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New dynamics reshaping the truck-dealership channel

May 2, 2014
The role of the truck dealership is in the midst of a major shift, according to a new study conducted by global consulting firm Frost & Sullivan, with demands for more “connected” services, mobile maintenance, vehicle uptime support, and tighter relationships between both customers and OEMs upending many “traditional” business concepts for dealers.

The role of the truck dealership is in the midst of a major shift, according to a new study conducted by global consulting firm Frost & Sullivan.

The report indicates that demands for more “connected” services, mobile maintenance, vehicle uptime support and tighter relationships between both customers and OEMs are upending many “traditional” business concepts for dealers.

“The value proposition of the dealership is evolving and that will change the very nature of truck sales,” Sandeep Kar, global director for automotive & transportation research for Frost & Sullivan, told FleetOwner.

“In particular, we see a shift towards ‘connectivity’ services through telematics that’s going to affect their aftermarket parts and maintenance services, which makes up the biggest part of the dealership’s business,” he continued.

For example, Kar noted that Cummins is now working towards the ability to update engine calibrations via software patches sent “over the air” via telematics connections – a capability that would turn traditional engine maintenance practices on its head.

“OEMs are now offering more and more diagnostic and soon prognostic services for their vehicles,” Wallace Lau, a trucking research analyst with the firm’s global commercial vehicle research practice, explained to FleetOwner.

“The downstream effect will not only result in more growth for the dealer’s parts & service business," he continued. "They will  be able to leverage customer ‘loyalty’ to particular truck brands to further capitalize on that.”

Specific findings from the Frost & Sullivan research include:

  • The dealership channel will remain a main staple in the Class 8 market, where 95% of new truck sales and 75% of used truck sales will flow from. Internet channels are expected to gain traction, garnering close to 5% market share in 2012
  • The approaching equipment replacement cycle is expected in 2014 and 2015 with totalCclass 8 unit shipments estimated at 469,600 and 492,000 units, respectively. However, this replacement cycle does not signify fleet size expansion, as fleets are only looking to replace old equipment
  • Parts, servicing and maintenance will grow as the “pillar” of successful dealership revenue maximization with current profit contributions around 45% to 50% experiencing an additional 5% to 10% growth by the year 2020
  • By contrast, the dealership profit “split” contributed by truck sales will fall from 30% to 35% today down to 25% to 30% by 2020
  • Connectivity technologies such as telematics, prognostics, and remote diagnostics will emerge as a key new monthly revenue stream with expected contribution of 10% to 15% of profits by 2020, up from less than 3% today. Those technologies will provide downstream benefits of improved customer communication, service efficiency, parts allocation and customer loyalty

The whole angle driving all of this change, stressed Kar, is to keep reducing vehicle downtime for fleets while giving dealers an opportunity to charge a premium if they can indeed successfully minimize downtime for their customers.

Dealers themselves are recognizing the import of such changes with many adapting to them not only to improve their own operations, but to help customers improve on theirs as well.

“Right now, we’ve become the teacher when it comes to telematics and remote diagnostics,” said Bill Gross, sales manager at the Allentown, PA-based TransEdge Truck Center, one of several Mack and Volvo dealerships managed by the TransEdge Group.

As an example, he pointed to Mack’s new GuardDog Connect telematics package– akin to Volvo’s Remote Diagnostics offering– which offers dealerships a variety of ways to help customers boost vehicle uptime.

“Getting past the mentality of ‘Big Brother’ being in the truck is the biggest initial challenge,” Gross told FleetOwner. “Making changes is just the hardest thing to do; it’s human instinct.”

OEMs are also stepping up their involvement with dealers to help them gain the necessary expertise to boost service levels. This trend is exemplified by Daimler Trucks North America’s Elite Support Certified dealership program, which includes use of “best practices” and continuous improvement to ensure the fastest possible turnaround time.

Since its inception in 2009, the number of DTNA dealerships achieving Elite Support Certification has grown steadily every year to its current number of 129.

“Dealership involvement is the key,” said Jennifer Stevenson, director of distribution development for DTNA. “The dealers have really pushed the idea of continuous improvement in their own organizations, adding new criteria every year to improve their own efficiency and provide better service to their customers.”

About the Author

Sean Kilcarr | Editor in Chief

Sean previously reported and commented on trends affecting the many different strata of the trucking industry. Also be sure to visit Sean's blog Trucks at Work where he offers analysis on a variety of different topics inside the trucking industry.

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