Dealers Can Turn to Safety Recalls to Help Boost Revenue
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As Chip Shortage Limits Inventory, Dealers Can Turn to Safety Recalls to Help Boost Revenue

While OEMs scour the globe to find chips, dealers still need to find ways to bring in extra revenue. Vehicle service revenue will be more important than ever.

Mark Paul is the president and CEO for AutoAp

The biggest challenge in the auto industry today — the global semiconductor shortage — is causing ripples that ultimately will impact vehicle supply and threaten dealership profits. According to IHS Markit data, the industry lost 1.3 million production units in Q1 2021.  

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The problem is likely to get worse in Q2. 

On an April 28 conference call with reporters and analysts, Ford CEO Jim Farley said the company could lose as many as 1.1 million units this year. Several other manufacturers have reported plant shutdowns in recent days. 

In late April, there was approximately 33 days inventory on dealers’ lots. Customer demand remains high, so dealers are making healthy margins on each vehicle sale right now. But, lack of inventory will likely lower overall sales and decrease dealership profits. 

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While manufacturers scour the globe to find chips, dealers still need to find ways to bring in extra revenue. Vehicle service revenue will be more important than ever, as dealers scramble to make up for lower inventory and lost sales. 

We’ve seen our clients drive significant service revenue proactively managing safety recalls. Remember… “There is money in the VINs.” 

Most dealers are sitting on an ample source of vehicle repair revenue and may not realize how large this could be. Every vehicle they’ve sold in the past couple years represents vehicles with potential open safety recalls. Dealers can run these VINs and identify vehicles with open safety recalls. Dealers can then reach out to these customers to get them into the dealership for service. Not only will you find new revenue but your CSI scores can increase and customer pay can bring the average recall repair work up to more than $500 each! 

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This simple strategy has benefits on multiple levels. First, it can drive significant revenue. A Hyundai dealer generated an additional $800,000 by deploying this strategy — on just 1,600 vehicles! It also helps strengthen customer relationships. The customer comes into the dealership and gets a free repair. They’ll likely thank their dealership for letting them know about (or at the very least reminding them of) the safety recall and doing the repair at no charge to the customer. Truly, everybody wins. 

There is no telling when the chip shortage will abate and its true impact won’t be known for several months. But, dealers who proactively drive additional safety recall service revenue are more likely to weather the chip storm and protect profits in 2021.  

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