How an automotive company could change core business

Photo by zak mc

This post was originated as a practical continuation and as an integration to the previous “The automotive dealers haven’t changed core business yet” and for this reason it is necessary to make some clarifications.

For 10 years, if even not more, they tell us the world has changed, or better by making a more careful analysis the world has always changed; in the last few years, however, it is changing faster than we were used to and this implies that the corrections, the alignments must be faster.

The Economic Cycles have temporarily shortened and if, before, it passed 15 years between one cycle and another, today we donÕt even reach 5 years.
This in practical terms means that if we stay 15 years with a business model, we would have lost at least 3 economic cycles.


Photo by mtneer_man

By applying these theories to the automotive sector, we must more quickly get used to change our business to achieve a greater benefit at each restart of the business cycle.
Losing the propulsive thrust of more economic cycles means to condemn us to close or to a drastic restructuring, with new and huge investments in Capital and Work Force.

If the sale / assistance of new cars (in particular) no longer represents my core business (in terms of contribution to the Income Statement) I have only two ways to remain in the sector.

  1. The first route is to increase the turnover so that, increasing it, I always have the same volume of absolute margin – at equal relative margin – which allows me to make profitable and “rewarding” my business.
  2. The second path, which does not exclude the first, consists in moving the core business to increase the possibility of margins on the turnover.

Photo by .Larry Page

The first path imposes strong financial exposures and underlies an excellent organization of business processes and the ability to adapt them to the new realities that will be incorporated; certainly the one who is incorporated is not a leader of the sector, so there will be a lot to work!
To this must be added the necessary creation of a superior entity, able to have a strategic overview of medium and long term.

The second path is the most challenging but also the most difficult in terms of strategic prospective, also because we will have “hands free“.

The examples to be done are many and changing from territories to territories:

  • What does it mean to have an antitheft installation centre in Bolzano (Italian City with the lowest number of car thefts)!
  • In the sunniest areas of the south is it a valid proposal the tinted windows?
  • In the mountain areas is it possible not to offer the winter wheel storage service?
  • If there is a historical centre in the nearby could we not offer the LPG and CNG transformations?
  • If a government agency provides subsidies for vehicles with green power supplies, are we ready to meet these needs?
  • Are we ready to offer the Fast Repair that still allows us to make a turnover otherwise lost with the classic repair?

All activities that are good opportunities to make margins without radically changing our structures, but above all to secure the loyalty of new customers and to re-contact the “old customer“.

I remember two activities, very far from the automotive sector, but that were very useful, and that strucked me particularly about 15 years ago.

  • A dealer who opened a center for the activation and recharge of mobile phone lines, in the midst of the mobile boom, creating not a little crowd in the dealership.
  • Another one that had a real bar in the lounge, also open for the external customers.

Photo by fogfish

In 15 years the world has changed, but coincidentally – these two cases mentioned – are among the few survivors! (I think due especially to something else).

By this I want only to underline that in the era of globalization there is not only a recipe that is the same for everyone and that is really valid for everyone.

This makes it more difficult to create a unique business model, but at the same time everything is more stimulating.
What is fundamental is not get stuck on activities that, over time, may not be more profitable.

It would be a contradiction to lose flexibility when, in reality, this is one of the reasons for the decline of companies in the automotive sector.

Translated by Federica Izzo

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