Automotive News Canada - April 2023 - 10

10
04.23
OPINION
Cashing in on the
cockpit? Cha-ching
THE AUTO INDUSTRY WAS FOUNDED
on the business model of providing four
wheels and a body in exchange for
money. But that evolved.
Automakers became masters of
upselling. They looked at what people
were buying from the aftermarket and
then added those
features to their
vehicles. Fancy
name-brand audio
systems with rearseat
screens, roof
racks, running
boards and wheel
EDITOR-IN-CHIEF
JEFF
MELNYCHUK
options all came about because an
auto executive somewhere wanted to
get the money that buyers were spending
in the aftermarket. It worked. It's not
even possible to put an aftermarket
audio system in a new car.
Going beyond
selling hardware,
automakers will
find a nearly
limitless stream
of revenue with
data and software.
And that increasingly long list of standard
features? They drive up the base
price and profits. Of course buyers can
afford this because many car brands
now have captive finance companies
that provide easy, long terms. They did
this to make money on loans and leases.
It worked.
When was the
last time you
were at a bank
for a car loan?
But selling
hardware is limiting.
There's
only so much
money people
can spend, and
it's often years
before they'll do
it again. So what's the next revenue
frontier? A major shift from hardware.
Auto companies are going to use
their vehicles as platforms to sell services
and to monetize data.
We've all heard the old stories about
how automakers would cut corners on
the tiniest things, because even $1
saved is significant when building hundreds
of thousands of vehicles.
Imagine then the interest in the
potential that data and in-car services
present. It's far more than $1 here and
there, and it doesn't take giant assembly
plants and robots to make.
In a story at automotivenews.ca,
Stellantis expects to get US $21.6 billion
in annual revenue from vehicle software
by 2030. How? For example, it
might sell a subscription to increase
horsepower in an electric vehicle.
Even though capability and technology
have advanced, vehicles pale in
comparison to what mobile devices can
do. Automakers therefore look at the
interactive cockpit as a wormhole to
revenue. That is once the capabilities
are unlocked and car companies begin
thinking beyond
hardware, more like
Apple and Google.
Then the money
will start raining
down. And the forecast
is for a deluge.
In a Page 20
story about how the intelligent cockpit
will revolutionize auto revenue, " There's
going to be an inflection point where
the data's more valuable than the metal
and plastic, " said Flavio Volpe, president
of the Automotive Parts Manufacturers'
Association.
That's a huge statement. We're not
just talking about satellite radio subscriptions
or GM's OnStar concierge
service anymore, but a much higher
level of interactive in-car services.
According to the story, the intelligent
cockpit opens the door to subscription
services for everything from heated
steering wheels to in-vehicle safety
coaching.
" It's going to allow the manufacturers
... to provide additional services that
can be monetized, " said Sherry Calkins,
vice-president for connected-car and
platform solutions at telematics company
Geotab.
But what else? That could entirely
depend on the user.
For one, how about a feature that
keeps me ahead of red lights? And an
app that sends me the menu for that
shawarma place I keep seeing on the
drive home but have never tried? Touch
the screen to have the special of the
day delivered. Perfect.
As ridiculous as it seems, the ideas
- and revenue - are as limitless as
third-party developers.
Intelligent vehicle systems can also
collect vast reams of behavioural data
on drivers, said Volpe, which will be
valuable to insurers, banks, retailers and
numerous others.
Vehicle electrification gets all the big
headlines these days, but I think more
importantly for automakers, those vehicles
will become software platforms. It's
not just hardware anymore.
Now sign me up for some of that
extra horsepower. - ANC
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Banish bias in the showroom,
or bid bye-bye to buyers
Dealers risk losing
customers if they
consciously or
subconsciously
employ bias-based
business practices.
OF ALL THE FINDINGS FROM A GROUNDBREAKING
survey probing the dealership experiences of Black
car buyers, the most disturbing exposed the " profiling "
of people of colour.
According to the study, commissioned
by Accelerate Auto, negative
experiences - such as store staff
assuming that a customer had poor
credit - were cited by 76 per cent
of Black consumers, compared with
64 per cent of white consumers
and 82 per cent of other minorities.
As well, 22 per cent of Blacks said they were
steered toward less expensive vehicles, compared
with 12 per cent of white respondents.
Assuming a customer falls into a specific income
bracket is bad for business, said Jerry Chinner,
vice-president of sales
and business development
at taq Automotive
Intelligence and founding
member of Accelerate
Auto.
Eighty per cent of customers
consider their
experiences with a company
just as important as
the product they're buying,
he noted during the
March 28 Embracing Diversity online panel (story on
Page 22).
" Now, the interesting side was that 60 per cent of
those people said they would drop the brand or their
product that they were looking at buying if they experience
a bad experience at the retail level, " Chinner
said.
The bottom line: Dealers risk losing customers if
they consciously or subconsciously employ biasbased
business practices.
MACALUSO
MANAGING EDITOR
GRACE
The study also suggested that Black Canadians
feel they must earn respect once
they walk into a dealership, said Raj
Kuchibhatla, founder and managing
director at the marketing firm RK
Insights.
" Whereas when white Canadians
walk into a dealership, that respect
is automatically given, " Kuchibhatla
said.
Respectful customer service,
meanwhile, " has ripple effects
downstream, " Chinner said. " The
Black community is extremely
high on the loyalty side and is very
quick to start to give referrals
about their experience that they
had at a specific location -
which drives, again, more loyalty
and more business. "
Another key finding: More than
60 per cent of customers, regardless
of race, noticed a dearth of
diversity at Canada's dealerships.
Accelerate Auto, dedicated to
boosting Black representation in
the auto industry, explored their
constituents' car-buying experience
because the dealership is largely
their point of entry into the sector.
The findings of the study, which
Chinner:
Making
assumptions
about
customers
can be costly,
whereas
simple
respect can
bring referral
business.
FILE PHOTO
surveyed about 1,100 consumers, should do more
than hold up the proverbial mirror. It should prompt
the industry to implement long-overdue change in
the showroom. - ANC
Why I'm in a daze: Have you
seen those monthly payments?
CANADA, WE HAVE AN
affordability problem.
While I, like many in the industry,
began the year with high
hopes of a return to pre-pandemic
annual sales, I'm not so sure.
In early April, I received some
startling figures from J.D. Power
Canada that made me second
guess where sales are heading.
Some of the data downright
High interest
rates might
soon have an
effect, one way
or another.
PUBLISHED MONTHLY BY CRAIN COMMUNICATIONS, INC.
KC CRAIN, GROUP PUBLISHER & CEO
JEFF MELNYCHUK, EDITOR-IN-CHIEF, 506.866.8236, Jeff.Melnychuk@autonews.com
GRACE MACALUSO, MANAGING EDITOR, 226.787.0441, Grace.Macaluso@autonews.com
GREG LAYSON, DIGITAL AND MOBILE EDITOR, 519.567.8877, Greg.Layson@autonews.com
TIM DIMOPOULOS, MANAGING DIRECTOR/PUBLISHER
416.560.7663, tim.dimopoulos@autonews.com
ADVERTISING SALES
MATT PARSONS, 313.446.5866, mparsons@autonews.com
CUSTOMER SERVICE/SUBSCRIPTIONS: 877.812.1257
customerservicecanada@autonews.com
CHRISSY TAYLOR, VICE-PRESIDENT EDITORIAL OPERATIONS, AUTOMOTIVE NEWS GROUP
KC CRAIN, PRESIDENT & CEO
KEITH E. CRAIN, EDITOR EMERITUS
shocked me.
For example,
The average
total monthly
car payment,
comprising
loans from
banks and
captive lenders
and leasing,
sat at $800 in March. That's up
$120 from the same month a
year ago and $10 from February.
And 18 brands now have total
average monthly finance payments
of more than $1,000 per
vehicle. And $1,000 per month is
also the average payment on a
full-size pickup in Canada.
The average transaction price
broached the $50,000 mark in
December but slid back to
$49,400 in March.
Scarier still is how much interest
Canadians are paying on their
new-vehicle loans.
In 2020, right before COVID19
landed on our shores, the
GREG
LAYSON
average financing charge on a
new 84-month loan, the most
popular term length in Canada,
was $3,800. Today, it's $11,750.
" This is the large hidden cost
of having APR on average in
Canada be about six per cent right
now, " said Robert Karwel, senior
manager of J.D. Power Canada's
Power Information Network.
Those interest rates might
soon have an effect, one way or
another. People are going to stop
buying new vehicles because they
simply can't afford them. Or, automakers
are going to have to give
them a nudge toward the dealer
lot by way of incentives.
Two new surveys by the Bank
of Canada, released in April,
found that consumers expect to
slow spending, while businesses
report a subdued sales outlook.
However, respondents in one of
the surveys - the Canadian
Survey of Consumer Expectations
- expect inflation to slow for
goods, specifically for vehicles and
fuel.
That's not exactly what automakers
and dealers want to hear
DIGITAL AND
MOBILE EDITOR
as the chip crisis and inventory
crunch appear to be turning the
corner.
So, just as interest rates rose
and Canadians got a little more
skeptical about the economy,
automakers tweaked their incentives.
They climbed last month,
with a fair amount of strength, to
$4,500 per transaction on average,
said J.D. Power, yet that's
still a far cry from the $6,000plus
of 2020.
But Sandor Piszar, GM
Canada's vice-president of sales,
service and marketing, doesn't
want too many vehicles on
Canadian lots. Nor does he want
automakers to start throwing
money at customers.
" We certainly don't want to be
in an overbuild situation and go
back to the old days of having to
put large incentives on vehicles to
move them, " he told me.
But there might not be any
other option, Karwel said.
" OEMs are realizing that the
monthly payment is getting very
high, so they provided some APR
relief (but not much) last month, "
he said. " It's a sign that in the
current high-interest-rate environment,
there might be more
aggressive APR reductions coming. "
That
might be the only way to
solve the brewing affordability
problem. - ANC

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Automotive News Canada - April 2023

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