.

Emotions: The Forgotten Metric

I began my career as an investment banker with Goldman Sachs where, on a daily basis we were looking at macroeconomic conditions to better understand where any given market might be headed. This practice has enabled me the foresight to look at things a little differently than some might.

You may believe that if you want to know the direction of the Automotive Market, you should look at a few key indicators: Sales, Interest Rates, and Unemployment Rate. But if you were to gather these three metrics, would it help you plan for the next quarter, three quarters, or a year out? I doubt it.

We have to look a little further, a metric that involves feelings; consider ‘consumer confidence,’ which is a measurement of the consumer’s feelings about current and future economic conditions. This alongside an understanding of Sales, Interest Rates, and Unemployment Rate should give a clearer understanding of where the market is going.

What to Expect

As many saw during the fourth quarter of 2016, there was some uncertainty in the market. Many consumers and/or companies delayed making larger purchases until the election results came in. Had the other party won, I do not believe that the outcome would be different. As a result, many companies ended November up, compared to prior months.

In fact, the industry as a whole, was up roughly 3.6% in November after the being down the previous three months. With the political direction of the country decided, consumers were able to refocus on the holidays and their end-of-year, with December increasing 3% in new car sales. Both GM and Ford reported the strongest consumer confidence in 15 years and have told shareholders and franchises that they view 2017 as another record-breaking year.

Now more than ever, I think that it’s important to pay attention to what we see and hear, not go by what we are being told. With the US population split almost equally by political party and the direction of the country, it’s easy to see how one failed move could change the consumer confidence. Many Wall Street analysts suspect that there is a downturn near and as leaders in the Automotive Industry, we need to be prepared.

Don’t mistake my statement, I don’t believe the sky is falling and I don’t believe another great recession is headed our way, but I do believe that the “huge” numbers of the past seven years are likely to fall to some extent. When it does, it is better to be prepared than to have to reactively scramble and respond.

How to Prepare

We know that consumers are still going to view websites, call dealers and visit stores, which means we absolutely need to prepare and plan for when they do so. It is essential to make sure that we treat every guest the best we can, as there just might be fewer and fewer opportunities in the upcoming quarters. A positive guest experience along with a test drive, are two of the most important aspects of the car buying process and we should focus on improving this to ensure that we close every opportunity that comes to the store.

Service is no different. When we see a dip in consumer confidence and a decrease in new car sales, that translates into more aging cars on the road. As a dealership, you want to service them and ensure that your shop is chosen over a local independent service lot. There’s a reason for beautifully outfitted client lounges with a multitude of magazine subscriptions. Your goal should always be to get people in the service lanes and give them the same great experience they would expect if they were visiting to buy a new car.

Managing a dealership or a company can be a daunting task, but don’t forget that our primary focus should be for consistent improvement.

This comes in many forms.

Too often people focus on car sales, but there are many other ways to improve: CSI scores, repeat buyers, service clients, employee tenure, etc. Don’t let the success of the past fool you into thinking that it will continue forever.

We need to prepare for when the market changes so that you can continue to respond, adapt and grow.


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