Acura is taking the lead in the transition to electric vehicles at Honda Motor Co. What do Acura dealers think about it? Are there any positive expectations for the first Acura EV crossover next year?
There is definitely positive anticipation. Acura has made some great product changes recently. I think the versions of the BEVs that we will have will be worthy of Acura. The first example will come from the General Motors-Honda collaboration, but we’re certainly excited to see what Acura’s take on electrification is, with the technology and their engineering.
Do you feel there is a market for Acura electric vehicles?
We’re pretty positive about it. Acura has no hybrid products now except for the NSX [supercar]. So we want to have a bit more of a transition, I guess, between the ICE products and the BEVs, but we certainly think there are Acura buyers who want to make that transition and we want to have a product to offer them.
Is Acura engaging with dealerships on the timing of the EV transition? Are dealers worried about sufficient access to ICE vehicles in the future?
Their plans are quite specific and they seem to be quite clear. So I think they are on the right track. And my opinion, having been involved with Honda or Acura for 35 years, is that they make good product decisions. There are occasional stumbles, but generally I think they have a pretty good idea of where they’re going.
Acura has traditionally had a mostly hands-off approach with dealerships in terms of installations and digital advertising. How is this evolving and are dealers affected?
Of course, dealers are on the lookout for electrification, the digital side of our business and the relationship we have as franchisees with the manufacturer. We’ve had conversations with Acura that are more than collaborative. And there are a couple of dealer groups that are in on the dialogue and the conversation with Acura about what they’re trying to accomplish.
American Honda has made changes to the structure of its national sales team. Has this affected dealerships? Are dealers getting the attention they need from head office?
Its good. There were necessarily challenges to be met because it is a fairly significant change that is taking place. I think dealers were disappointed in some cases, but I think overall the transition was decent. Our dealership, in particular, has benefited from the change in field personnel that we have had. So that’s fine with us. But it does not surprise me that you have heard about different problems. I think these are usually isolated things. When we speak with the Acura field crew, they also generally believe that these are isolated situations that they handle and pay attention to.
What do dealers know when Acura’s production and inventory levels will get back in line with demand? What do dealers expect in terms of inventory and days of supply this year given the shortage of chips?
I think production is going to be limited for a while. I don’t see a full recovery this year, and Acura’s volume forecast generally confirms that. The recovery starts in the first quarter for us. At the moment, the February, March and April receipts are certainly at a recovery level. And the production dates that we see fit pretty well in our communication system. Cars that have production dates – these dates remain. This was not the case in the fourth quarter of 2021, and we are bullish on that.
How do dealers deal with inventory issues? What are they doing to bolster their used vehicle business or other areas of dealership business to deal with declining new vehicle volumes?
We focus on fixed operations and our pre-owned business and last year that grew for us quite dramatically because when you don’t have new inventory to sell, you try to acquire and sell all you can. I think that was generally the case across the country.
How do dealerships manage new vehicle pricing? Do they generally stick to the listed prices or do they add market adjustments? What does Acura tell dealers about pricing and markups?
We haven’t had any conversations about this with Acura. At town halls and calls, I haven’t heard of this for probably obvious reasons.
I think there is a bell curve. There’s a big chunk of average in the middle, people adding accessories to increase the price and growth of cars, and then extremes on both sides.
We would like to have more cars, and it would be nice if this market loosened up a bit, but we certainly had a great year despite all the challenges last year.
How are the dealers faring from a profitability perspective? How sustainable are current vehicle margins and profitability levels as inventory levels improve?
It was truly a vastly improved year in just about every area despite product shortages. I think it has a lot to do with the adjustments people have made to adjust other areas of their business. There were months when what happened was less than you expected. And when you have a month like that, you start to be very specific about the other things you pay attention to in order to compensate for that. And when you have cars coming in, you deliver them quickly and customers get excited and they buy accessories.
How have sales incentives changed during this period of declining production? How do you anticipate their evolution as production and inventory figures improve?
Incentives have gone down and Acura is spending less. We are confident that anyone building cars will adapt to get things done, and that Acura will act to meet the necessary incentives and programs as the car supply improves. That being said, one of the reasons for our success last year was that Honda and Acura had these things pretty well dialed in.
What does Acura do to promote used vehicle sales, including its Certified Pre-Owned vehicle program? Has the brand launched or offered an online platform for the sale of used vehicles? Would dealers support such a platform?
They added the Precision Used category for older vehicles. They’re certainly making adjustments and recognizing that it’s a big, strong market and helping us get our share of it.
Dealerships made the transition to a digital lifestyle in the automotive sector a long time ago. Does Acura provide resources for this? Yes they are. Anyone in the automotive business has already made many important adjustments to how leads are handled, how far you want to bring someone online rather than bringing them to the dealership.
In this part of the country, the northeast, at least outside of the metropolitan areas, we just don’t get a lot of fully online transactions. People still want to come in and kick the tires and drive the very car they want to buy. It’s not a general Carvana experience. We’re certainly all set to do that, and that’s one area where COVID has forced people’s hands.
Does Acura advise and provide adequate resources to its dealers on how to prepare for the deployment of electric vehicles or other industry developments such as new mobility services and vehicle advancement autonomous?
Mobility services and autonomous vehicles aren’t on our conversation list yet, but we’re confident that Honda and Acura have a plan. They’ve already outlined their short-term BEV plan and gave us a look at a few products last summer that are on the way. There will be specific recommendations coming on facility design and equipment, charging stations and that sort of thing that I think will start to clarify what they expect a dealer to be ready for. electrification when these products arrive.
Are dealers concerned about legislative efforts to allow start-up EV makers to sell directly to consumers?
Yes they are. Guys who want to do direct selling, they’re not going to change their minds about it. Will that change? Yes.
What interests us all is with this transition to BEV, how it changes the business model. We certainly don’t want this to have an effect on how business is done between manufacturer and dealer, but it is an important issue. Acura and the Dealer Advisory Board have had very specific conversations with senior management about their expectations. And their insurances aside, it’s still something every dealership is going to be paying attention to for the next few years.
Have there been any changes to Acura’s facility image programs? What do dealers want to see changed with these programs?
Acura has just started showing us some concept elements related to the facilities image program. Dealerships have asked — and Acura is answering — what electrification-related issues are addressed in these plans. How many charging stations do you need? Not just in a current installation, but if you were doing a completely new design. What should this installation look like in terms of electrification? Where will the batteries be stored? This kind of things. These are really important things that I think all manufacturers are involved in. It’s going to be exciting to see how this comes together.
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