How are VW dealers coping with inventory struggles?
I feel that we have developed a new model of selling as a result.
Prior to this, what would happen is we would have 200 cars sitting on the ground, the customer would come in and they had a variety to choose from.
But now what we’re doing is we’re selling into our pipeline. So we say, “Here are the cars we have on order, here’s what you have to choose from.” So instead of the customer walking onto our physical lots for a particular car, now we’re just picking it basically through [the order] pipeline.
Now we say, “Hey, here are the cars we have to choose from. Which one would you like? And here’s the approximate time it’s going to be here. Let’s lock everything in now and we’ll go from there.” So we have seen customer satisfaction actually go up in our store because the customers don’t have that high pressure making a decision on the spot because something is going out of stock. I feel like customers feel as though they are a little bit more in control. But at the same time, the dealers are making a little bit more profit.
How are you managing the expectations of customers who are ordering a car or buying from the pipeline, in terms of their wait for the vehicle to arrive?
A lot of times, what we can do is either extend their current lease, or in some cases, what I have done is sold them another vehicle. Let’s say their lease was up they didn’t want to renew their lease. I would sell them a new vehicle, and then I would guarantee the trade-in value, less any miles that they put on the vehicle, toward the purchase of the one that they have coming in on order. We have done that a handful of times. For someone that needs a [replacement] because and needs it now.
As a dealer, we need to be able to change and pivot at any point in time and that’s one case where we were able to overcome a customer’s objection that the vehicle may not have been the color or the equipment they wanted, but they bought it , and we gave them a guaranteed trade-in less any miles.
How have VW dealers managed demand for the ID4?
If we had 100 tomorrow, we’d sell 100 tomorrow. What we basically tell our customers when they come in, we’re going to order a vehicle. And as soon as it comes in, you will be the first person that we contact. That vehicle has been challenging, just because demand is so high and production is not. That’s the only challenging thing about it for the dealer body is that we just don’t have them to sell, and if we had them, they would sell.
I assume dealers have been pushing to get ID4 production in Chattanooga up and running quickly, then?
Every single day.
Are there lessons to be learned from the ID4 launch for when the brand begins taking orders this year for the ID Buzz microbus?
If there’s anything that I think we need to button up and tighten up it is our ordering system. And I think that’s where we, the VW dealer advisory council, are going to be looking at the brand and asking: How can we tighten this ordering system up? How can we get better ETAs for the vehicles to our customers? And all in all, that will help out the dealer satisfaction, and it’ll help our customer satisfaction.
That is the dealer body’s biggest request right now to the brand, that we need an effective ETA that we can tell our customers. Here’s the one thing that I try to tell my employees, my managers and also the brand: “No answer” is not good. Updates — whether it’s a good answer or not — the customer feels informed and they’re more likely to be happy going through the transaction. If we don’t have answers, they are more likely to go to another brand and cancel their order. But I’ve noticed if we stay in front of the customer and give them updates on where we are, when we are, how we are, typically they’re happy and they stay with our brand.
Production of the Passat has ended, and the Arteon likely won’t be renewed after its current life cycle. What do you see as the long-term prospects for the Jetta? Will it survive?
Look, the Jetta is a great vehicle. As we know, 70 percent or more of the vehicles sold now are SUVs and CUVs. So when you look at that, I think the sedan business in the industry is definitely on a downward turn, but the Jetta really has not been. The only downturn we’ve seen with the Jetta is because of the microchip issue. I think the Jetta is definitely one of the vehicles that we’re known for. And we still sell them in volume; as soon as we get a truckload in, they’re gone. The Jetta is a very, very good vehicle for us. I hope it doesn’t go away.
There still is a market for that sedan and sedans in general; I truly believe that. It’s a great price leader, it’s a great value and it’s a great car.
Both the Atlas Cross Sport and the new Taos are examples of VW’s strategy to offer multiple nameplates in popular segments. How are consumers responding? Are these new crossovers taking sales from the Atlas and Tiguan, or bringing in new customers?
I’m starting to see trades that I have never seen before. We are definitely trying to hit every segment and it’s definitely working.
Don’t get me wrong: We have some cross-sell. There are some people that were in a Jetta and they went to a Taos, or they were in a Tiguan and now going to an Atlas or Atlas Cross Sport. We have some of that, but for the most part, we see the Atlas, the Atlas Cross Sport, the Taos; these are all customers who are new to the brand.
VW AG CEO Herbert Diess suggested in February in an online chat that an electric pickup for the brand would be a “good idea.” Is he right?
I think it’s definitely a good idea. I really do. That is a question that we often hear from our customers. I think that’s really what the market is asking for. And a pickup truck, that’s kind of the last segment to possibly hit that EV market. People want it, they really, really do. So I will be very happy if we decide to do that.
Many VW dealers have had profitability levels during the pandemic that they haven’t seen in decades. Do you think those levels will or can be maintained if the microchip and production shortages ease?
Yes. One thing through this whole pandemic that I have said to [Volkswagen Group of America CEO] Scott Keogh, and I’ve also said to my colleagues: There’s one thing that we’ve noticed that made this market go — when you look at the rental car companies, we realize the rental car companies will pay more for cars if they need to. That’s on the brand side. One thing that the dealer body has learned is customers will pay more if we ask them to.
It really doesn’t have to be a race to the bottom on the brand side to the rental car companies just to push volume out. Same thing applies on the dealer side. It doesn’t have to be a race to the bottom to push out volume. We can still sell volume and maintain record profits. We have a very good brand, a very dependable brand. We have a brand that customers want to drive and customers are willing to pay for, a better brand. Whether the customer be the rental-car agency, or the customer coming into the dealership, the same is true.
What are you seeing from VW dealers in terms of stickering to sticker price or putting on market adjustments? Are dealers who go above sticker getting pushback from the factory?
I do see some dealers that are putting adjusted market values on it, due to supply and demand. They don’t have any cars coming in, so they have to make some money on the cars that they currently have. There are some dealers out there, they may only have two, three, five, 10 cars, so they have to make the money to cover their costs, which is understandable. On the flip side of that, the customer that’s trading in their car, they’re getting that same exact increase on the value on the trade-in, so they may be paying it on the new car, but we’re also returning the favor on the trade-in. So I think it’s kind of a give-and-take there.
The dealer body recognizes that the “S” in MSRP is “suggested”: It’s the manufacturer’s suggested retail price. But dealers have to respond both to their customers and to their market conditions. When supplies are plentiful, then they likely sell for under MSRP; when they are not, the opposite applies.
In terms of pushback, the vibe that we are getting is, as long as it does not affect customer satisfaction and returning customers, it shouldn’t be an issue. However, it’s very hard not to, because at the end of the day, for a lease return on some of the websites that we have to buy vehicles on, those cars are selling for over MSRP and they’re 2 or 3 years old.
With the inflated values in the used-car market, are VW dealers having difficulty getting certified pre-owned vehicles?
It definitely is still a challenge. We’re getting the vehicles, but consumers are starting to realize that they can go to other avenues and sell their vehicle for more money. So in turn, they’re coming to us saying, “Hey, if you want my car, you’re gonna pay for it.” So I think the entire market — whether it’s the dealer body marking up their car, whether it’s the manufacturer pulling back the incentives or whether it’s the consumer requesting additional margins on their lease return or trade-ins — I think you’re seeing it on all sides of the spectrum. You’re seeing it from the consumer saying they want more for their trade. You’re seeing it from the manufacturer saying they don’t need to put incentives on and then you’re seeing it from the dealer body saying they need some adjusted market value.
What are the big issues the dealer council is working on right now?
We’re working on the better, more accurate ETA times for vehicles, as I said earlier, and on communication. We have made leaps and bounds on where we are from a communication standpoint, from a trust standpoint, from a confidence standpoint, as a dealer or the brand. We put a structure in place where we have the [National Dealer Advisory Council] and [Regional Dealer Advisory Councils], and subcommittees. We have the regions report out to the subcommittees, and the subcommittees then report out to the NDAC, and what we’re doing is allowing the sub-councils to make decisions, and anything that they cannot make a decision on goes to the national board . Since we have done this, we’ve really accomplished a lot.