Fleets Increasingly Switching to Non-Franchised Servicing

With a new report rating customer care at franchised dealers at just 6.3 out of 10; it is no surprise that 39 per cent of companies are switching to non-franchised dealers for routine servicing.

The 2007 Business Car Perceptions Report by business and management consultants BearingPoint suggests that the traditional franchised dealer network, which car manufacturers depend on as their key channel to market, is under strain as a result of a growing fall-off in aftersales business. reveals that fleet servicing business, which provides an important source of revenues for car manufacturers and franchised dealers alike, is being lost to non-franchised dealers.

The research, which was conducted by Professor Peter Cooke, the recently appointed Professor of Automotive Management at the University of Buckingham, in association with BearingPoint, shows that almost two-fifths (39 per cent) of companies already use non-franchised dealers for routine servicing. This number is set to grow, as nearly a fifth (18 per cent) of those respondents still using franchised dealers expect to switch to non-franchised dealers in the future.

In what could be one of the most significant developments to emerge from the research, over two-thirds (63 per cent) of respondents now claim to use the internet to help manage their business car fleets. This of course means that vehicle manufacturers have a direct channel of communication to fleet managers. As a result, manufacturers must ensure their websites fully address the needs of modern fleets, especially smaller fleets where a ‘one-size fits all’ approach geared towards the retail consumer is off-putting.

Information on products (88 per cent); information on price (75 per cent); and online ordering (42 per cent) were the most often quoted use of the internet in fleet management.

Professor Peter Cooke commented: “Use of the internet in relation to business car management has shown a huge jump in recent years and given the shift away from franchised dealer relationships in some areas of the market, this should be fully embraced by manufacturers and dealers as a vital channel of communication, especially with smaller fleets.”

This described switch away from manufacturer dealerships has a dramatic impact as spare parts sales are an important source of profitability for the manufacturers, and a healthy aftersales business is vital for the viability of their franchisees.

What is perhaps more interesting is the fact that it is actually the larger fleet operators that are most likely to make this switch in the future – something that could have serious implications for manufacturers and their dealers as potentially large volumes of vehicles move outside of the franchised networks for servicing.

Respondents gave very specific reasons for why they were making this change. Bearing the above approval ratings in mind, it is perhaps unsurprisingly that “improved customer service” is cited as one of the principal reasons for choosing to move to a non-franchised dealer in the future (51 per cent of respondents). Convenience (72 per cent) and lower price (71 per cent) are also key influencers in the move from a franchised to non-franchised dealer/servicing relationship.

What is more surprising is that the much-hyped changes to the Block Exemption Regulation (BER) do not seem to have influenced fleet operators significantly. Indeed 80 per cent of respondents claimed that the changes to the BER had made “no change” to their fleet operations

James Rodger, Global Automotive Leader at BearingPoint, commented: “Our research should serve as a serious wake up call to… vehicle manufacturers and dealers alike…that their aftersales business is under threat and that now is the time to address this situation.