Infiniti dealers: After QX60 delay, looking for a rebound

Infiniti dealers: After QX60 delay, looking for a rebound
Written by Publishing team

In 2022, we don’t have any new product coming. We would love to see the [redesigned] QX80 this year, but based on everything that’s going on with the supply chain, I believe it’s going to be 2023.

So all we can do this year is maximize what we have. And the best thing that we have is the all-new QX60, which remains supply-constrained.

On older models, Infiniti will have to make sure incentives are competitive.

Are dealers more satisfied with how the Infiniti franchise is run than they were two or three years ago?

The brand’s NADA survey scores have improved over the last few quarters as our business has improved thanks to new products.

The new QX60 is a winner, and if that’s representative of our future products, we are heading in the right direction.

Infiniti management has kept an open dialogue with the dealer board and made changes to help us negotiate through a difficult 2021.

What is Infiniti’s plan for permitting third-party off-lease buybacks in 2022?

The biggest challenge for most dealers is acquiring used-vehicle inventory. Last year, Infiniti Financial Services required lease returns to be transacted exclusively at Infiniti dealerships. This allowed dealers to have the right of first refusal of lease returns that then are sold as CPO or used vehicles. It makes a big difference because the supply of pre-owned cars in 2021 has been very difficult.

As a Northeast dealer, I have a large lease portfolio. So we have access to a rich supply of CPO and used cars compared with dealers in more of a retail market.

I see a lot of guys from the Midwest coming to the East Coast to buy cars because they don’t have as large of a lease portfolio.

After diminished leasing volume for some automakers in 2021, what are Infiniti’s plans to promote leasing in 2022?

Infiniti plans to be conservative on leasing. They don’t want to have as high of a lease penetration as in the past because it involves added cost in terms of guaranteeing a residual value.

Pre-pandemic, 90 percent of my business was leasing. Now, we’re probably at 60 percent, which is healthier.

In many cases, the retail buyer is a much better customer service. A retail customer is also easier to trade out of a car at any particular point that they own it. In most cases, if you have somebody who’s in a 36-month lease, they’re out of the market for two or two and a half years.

How sustainable are current vehicle margins and profitability levels as inventory improves?

Return on sales for Infiniti dealers last year was about 4 percent. But sales volumes also shrunk. As supply normalizes industrywide, I would expect to see a lower return on sales and gross profit averages.

When do you expect Infiniti’s production and inventory levels to come back in line with demand?

We expect production to increase in the first quarter of 2022, but it’s unclear when inventory levels will recover to pre-pandemic levels. Manufacturers have realized 90 days’ supply of new cars is detrimental to everybody. It costs the automaker too much in the incentive department. It costs the dealer too much to carry. We believe an appropriate inventory would be a 45 to 50 days’ supply.

How are dealers coping with tight inventory?

Dealers have relearned how to sell ordered and inbound inventory.

We also have a renewed focus on CPO and used-car sales. We’ve asked Infiniti to make TV spots specific to the CPO business. Infiniti Financial Services should consider offering special financing on used vehicles and bundling maintenance packages.

Have sales incentives changed during this time of decreased production?

Incentives have not gone away, but they are nowhere near as generous as they used to be because the production is not there.

Average incentives last year declined at least $1,000 to $2,000 depending on the model.

As production normalizes, the dealer board is laser-focused on staying price competitive. We have worked with the brand to keep incentives competitive in particular segments. We are a challenger brand and must be competitive with our transaction prices.

How are dealers handling new-vehicle pricing? Are they adding market adjustments?

We have an all-new vehicle that could command over MSRP. I know some dealers who are marking up product, but they should take a hard look at that strategy. Eventually, the supply shortage will end, and I wonder how many customers are going to go back for their next vehicle to the dealership that charged them over sticker.

Most of my business is repeat business. Our customers have supported us for the past 30 years, and I could not in good conscience present them a new car at over MSRP.

How is the fixed operations business performing?

Fixed operation revenues have improved over the last year as more consumers are hanging on to their vehicles longer due to the new-vehicle shortage.

But service revenues are still 20 percent lower than pre-pandemic levels at our store.

Dealers using Infiniti’s valet pickup and delivery service have seen an increase in repair orders and CSI scores. But technician and parts shortages are affecting service department throughput.

Has Infiniti shared its electrification plans with dealers?

Retailers are eager to see where electrification will take us. But Infiniti is holding its cards close to its chest. We want to see a five-year plan from the manufacturer. What’s Infiniti’s vision regarding electrification? We can’t plan expansions if we don’t know what product to expect. Dealers want to feel comfortable about the franchise’s future.

Is Infiniti’s e-Power serial hybrid technology coming to the US?

I believe Infiniti has shelved plans to bring e-Power to the US and is betting on battery-only models. Based on the acceleration of EV adoption, Infiniti is making the right move.

My understanding is the e-Power technology is underpowered for Infiniti’s larger, more performance-oriented vehicles. In addition, I think cost would be prohibitive.

What’s missing from the lineup?

A new entry-level model would bring younger consumers to the brand. The affordable 1990s-era G20 introduced younger buyers to Infiniti. As they climbed the career ladder and started families, they upgraded to larger, more profitable models in the lineup.

Infiniti also needs a $100,000-plus flagship model — whether it’s a coupe or convertible. An aspirational halo model would create interest in the brand and help drive sales for the entire lineup.

If you have the right vehicle and it’s got the right content, we can get $100,000 for a car, no problem.

What is Infiniti doing to direct dealers on digital retailing?

Infiniti invests in training its field team and the retail network in making the shift to e-commerce. The factory is providing recommendations and best practices for streamlining in-store action items and online sales processes. The Infiniti Now e-commerce program offers dealers a choice of approved digital retail vendors. About 75 percent of the network has signed up for the platform.

Has Infiniti imposed requirements for dealerships regarding data protection and security?

There are no formal requirements for dealers. Infiniti is monitoring this given the sensitivity around cybersecurity in today’s digital world.

Any change in facility image programs?

Infiniti has worked with the retailers to help drive down the cost of their facility program from a design and size perspective. Most dealers have invested in updating their stores over the last five years.

The brand does annual facility inspections, and they’ve gotten easier to pass. There used to be a laundry list of required updates. Now, Infiniti requires some basic updates, mostly around customer touch points.

Infiniti isn’t pushing major store changes on dealers. Those days are over because everybody’s talking about how you’re going to buy everything digitally. It used to be, the larger your facility, the better you were. I’m not hearing that anymore.

How is Infiniti helping with recruitment and retention?

The pandemic and the shift toward electrification have worsened the industrywide technician shortage.

Infiniti has created the Empowered Performers Program, which provides earning opportunities for retail and service employees who achieve seniority and meet performance metrics. This has been a great tool, funded by the automaker and dealers, to help us retain and recruit the right people.

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