12 March 2012

Vauxhall’s new fixed low-price servicing scheme for older cars has got me thinking. The prices sound fantastic if you own a Vauxhall that’s more than three-years-old, but is it good news for franchise holders?

Every expert I’ve ever spoken to about running a successful retailer has at some point stressed the importance of strong workshop figures, whether that’s a good overhead absorption rate or a high ratio of retail to warranty rate work.

Which is why I’m a bit puzzled by Vauxhall’s move (see Auto Retail Bulletin for full details) which comes with a labour rate of £50 an hour, both for the deal and any additional work carried out after a vehicle health check.
This rate is near identical to Vauxhall’s warranty rate, so hitting the ASE benchmark of 70% for retail hours (versus 30% warranty) is going to hit profitability and absorption rates.

The Vauxhall network average hourly retail labour rate is about £73.
I’m not sure this new move is going to help Vauxhall’s score in the NFDA Dealer Attitude Survey for ‘How do you rate the following aspects of relationship you have with your manufacturer: The partnership you have with your manufacturer’, but then given it’s ranked last, it can’t get any worse.

The ‘profit return’ score is nearly as bad, which Vauxhall ranking fourth from bottom. And it’s not as if the manufacturer scores well for ‘warranty rate allowance’ either, with a below average score here.

However, maybe I’m wrong. Vauxhall scores well for its parts pricing (even before this new scheme which has lowered some parts prices even further). So perhaps this is where Vauxhall retailers will make their return?

The thing is, all these points skip the preceding question about the validity of a two-tier service rate structure for older and newer cars.

As we’ve said before on this blog, franchised retailers shouldn’t be competing on price (within reason) with independents. Franchised retailers’ strengths are in the fully (and specifically) trained technicians as well as the quality of service, equipment and premises. Retailers should be pushing those valuable points rather than just pitching a price message.

Tristan Young

Got a comment to share? Drop me a line at tristan@auto-retail.com

Tags: franchise, hourly labour rates, loyalty, older cars, profitability, profits, Vauxhall