SAN FRANCISCO — Slowing car sales and the prospect of higher interest rates mean dealers will have to keep a lid on costs while exploiting every facet of their business, according to John White, president of the Canadian Automobile Dealers Association (CADA).
Tariff and trade uncertainty with the United States has paused increases in interest rates, White said. However, once those issues have been resolved and the economy picks up, the Bank of Canada probably will impose a couple of moderate increases, White told Automotive News Canada.
“If interest rates go up, it puts more cost pressure on everyone,” he said. “It could decrease sales or flatline sales.”
White, 63, who will step down in September after serving almost three years as the CADA’s chief, said he plans to remain active in the auto industry. A search committee has been formed to find his replacement, he said, adding that the timeline of his departure could change if a candidate is selected early.
“In the meantime, I’m keeping my head down and staying focused on the task at hand.”
The CADA expects 2019 to be another strong sales year, although not as robust as 2018 and 2017.
“We’re forecasting it’s going to drop a couple of per cent. We think the market is going to finish somewhere around 1.95 million [new vehicles sold]. We’re going to see more compression.”
Annual sales have exceeded 1.9 million in each of the last three years — with a record 2.04 million sold in 2017 — and have been above 1.8 million units in the last five.
Canadian sales haven’t increased year-over-year on a monthly basis since February 2018, resulting in 15th consecutive months of declines.
While the downturn should be manageable, “dealers need to continue to exploit all of their departments — new car, used-car department, F&I, a strong fixed-ops department,” White said. “You need to keep your costs in line but make sure all your departments are running on all cylinders.”
Dealers, he said, must never underestimate the value of a “good, solid used-car program.” A certified pre-owned program is paramount, White said.
“If you have an [automaker] that has a [certified-used-vehicle] program, you have to exploit that to the max,” he said. “And if you’re dealing with an [automaker] that doesn’t, you need to make sure you have somebody to underwrite an extended warranty and that you’re able to demonstrate you have your own dealer-certified program.”
Boosting used-car sales will enrich the bottom line, White said. “But ... dealers need to materially increase the amount of used cars that they do on the retail end. That’s a great opportunity.”
White also addressed a variety of issues.
ON THE CHALLENGE OF FINDING QUALIFIED EMPLOYEES
“For us at CADA, one of our main initiatives is to help create that demand, change that perception and to help our dealers find more qualified people. And if you’re looking at the future... you need good people. And right now, our industry has a lot of job openings.”
ON CADA’S EMPLOYEE RECRUITMENT EFFORTS AND JOINT INITIATIVE WITH ONTARIO’S TRILLIUM AUTOMOBILE DEALERS ASSOCIATION TO EXPAND ITS PORTAL AT CARSANDJOBS.COM
“You can make a lot of money working for a dealer. You can have a very rewarding career. I spent 10 years
on the retail side when I started in this business, going around the circuit. And they’re great experiences you don’t get anywhere else in a corporate ivory tower somewhere. We’ve got to find a way to get more people and attract more of them. I think that’s a major challenge for dealers.
ON CONSUMER PREFERENCES FOR UTILITY VEHICLES
“We continue to see trends to SUVs, CUVs. The pickup truck market is probably going to flatline now. But clearly, we continue to see these shifts away from passenger cars. The question is where is the bottom. Dealers that benefit from having associations with manufacturers with a strong SUV/CUV lineup are going to do the best, and those that are lighter on that might struggle a little bit.”
ON AUTO SUBSCRIPTIONS
“I think the jury is out. I think you’re going to see some percentage — I don’t think it’s going to be a big percentage — of interest in subscription models. I don’t see how it’ll be any more affordable when you look at your whole usage to the consumer than it would be over a long-term usage. You look at the depreciation curve of these subscription cars. At the end of the day, you need to spread your costs out. And I don’t see it as being inexpensive.”
ON DEALERSHIP MODELS
“The dealership model has been evolving, always has been, and it will continue to evolve. When I talk to [automakers], not one has told me they see a future without dealers. Some say dealers will play a different role, maybe a more expanded role. But at the end of the day, buying a car is your second-most-expensive proposition after buying your home. “Dealers need to have state-of-the-art IT systems. ... Some consumers want to buy online, of course. You still have to repair the car, even if you’re going to electric vehicles by whatever time frame.
“I believe human beings still want to have some sort of relationship with other human beings. I buy cars and I buy boats. I always go back to the same place because I have that relationship with people that I’ve known and trusted over time.”