The 2021 Cox Automotive Service Industry Study portrays both good news and bad news. On the positive side, dealership market share grew by 1 percentage point since 2018. The bad news shows shortages and staffing concerns hold back dealership service departments.
But though current headwinds and market conditions throw obstacles before dealers, Cox data shows service centers remain resilient and are among the most preferred service providers. The survey, the third of its kind by Cox, finds 34% of consumers prefer dealership service centers to general repair shops.
But while this is great news, it also means dealerships fall short of capturing most of the market, which Cox says translates to up to $214 billion in potential revenue.
“Market share grew from 33% to 34% over a three-year period, which sounds small, but one percentage point in this market is several billion dollars. That’s a really good sign,” says Bobby Chen, head of product at Xtime at Cox Automotive Inc.
But the figure also leaves plenty of room to grow. “Two out of three visits do not happen at dealerships,” he says.
Consumers cite specific reasons for not choosing dealership service centers, and those reasons have stayed consistent since 2015, according to Chen. “There’s the perception that dealership service costs are overpriced,” he says. Other barriers include location with vehicle owners choosing service centers closer to home and beliefs that dealership visits take longer.
Chen puts the onus on a lack of transparency around pricing. In a world where people can buy anything online and always know prices to the penny, automotive service costs remain a mystery. “If a consumer wants to know the cost to replace a water pump or a timing belt, they need to make a phone call and they won’t learn the price quickly,” he says. “This adds to the perception that dealership service is overpriced.”
Disparate systems often increase pricing difficulties. A technician must look up the needed part, then get approval from a service adviser, then a parts person works up the quote. Customers sit on hold as this takes place. Xtime builds tools to streamline the quoting process. When a customer calls in, a technician can find a price at the click of a button.
“When you can give a price quickly, customers see right away that the dealership offers a competitive or even lower price,” he says. “When you factor in that dealerships also offer factory-trained technicians, OEM parts, modern facilities and tools, customers begin to value the experience they get at dealerships over their experiences at other service facilities.”
One in four consumers also cited service visits taking longer than expected as a common frustration. Others complained of location in the survey. Chen believes these concerns grew greater during the pandemic. People no longer drive to the office, and they also got used to clicking a button and having products arrive on their doorsteps, he says.
“Top performing dealerships began offering service pickup and delivery, and even mobile service, during the pandemic,” he says. “Someone comes and picks up your car, takes it back to the dealership for service, and brings it back to you when it’s done. Or they perform certain jobs in your driveway or at your workplace without you having to move your car at all.”
More dealerships now offer these services or plan to in the future, he adds. For instance, 59% of dealerships offer service pick up and delivery and 24% plan to add it in the future. And 21% currently offer mobile onsite service, with 20% planning to in the future.
Another growing service area surrounds electric vehicles (EVs), where the survey found 66% of service departments currently service EVs and 30% plan to service EVs within the next year.
Service Department Challenges
The Cox survey also inspected dealership operational challenges. Here, service departments reported delays (58%) and hiring the right technicians (45%) as their top operational challenges.
They say both play a role in declining customer satisfaction. In fact, just 55% of dealerships believe satisfaction improved in the past 12 months, down from 71% in 2018. And 57% of dealerships report their service departments are understaffed and 80% expect labor shortages to continue or worsen. Over 60% of dealerships report they plan to invest in growing their service technicians in the next year.
Though parts challenges may persist as supply chains issues continue, Chen says dealerships can ready themselves for these challenges. “They may not immediately rectify supply chain issues, but they can do a better job of predicting when parts will be available and better communicate that to customers,” he says.
When customers book an appointment, service centers can make sure parts are available. If not, they can set expectations for when parts will arrive. If it’s an issue that’s not emergent, like a worn brake pad, customers might wait on service until the parts come in. If it is an emergent issue, dealerships can provide loaner vehicles until technicians receive the parts and complete the repair.
The labor shortage, however, isn’t a problem that’s as easily resolved, he adds.
But adding digital tools can make technicians more efficient. Just as scheduling can occur via digital voice assistant, there’s a place for that technology in service bays. “Technicians often have to go back and forth to a computer or hold a tablet in their hands as they work,” he says. “But what if they could speak to a digital voice assistant as they complete inspections or order parts? This could make technicians more efficient and give them more time to turn wrenches.”
Dealership also can streamline training to get technicians up to speed quicker, he adds. A digital assistant, for example, could walk technicians through inspections or repairs without them shadowing someone else or taking another technician off the job to train them.
“Dealerships also need to enter partnerships to drive technician education and broaden the base of available labor. These are good paying jobs,” he says.
Transform the Experience
“The industry is ripe for transforming the customer experience,” says Tracy Fred, vice president of operations for Xtime in a press release. “Despite a challenging marketplace, opportunities exist to better leverage digital tools to deliver on, and even exceed, customer expectations while offsetting some operational challenges. Elevating the entire consumer experience with a consumer-minded mindset and the use of technology can help raise overall profits, capture additional market share and help mitigate the frustrations service departments are currently facing.”
Fred is spot on in her assessment; the industry saw a digital service revolution where dealers upped their online games to deliver services during government lockdowns.
“The top performers embraced the digital experience,” Chen says. “The pandemic forced dealerships into a digital workflow. Top performers made that a key part of the customer experience and validated what we had envisioned for the digital service experience all along.”
The study showed customers demand digital service experiences and that 62% of dealers now believe their current online solutions enable a better service experience.
Consumers still make 80% of service appointments via phone; not every customer feels comfortable speaking to a digital assistant when making an appointment. Still, Chen says, “dealers should digitize their experience and improve the service department’s efficiency with digital tools.”
He explains that some dealers now take video as technicians inspect a vehicle in the service bay. Service centers send customers the video along with their estimate. “This has driven a significant increase in approval rates for work,” he says. “Without a video around 25% of recommended work gets approved, versus 50% if there’s a video that accompanies the estimate.”
“Dealerships need to find the technology trends that are pervasive across industries outside automotive and bring them into the dealership,” he concludes.
Ronnie Wendt is owner of In Good Company Communications and an editor at F&I and Showroom.