If the Cape Fear Region’s auto dealerships needed a common slogan, it just might be Keep On Truckin’.

Light-duty trucks and small- and mid-sized SUVs are leading the 2015 sales parade both regionally and statewide as auto dealerships ride the wave of a post-recession boom. But look under the hood, and you’ll see a dramatic rewiring of how dealerships are pushing hard in an environment of increased competition, lower customer loyalty, recall controversies like the current VW diesel scandal and warp-speed technological change – all of which are forcing dealers to get the lead out.

A spot check of area dealerships shows them riding high as year-to-date sales remain robust.

“We’re on fire,” said Robert Campbell, Buick-GMC sales manager at Bob King Automall, as associates rolled in and out of his office off the showroom to confer about deals in progress. The dealership’s GMC-related sales are up about 20 percent through August over the same period last year on top of a 25 percent year-over-year increase in 2014.

“Right now, we’re pushing up the numbers to where we were in pre-recession days,” he said.

At Jeff Gordon Chevrolet, Mark Santilli, the dealership’s marketing manager, saw overall sales increase 18 percent in 2014. “We’re on track for another record year,” Santilli said.

Sales of upscale brands are strong too. At Audi Cape Fear, sales of both new and pre-owned vehicles exceed last year’s figures, said owner A.J. Aliah, who opened the architecturally sleek dealership on Old Eastwood Road at the end of 2013.

From 1992-2007, an average of 451,000 cars were sold around the state each year, said Robert Glaser, president of the N.C. Automobile Dealers Association (NCADA), but that figure plummeted to 269,000 during the first year of the recession. Last year, statewide sales bounced back to 450,000 units, about where they were two decades ago.

“This year, we expect to sell somewhere in the area of 475,000 to 480,000, and that would be the third best year in the history of North Carolina,” Glaser said, with more than 60 percent of sales occurring in the light-duty truck and SUV category. “With the price of gas being low, and North Carolina being an agricultural state, we are seeing a boom.”

Chevy’s Silverado is the biggest seller on the Jeff Gordon lot, said Santilli, due to the rebounding economy. “It’s that huge owner base that earns their living through their hands,” he said.

The low cost of money has also propped up sales, allowing shoppers to buy “a little bigger SUV and a little bigger pickup truck,” offered Glaser, as they extend payment terms on vehicles that have achieved higher reliability ratings in recent years and are also more environmentally friendly. “Nowadays, the average is above 60 months,” he said.
But there’s a caution light ahead.

Nationally, the average transaction price for light vehicles stood at $33,543 in August, according to Kelley Blue Book.

As sales volumes peak and prices keep rising and with the Federal Reserve ready to reset rates by the end of the year, dealerships will have to find ways to maintain sales momentum.

Campbell at Bob King Automall sees sales leveling off after next year’s elections. “I think it’s going to happen within the next year or so,” he said.
 

Loyalty is dead, long live service

Service departments at the region’s dealerships remain a beehive of activity, and to management, that’s especially good news.

“Service is everything. Service generates sales,” is how Campbell puts it.

“What sells us a lot of cars is the after-market experience,” adds Patrick Koballa, general manager at Stevenson Honda, who presided over a whopping 30-percent increase in pre-owned sales last year.

To Koballa, the service experience is key to future growth. “It is a profit center for the dealership – but we’ve got to be competitive in the market,” he said.

Indeed, 44 percent of a dealer’s gross profits result from service and parts, not sales, according to Edmunds.com, quoting National Automobile Dealers Association (NADA) figures. And that number is more critical than ever due to crumbling customer loyalty.

“Past loyalties don’t mean anything anymore,” grumbles Campbell. “With the advent of the Internet, prices have changed,” and three or four dealers now compete for each sale, he estimates, with “showrooming” – consumers using their smartphones to comparison shop while at a dealership – now the norm.

“They’ll jump ship in a minute,” Koballa said. “If we’re not in the [pricing] ballpark, we’re not going to get the shot.”

As a boom in sales brings a larger number of new buyers into service departments, dealers are trying to combat consumer fickleness and help kick-start brand loyalty by enhancing each customer’s experience.

Bob King Automall has added more service technicians, and Jeff Gordon Chevrolet has added more hours.

“The service center we’re actually trying to expand,” said Santilli, while noting there’s no more property around Jeff Gordon’s current location to purchase. Because repairs generate cash flow and build relationships, “It’s a great problem to have.”  

At Stevenson Honda, Koballa is using its factory-trained technicians and state-of-the-art equipment to create more value. The dealership promotes its service quality as a way to steer buyers of pre-owned vehicles away from independent repair shops.

Recalls are another way for dealers to ingratiate themselves with customers.

While GM’s ignition-switch fiasco and Volkswagen’s disclosure of a “defeat device” capable of thwarting emissions controls have made national headlines, dealers say customers don’t blame them.

Koballa, who has brought in three additional staff members to help with recalls, says that Stevenson Honda can at best charge the manufacturer for labor and make a modest profit on parts. His own dealership is still grappling with the air bag recall.

“The margins on that repair are very, very slim,” Koballa noted. But recalls pay off in other ways, he believes. In a non-confrontational setting, “It is an opportunity to win back or win over a customer.”

Yet the VW scandal could further erode brand loyalty, impacting a dealer’s sales. In the face of U.S. EPA demands, the automaker alerted owners of 2009-15 four-cylinder VW and Audi diesel cars that they will be retrofitted – a fix that could compromise expected mileage and performance levels, analysts say.  

Consumers who own the vehicles can call (877) 5-NO-SCAM toll free.

Combined recall and warranty work performed at new-car dealerships increased 22 percent nationally last year and at no cost to consumers, according to Bill Fox, NADA’s chairman, who placed the average pre-tax, net profit at franchised new-car dealerships at 2.2 percent of total sales during an appearance at this year’s association convention.
 

Technology bells and whistles

If dealerships can lose business due to increased competition, they can gain it not only by creating a
positive service experience but also by offering exceptional assistance with all the gadgetry that’s now packed into vehicles.

“Technology’s going crazy,” said Campbell at Bob King’s New Centre Drive operation, where an associate is charged with evaluating new, cost-effective apps that may be of interest to consumers. “There’s just product out there you’re being constantly shown.”

At Jeff Gordon Chevrolet, an on-site certified technology expert serves as the point person on new apps, explaining “how all this great technology works,” said Santilli, and a GM field representative drops by periodically to ensure that everyone remains technology literate.

To help consumers make sense of all the latest gizmos, the dealership holds large-screen workshops for up to 20 customers at a time, complete with refreshments and door prizes, as they learn how to connect with Pandora music streaming, enable Wi-Fi or pair an on-board device with a garage door opener.

Even older employees at the dealership have come to understand the apps. “I’m 55 years old and self-taught and out of necessity learned that on my own,” Santilli divulged.

To Koballa at Stevenson Honda, “It’s just constant training.  … It’s almost too much information that the consumer can digest at one time.”

To remedy the overload, Koballa’s staff suggests that new buyers come back for a second or third tutorial for a greater understanding of their new vehicle’s capabilities.

At Audi Cape Fear and its sister company, Land Rover Cape Fear, sales staff make house and office
calls to answer any questions about the vehicle.

“I see a very new competitive world, and that will translate into better products and better experiences for the consumer,” Aliah said.

Cars will last longer, be equipped with even more technology and become ever safer, he predicts.

At this fall’s Frankfurt Motor Show, for example, Audi teased its all-electric, luxury-class sport SUV planned for 2018.

The four-seater can go from 0 to 62 miles per hour in 4.6 seconds and can travel 310 miles on a single battery charge.

Meantime, Glaser of NCADA has taken a spin in GM’s 2016 Yukon.

“It has lane control. If you go in the other lane your seat will vibrate. … It was pretty cool,” the association official said.

“It’s been a long, steady climb back up” is how Santilli describes the return to pre-recession sales levels in his industry.

Going forward, area dealers suggest, it’s all a matter of maintaining a firm grip on the wheel, strapping in your customer and keeping an eye on the lanes around you as the pace of change accelerates.