the future of the parts & service business in€¦ · the future of the parts & service...

The Future Of The Parts & Service Business In The Age Of Mobility:

Presentation To The Automotive News Fixed Operations Summit.

Frank FerraraPrincipal, Traction Labs LLC

August 9, 2018

Parts & Service In the Age of Mobility

➢ The Big Choice

➢ The Age Of Change

➢ The Drivers Of Change: Mobility

➢Our Big Idea: Neighborhood Mobility Centers

➢Opportunities For Transformation

➢Next Steps

3Proprietary & Confidential


➢ The Big Choice


Used-vehicle department gross as %

of total gross

Other

New-vehicle department gross as %

of total gross

Service, parts and body shop gross as % of

total gross

Source: NADA 2017

26%

24%

49%

Traction Labs’ analysis indicates that Dealer Gross Profit from

Service & Parts

NADA GP

Analysis

Balance Sheet Of A Typical Dealer in 2017

5

will drop by 50% over the next 5-years.

Proprietary & Confidential

➢Quality Improvements• Fewer recalls / Over-the-Air Updates

• Improved overall quality

• Electronic Components replacing mechanical components

➢Amazon continues to make inroads in the parts business

➢Increased Safety Equipment / Reduced Collisions

➢Electrification

➢Autonomous Vehicles

➢Mobility

Key Developments Impacting Parts & Service


The BIG Question: Who Are You ?


Dealerships Lost 10% of their Gross in the transition to Hybrids.

Hybrids Was Last-decade’s Technology!

What happens when all systems are Electrified?Computerized?Autonomous?

Dealers Are In The Midst Of A Shifting Business Landscape



➢ The Big Choice



Cost Of Maintenance over 5 years

$2075

Mass-Market Plug-in HybridMass-Market Sedan

Cost Of Maintenance Over 5 years

$2500

Pipeline Changing:Hybrids costs 20% less in dealer maintenance.


Mechanical 50%

Powertrain 5%

Electrical/Electronic 20%

Safety & Other 20%

A Rapidly Changing PipelinePipeline Changing:

Mass-Market EV Sedan BOM At A Glance


-20% -52%

Mass-Market Sedan

Cost of maintenance over 5 years

$2,500

Cost of maintenance over

5 years

Mass-Market EV

$1,000

Cost of maintenance over

5 years

Mass-Market Plug-In Hybrid

$2,075

Pipeline Changing:

Dealership Maintenance Costs Compared



➢ The Big Choice




Owning A Car

Part Of A Journey

“Mobility” Is A New Relationship Being Sought By Riders.


➢ 100x faster; 10x capacity

➢Designed to bridge cyber to physical

➢ Rollout starts June ‘18; full coverage by Q1 2020

Source: TechCrunch

➢Builds on e-commerce platform with powerful VR and AI engines

➢Designed for home and work

➢Gen 3 rollout planned for mid-2018

➢3D recognition is among the fastest growing technologies

➢Enables for security, research and more

➢Replacing cell phone cameras by 2020

Mobility: Powers Driving The Transformation

Significantly Improved Technologies Are Coming.


➢50mm (2x) subscription rate by 2020;

➢$7Tn economy; $250bn contribution YOY

➢Fastest growing sector of the economy - worldwide

Source: TechCrunch

Mobility: Powers Driving The Transformation

Significantly Improved Technologies Are Coming.


“Experience” not “Ownership”

➢Hyper-customized

➢Available on-demand

➢Available everywhere

➢ Seamless experience

➢ “Enable Me”

Source: TechCrunch

Mobility: Powers Driving The TransformationTogether, They Will Further Transform The Retail Landscape.


“Mobility” is Being Powered By The Convergence of These Technologies and A Rapidly Changing Customer.

Mobility• Hyper-customized

• Available on-demand

• Available everywhere

• Seamless experience

• “Enable Me”

“Uber”Services

5GSmart

Connectivity

3D Imaging



➢ The Big Choice





Transitioned from Own To Experience

Owning An Experience

Customers Are Transitioning To “Mobility”

Owning A Car

Part Of A Journey

Leverage The Opportunity: Action Plan

Our “Kodak” Moment

Storing A Memory


The Vision:

Local Dealership As “The Neighborhood Mobility Center”

NOW Neighborhood Mobility Center

Focus: Sales & Service For New & Used Cars

Focus: Be the Multi-brand, Multi-modal transportation center offering customer choices :

➢ Sales, Service

➢ Mobility

➢ Ride sharing

➢ Fleet management

➢ EV/AV infrastructure

➢ Training/Education



Goal: Make money by pushing metal

Goal: Make money by meeting all life-cycle & life-time transportation needs

The Vision:




ROI: Single transaction based process; Extremely competitive, incentive driven businesses with low margins, high inventory --- under threat of OEM

ROI: Plus Revenue at each “transportation service node”; Service centric, offering a local bridge between OEM’s and local community; low inventory; high-service model

The Vision:




RESULT: Low income sales and service jobs

RESULT: High income, technology and service focused jobs

The Vision:



The Vision:


That was where we bought Coffee This is YOUR Coffee now …..



➢ The Big Choice






Keys to a Parts & Service Action Plan


➢Don’t add any more overhead costs! Move service offsite if you need more capacity!

➢Grow Service Retention from the current 35% at year 3 to 75%

➢Get in the Rental business – it’s the first step to subscriptions

➢Focus on Used Vehicle Sales & Service

• Customer Service Retention

• Maintenance Contracts

• Extended Service Contracts

➢Expand operations to 24x7 7 days a week

➢Sell additional services• Detailing

• Software updates

➢Figure out how to get fleet service business

Embrace Opportunities For Growth:

Neighborhood Support Center For On-Demand Services

Embrace local ride-hailing companies with special services that enable them to maintain their cars in peak form – maximizing their performance ranking.


Encourage local automotive entrepreneurs with specialized automotive innovation spaces, training and services that helps build local relationships.


Neighborhood Center For Automotive Entrepreneurs


Demand for BEV’s, FCEV and alternate fuels charging stations is very high - there is a need for local charging stations and related services.

Tesla Charging Station at Harris RanchLocal Businesses are up 20% since installation


Neighborhood Alternate Fuel Support Center


Create & support a custom fleet of vehicles that help local businesses with their delivery, service needs.


Neighborhood Transportation Center



Autonomous Vehicle Support Center


Large opportunity for growth in these services.

Neighborhood Mobility Center can transform the way you do business – changing the way you look at cars!

Each of These Are Opportunities For Increasing Foot-traffic …. Embracing change, ensuring long-term growth.


of total gross

Other


of total gross


total gross

26%

24%

49%

NADA GP Analysis


Neighborhood Mobility Services

Center

Opportunity 2023

75%

Traditional Sales & Services

25%

Each of These Are Opportunities For Increasing Foot-traffic …. Embracing change, ensuring long-term growth.


of total gross

Other


of total gross


total gross

26%

24%

49%

NADA GP Analysis



➢ The Big Choice





➢Next Steps


Traction Labs Steps To Business Transformation & Growth

Think

Assess current business mix

Translate

Develop a vision for what your Mobility business can be

Test

Commit to a long-term plan

Transform

Take the leap!


Traction Labs Steps To Business Transformation & Growth

Balance sheet analysis: Sales mix and footprint

Local neighborhood analysis

Model and lineup

Staff capabilities

OEM support preparedness

Fleet support service capabilities

Transformation readiness

1

2

3

4

5

6

7


Thank You For Your Attention

Frank FerraraPrincipal, Traction Labsemail: [email protected]: 714-743-2352

Ravindra KondaguntaFounder,Traction Labs LLCemail: [email protected]: 949-540-5508

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