10 January 2023

Motor retailers saw the average value of sold red work increase by 24% year-on-year in November from £203.38 in 2021 to £252.23 in 2023. Similarly, the value of sold amber work increased by 23.5% from £207.43 to £256.10. These are some of the findings of the latest set of KPIs produced for Auto Retail Bulletin by Realtime Communications.

A key area to highlight for the November year-on-year figures is the amber conversions jumping up from 9.78% to 10.86%. John Law, insights and data director at Realtime Communications, says: “This is testament to retailers focusing on the amber work opportunities and a trend we hope to see continue into 2023.”

Looking at the red and amber work conversion versus work identified in the context of the 11 months to November, conversion has been mostly stable throughout the year, with red conversion tracking at 49.6% and amber at 10%. “This level of conversion is impressive,” says Law, “especially considering the increase in parts prices that have been passed through to the customers.”

Comparing January to November, we can see that average red identified work has jumped from £213.31 to £252.22, an 18.2% increase. Amber is a similar story, rising from £217.41 to £256.10, a 17.7% increase. “Again, considering this increase in costs the consistent conversion levels are even more impressive,” says Law.

The data also considers the relative invoices values of aftersales work on diesel, petrol, hybrid and electric vehicles, and it is interesting to note that average invoice values for aftersales work on hybrids continue to decrease, down a further 7% in November year-on-year, while the six-monthly average from June to November 2022 is tracking 4.5% below the average from December 2021 to May 2022.

November saw the average value of work on EVs increase over 10% from £121.04 to £131.10, but the six-monthly average has decreased 3.4%. There is a similar pattern in the average values for work on petrol vehicles. In contrast, average invoice values for work on diesel vehicles continues to rise – up 19.6% in November compared with the same month last year from £234.99 to £281.10. And looking at the six-monthly average, diesel invoice values are up 10.7% from £236.21 to £261.57. Perhaps this is to be expected as the diesel parc ages after rapidly falling levels of new vehicle sales.

Overhead absorption

Interesting for Law is to look at the trends seen so far throughout 2022, to see if some of the negative tail winds and issues that aftersales teams have faced are continuing to bite, or if we have reached a new normal. Within that, absorption is a key statistic.

Alastair Cassels, partner and automotive advisory lead at MHA MacIntire Hudson, notes: “Since August, each month has shown a decline in this metric, and whilst September could be partly explained by fewer working days due to the Queen’s funeral it does look as though overhead cost inflation is outstripping any gains that retailers are making in identifying and selling amber/red work.

“Anectdotal evidence also shows that a number of franchises are suffering with parts shortages which is increasing WIP and the number of vehicles which are VOR (vehicle off road). It is possible, too, that the cessation of Coronavirus rates relief is impacting on the overhead figures.”

Despite this, the fall in absorption rates that we have seen this year is not as great as many had predicted. Law says: “With the rise in overheads, staff costs and reduction in customer spending it was a perfect storm that could have pushed revenue generated by aftersales team down considerably. Instead, absorption has only fallen from an average of 60% to 59%.

“Retailers’ ability to react quicky, shore up processes and increase costs where needed has helped stem the downward trend. We will be watching closely in 2023 to see if this continues to fall, or if retailers can continue to be resilient in the face of the challenges we face as an industry.”

Another interesting KPI is technician utilisation, which is tracking relatively unchanged in November year-on-year, down just 0.1% at 80.6%. For the six-monthly average, technician utilisation is up 2.7% at 82.94%.

Potential in eVHC

One area where it seems there is still money to be made is with eVHC, where less than 30% of aftersales work identified through an eVHC is currently being converted into dealer income.

“Across the RTC dealer network from January to September 2022 over £600m in identified eVHC work was not converted to revenue,” says Law. “Just a small increase in conversion can unlock additional revenue for retailers.”

Marginal gains really can make a big difference, and Realtime Communications highlights that one of the leading contenders is the impact of a personalised video to explain the work requirement identified. On its own, this has been shown to deliver a 5% improvement in eVHC conversions.

Returning to the question, then, of whether the picture we are seeing now in the aftersales KPIs represents the new normal, Law concludes: “2023 is predicted to be challenging year for many industries, but we believe that these trends show there is still opportunity for retailers to maintain and grow their aftersales revenue so long as focus is given to it consistently and retailers look to adapt to any challenges they may face quickly.”

Tags: after sales, amber, conversion, EVHC, Jon Law, KPIs, overhead absorption, Realtime Communications, red, RTC