Managing Risk in a Volatile Auto Market

In today’s rapidly evolving automotive landscape, depreciation has become a major concern for all market participants. From car dealerships and finance companies to rental agencies, insurance firms, and even individual consumers, understanding and managing the future value of vehicles is a critical part of maintaining profitability and managing financial risk. Yet, despite the widespread impact of car depreciation, there currently exists no structured market for hedging this risk—creating a gap that could be filled by a Car Depreciation Futures Exchange.

A futures exchange for car depreciation would allow stakeholders across the automotive value chain to mitigate the financial risks associated with fluctuating vehicle values, just as they do with commodities like oil, wheat, or metals. With the right infrastructure, this market could provide a powerful tool for stabilizing portfolios, predicting costs, and enhancing profitability in the face of uncertainty.

 The Case for a Car Depreciation Futures Exchange

1. Fluctuating Car Values

Car depreciation is one of the most significant factors affecting the long-term costs of owning or leasing vehicles. A new car typically loses between 15% to 25% of its value in the first year, but depreciation rates vary dramatically across makes and models due to factors such as:

-          Technological Advances: The rise of electric vehicles, autonomous driving technologies, and rapid improvements in fuel efficiency are altering demand for traditional cars.

-          Market Shocks: Economic downturns, regulatory changes, or even geopolitical events can drastically affect car values.

-          OEM Pricing Strategies: Car Manufactures will occasionally react to poor sales or supply constraints, with large revisions of their new vehicle marketing strategies and pricing that has a proportionate effect on the value of existing units in the market. Overstocking of inventory in dealerships, can often lead to heavy discounting which also has a negative effect to the values of existing vehicles in the market.    

-          Consumer Preferences: Shifting trends (e.g., the preference for SUVs over sedans) affect the long-term value of vehicles.

For stakeholders, the unpredictable nature of depreciation creates significant financial risk. Without a standardized market to hedge these risks, participants are left exposed to fluctuations that can directly impact their bottom line.

2. The Need for Risk Management Tools

A Car Depreciation Futures Exchange would offer a transparent, standardized platform where car value risks could be hedged. Similar to how commodity traders lock in future prices to guard against volatility, market participants could hedge against unexpected changes in the resale value of vehicles.

For example:

-          Car Dealerships: Dealerships holding large inventories of specific models could hedge against future price drops, ensuring that their inventory remains profitable even in the face of falling demand.

-          Leasing & Finance Companies: Leasing firms could protect themselves from inaccuracies in their residual value forecasts by locking in the future value of leased cars.

-          Insurance Companies: Insurers, especially those offering GAP (Guaranteed Asset Protection) coverage or insurers that payout the market value in the event of a total loss, could manage the risk of paying out large sums if a car’s market value depreciates more than expected.

-          Car Manufacturers: Automakers could hedge against shifts in consumer demand or regulatory changes that could disproportionately impact the resale values of their vehicles.

Benefits to Market Participants

 1. Dealerships and Rental Companies

For car dealerships and rental companies, managing large inventories of vehicles presents a major financial risk due to depreciation. A futures market would allow these businesses to hedge against unexpected value drops, protecting profit margins and providing a more predictable cash flow. If dealerships know that they can hedge against losses, they may be more willing to hold inventory or offer financing options with lower risk.

2. Car Finance and Leasing Companies

Finance companies that offer car loans or leases are heavily exposed to the residual value of vehicles. Miscalculations in predicting future values can result in significant losses. A futures market would allow finance companies to offset this risk by entering contracts that secure the future value of the cars they finance. Leasing companies, in particular, could use these contracts to hedge residual value risk at the end of lease terms, ensuring that any depreciation beyond forecasted levels is offset by gains in the futures market.

3. Insurance Companies

Insurance companies that offer total loss coverage or GAP insurance face the risk that a car’s market value at the time of a claim will be lower than expected. Depreciation futures would provide them with a way to hedge against this risk. If cars depreciate faster than expected, insurers can offset higher payouts with profits from futures contracts that reflect those declining values.

4. Speculators and Investors

In addition to direct market participants, speculators and investors would also benefit from a car depreciation futures market. Investors with deep knowledge of automotive trends could take positions on the future value of specific models or entire segments (e.g., electric vs. gasoline cars), creating opportunities for profits based on market insights.

How Could a Car Depreciation Futures Exchange Be Created?

1. Standardization of Contracts

The first step in creating a Car Depreciation Futures Exchange would be standardizing the contracts. Similar to other commodity futures, the contracts would need to specify the car model, make, and year. Each contract would be tied to a particular vehicle type (e.g., 2024 Tesla Model 3 or 2023 Ford F-150) and would establish clear terms on the vehicle’s expected future value.

To reduce complexity, the market could begin with a smaller set of widely traded or high-volume car models. Over time, broader categories could be added, such as:

-          Specific makes and models

-          Vehicle segments (e.g., sedans, SUVs, trucks)

-          Powertrains (e.g., electric vehicles, hybrids, internal combustion engines)

2. Creation of an Index

A reliable index would need to be established to track vehicle depreciation. This could be achieved through partnerships with companies that already track car values, such as Kelley Blue Book or J.D. Power. The index would provide a benchmark for the futures contracts, giving participants a transparent and reliable way to settle their positions.

3. Cash Settled vs. Physical Delivery

Given the complexity of physically delivering cars, the futures market would likely be cash-settled. This means that, rather than delivering a car at the end of the contract, the difference between the futures price and the actual value of the car (according to the depreciation index) would be paid in cash. This simplifies the process and makes the market more accessible to a wide range of participants.

4. Regulatory Oversight and Market Governance

Like any financial market, a Car Depreciation Futures Exchange would need regulatory oversight to ensure transparency, prevent manipulation, and protect participants. This would likely involve collaboration with financial regulators like the Commodity Futures Trading Commission (CFTC) in the U.S. or its counterparts globally. Establishing clear rules for participation, transparency in pricing, and ensuring market liquidity would be crucial for the exchange’s success.

What’s Needed to Establish the Market?

 1. Data and Analytics

For a car depreciation futures market to function effectively, robust data on vehicle prices, sales volumes, and depreciation rates is essential. Partnerships with automotive data providers, dealerships, and finance companies could ensure that the index used to settle contracts is accurate and reflects real market conditions.

2. Market Participation

The success of the market will depend on strong participation from key stakeholders in the automotive industry, including:

-          Dealerships and rental companies

-          Finance and leasing companies

-          Insurance companies

-          Speculators and institutional investors

Building awareness and understanding among these groups will be key to driving adoption.

3. Liquidity

For the market to function efficiently, it needs to be liquid. This means there must be enough buyers and sellers to ensure that contracts can be entered and exited easily without significant price distortions. Engaging a wide variety of participants will help ensure the market remains liquid and attractive.

Conclusion

A Car Depreciation Futures Exchange could revolutionize risk management in the automotive industry by providing a platform to hedge against one of the largest financial risks in the market: depreciation. With the right structure, reliable data, and broad participation, this futures market could offer significant benefits to dealerships, finance companies, insurers, and speculators alike. As the automotive world continues to evolve, managing depreciation risk will become increasingly important, and a dedicated futures market could be the perfect tool to do just that.

Why the Dealership Ecosystem Needs an OpenAPI Standard to Limit Future Damage

The recent cyberattack on CDK Global, a major provider of software solutions for automotive dealerships, has significantly disrupted operations across the United States. CDK serves over 15,000 dealerships in North America, and the attack, which began on June 19, 2024, forced the company to shut down its systems as a precaution. This shutdown has left many dealerships unable to access critical systems needed for sales, financing, and service operations.

The impact of the attack has been profound, with more than half of US car dealerships affected. Many dealerships have had to revert to manual processes, using pen and paper for transactions and appointments. Some have even sent employees home due to the inability to conduct business as usual.

Cybersecurity is an increasing problem for all businesses, and some say that total prevention is close to impossible. With the total worldwide cost of cybercrime estimated to reach $9.5 trillion in 2024, it is an unavoidable issue that every car dealership must confront. But what can a dealer do to prevent hacking attempts or mitigate their impacts?

Diversification

Created as a DMS, CDK Global has grown into diversified automotive solutions that can be used in almost all digital interactions within the dealership. The problem for many of the 15,000 affected dealerships is that they have employed CDK solutions within all aspects of their business, which has resulted in a crippling of their operations from this attack. Like any good investment strategy, it pays to be diversified, and good software risk mitigation involves ensuring that all your customer touchpoints are not consolidated to any one vendor or security protocol. While one could argue that this increases the potential for multiple entries, the effects are only limited to that service.

The Problem with Vendor Consolidation

So why are dealers increasingly consolidating their vendors? It has been an increasing bugbear of dealers that the myriad of software solutions are siloed and don’t communicate with each other, leading to lost productivity and consolidated customer oversight. CDK has been promoting its end-to-end solution as the savior to this issue. However, the solution isn’t vendor consolidation but rather an OpenAPI framework where dealership vendors can seamlessly communicate with each other with the dealership’s permission.

The Need for an OpenAPI Framework

Some DMS providers claim they are creating OpenAPI for the benefit of dealers, but DMS hardly have a good record in sharing data without gouging dealers or vendors. The industry needs an OpenAPI framework – maybe Drivible should create it? An OpenAPI standard would allow for diverse systems to communicate and integrate without compromising security. This approach not only enhances operational efficiency but also mitigates risks associated with vendor lock-in and single points of failure.

Conclusion

The CDK hack is a stark reminder of the vulnerabilities inherent in relying too heavily on a single vendor for all dealership operations. By adopting an OpenAPI framework, dealerships can create a more resilient and flexible system architecture that can withstand future cyber threats and ensure continuity of service. The future of dealership operations lies in interoperability, enhanced security measures, and strategic diversification of software solutions.

By implementing these strategies, the dealership ecosystem can better protect itself against cyberattacks and minimize the operational disruptions that such incidents can cause.

I have the privileged opportunity to drive lots of different cars and for the first time ever, I feel like cars are getting worse. I have been in the car industry for over 20 years, and I am constantly surprised by how car manufacturers can continually improve car features and comfort. I have also taken for granted how much safer a modern car has become, however in the past couple of years safety technology advances are no longer passive – new ‘improvements’ are intrusive.

Australia’s safety rating organisation is ANCAP which is responsible for setting safety requirements and in addition to testing cars against that standard – the rating that all manufacturers aim for is 5-star and the buying public has been educated to believe that anything less than 5-star is unsafe. In fact, government departments, fleets, rentals and ride-share insist on it.

But what does it take to launch a car today rated as 5-star?

From 2023, an increased weighting is attributed to active safety features such as driver monitoring, lane keep assistance, and collision avoidance – cars I drove prior to 2023 would have these features but would nudge you by vibrating the steering wheel or beeping. But now, new cars are taking over the controls and I would argue making driving less safe. Here are my latest experiences:

-          Almost daily, on a two-lane road I am confronted with a car parked in the left lane where there is enough room to merge into the next lane to get around it. Obviously, I look into my blind spot and in addition to blind spot monitoring, I am confident that there is no car in the lane beside me. However, the emergency lane keeping resists my steering intention and forcibly steers me back into the centre of the left lane. The problem is, that there is a car in my lane I am trying to avoid.

-          While reversing my car out of a shady car park, the cross-traffic alert suddenly slams on the brakes and beeps like I am on life support and I am about to depart. The problem is, there is no car coming and now the car refuses to budge.

- While driving on an undulating open country road, my car suddenly slammed on the brakes because it sensed an object on the road in front of me. The problem is, there is nothing there and my wife is now questioning whether I am losing my mind.

These issues are not exclusive to one brand, I have experienced all these issues in newly released Chinese, Japanese, and Korean-made cars and I have had friends and family complain about the same in European cars as well. 

OEMs are stuffing these features into new cars so they can get the required 5-star rating, and now it is stuffing up my confidence in a new car to keep me safe.  

This week, the Albanese government announced that from the 1st of January 2025, car manufacturers will need to have an average CO2 output 60% below the current average by the end of the decade. This threshold average will apply across the total model lineup of a car importer.  

Chris Bowen the Climate Change Minister says that Australian drivers will save $1000 a year in fuel and that ICE vehicles will not go up in price. I disagree.

While the policy makes sense and is likely to reduce the CO2 emissions of new cars sold in Australia, it is wrong to say there won’t be any impact on Australian consumers. Of course, there will be, that is the point - isn’t it?  

Take, for example, Toyota. Australia’s largest seller of cars and in most years sells one-quarter of all cars sold in this country. They have a vehicle in almost every model segment and are hugely influential in the market. Their Landcruisers and Hilux Utes dominate the 4WD and commercial market and are currently powered by diesel and are likely well above the CO2 threshold that the government will set. Once the legislation comes into force, the popularity of these models is likely to put pressure on Toyota’s total average CO2 output.

Toyota being a rational business will likely try to dampen the demand for these higher polluting cars by increasing the price and hence their gross margin. They will then use this increased margin to subsidise their hybrids and EVs to increase their volume and hence lower their average CO2 output to avoid the government-mandated fines. As a diversified OEM, Toyota has the ability to play with its sold model mix to ultimately sell more cars by using internal methods.

For those brands that aren’t diversified and sell mostly ICE models above the threshold, then their only option will be to trade their liability with another OEM that mostly sells EVs to avoid the fines. The effect on the price of ICE is the same, the internal cost to sell an ICE car will go up and the cost to sell an EV will go down.

The reality is, that despite the environmental rationale to buy an EV that there might be, there is still consumers who want and need an ICE vehicle. These cars will still be popular and will certainly go up in price. In fact, EVs are generally still more expensive to produce and therefore all cars on average will be more expensive.

This will inevitably lead to increased prices for used cars as the affordability of new cars reduces. This dynamic always pushes consumers towards more affordable used cars, which were originally sold before the legislation. Therefore, the price of used cars will generally go up leading up to and after the 1st of January 2025. This pressure will be particularly evident in large 4WD and Utes.      

If you disagree, please comment on LinkedIn

We recently launched our beta version of our Invoice Log, where car dealers can store and manage their accounts payable invoices (but more on this later). But it got us thinking, why isn’t a centralised database for bank accounts linked to Australian Business Numbers?

An increasing method of fraud used by criminals and hackers is to simply change the BSB and account number on an invoice. Known as Invoice fraud, according to the ACCC cost Australian businesses over $227 million in 2021.

This can be achieved by hacking into the email program, intercepting emails or can simply be achieved by emailing a business with a fake invoice and assuming a business doesn’t have a robust process of approving invoices (also more on this later).

A client dealership recently received an email where the supplier claimed that their bank account had recently changed and that this ‘urgent’ payment was required before they could release the equipment. One call to the supplier proved that the email was fake. But considering the supplier’s email had been hacked, everything about this email looked legitimate.

Whenever your dealership receives an email relating to bank account details and changes, your accounts department should always validate this with a phone call, however, a more robust national system to check bank account details would make the job of hackers substantially harder. 

The drivible invoice log would be more beneficial for dealers if an API existed to check bank account details for Australian businesses against their ABN. This could be an opportunity for an Australian start-up, however, the natural provider of this service should be the Australian government through the ATO or ASIC. It is already a requirement for Australian businesses to register and keep their details up-to-date. It would also be in their business interest to register their bank account details with the registrar. 

Australian businesses could manually check an ABN on the register to validate bank details and tech businesses such as drivible could utilise an API to make their clients more efficient and safer.

Invoice Log

We recently launched an early version of our invoice log, which allows dealers to save their suppler invoices digitally in the cloud. Suppliers can send invoices directly to the dealers document storage via a unique email address and dealers can manage approvals with a robust and auditable approval process. Early tests show that a dealer accounts payable department is substantially enhanced and more productive.

We have many more features to come, such as alerting dealers to changes in bank account details. But a national bank account register would be beneficial to all businesses.  

February has been a huge month for the drivible platform with some key features being introduced to our dealer clients.

Dealers now have the functionality to electronically store their payable invoices in the cloud and when combined with our OCR and machine learning capabilities, documents can be found in seconds. Documents can be manually uploaded or via our unique email technology where your users or even suppliers can directly upload invoices directly into your document storage – no need to print and scan – saving your employees, time and your business, paper.

Once reviewed, your accounts payable team can automatically forward invoices to managers or employees for electronic approval and this process is audited to ensure compliance.  

We have also switched on service ratings, where your clients can be sent an SMS and email for a quick survey after service. This easy two question survey is the ideal way to check the pulse of your dealership. Clients are also encouraged to review your dealership on Google and Facebook and you can even compare your dealership to thousands of dealerships across Australia! So if you are a dealer that takes your customer service seriously and you have a competitive streak, you will keenly be checking the drivible platform everyday.  

Stay tuned for some exciting updates over the coming months including the ability to bulk upload all your days repair order in a single scan!

It is the mission of every service department to ensure that every car that leaves the service department is safe and in sound working order. But what if your clients expose your dealership and more importantly your service technicians to a huge risk of fines or even worse?

On July 2011, the South Australian government removed registration stickers and other states soon followed. Now, all Australian states have replaced registration stickers with websites and apps so that drivers can check the registration status of a car.

This solution has proven adequate for owners and occasional drivers, but what if your business drives hundreds of unknown cars a day – for example a dealership service department. Unlike many other responsibilities, driving a vehicle that is unregistered is the responsibility of both the owner AND the driver, which means that your technicians could be issued a fine while conducting a Road Test. Even more concerning, the dealership would be fully liable for third-party damages and injuries in the event of a severe crash.  

Many dealers have recognised this grave risk and require employees to do a daily task of checking all the service vehicles with the solution provided by the government. Checking individually, is a laborious and inefficient task but with the risks involved - essential.

We have just developed a solution that batch-checks all your service repair orders with the data at the state registering authority. Once data is uploaded into the drivible, our solution checks all service vehicles which takes seconds versus the hours that large dealerships are doing each day. Saving 10’s thousands of dollars each year. In addition to reducing the risk of a catastrophic fine or payout in the future.

We have just completed the rollout of the South Australian Rego check. If you would like us to develop a solution for your state, then please contact us at hello@drivible.com.au

We used ChatGPT to create our 2022 yearly review.

“Dear valued Drivible users,

We are excited to announce several new updates to our platform! Firstly, we have just launched the ability to search for any word within your documents, making it easier than ever to find exactly what you're looking for.

In addition, we have developed the ability to send payment requests for deal deposits, service invoices, and parts invoices directly through our platform. This feature will streamline the payment process for our car dealership partners and make it more convenient for you.

We are also pleased to announce that we have recently onboarded some big dealers and we are looking forward to partnering with them in 2023.

Looking ahead to next year, we have several exciting new features in the works. South Australian dealers will soon have the ability to batch check registration expiry dates, and our [your] accounts department will have the ability to save accounts payable invoices. We will also be introducing electronic signatures and launching a new user interface that centers all of your data around your clients, much like a CRM.

We would also like to take a moment to recognize and thank our hardworking development team for their contributions this year. Their dedication and efforts have been instrumental in bringing these updates to fruition, and we are grateful for their commitment to improving Drivible for our users.

Thank you for choosing Drivible for your document and data storage needs. We are constantly working to improve our platform and bring you new and useful features.

Sincerely, The Drivible Team”

What is ChatGPT?

“As a large language model trained by OpenAI, I am able to understand and generate human-like text, which makes me well-suited for tasks such as answering questions, providing information, and assisting with language-related tasks. I can provide quick and accurate responses to a wide range of questions and topics, and I am able to generate text that is coherent and flows naturally.

In addition, I am available 24/7, which means I can assist you at any time of day or night. Whether you need help with a specific question, some general guidance, or assistance with a language-related task, I am here to help. So, if you have any questions or need assistance with something, please don't hesitate to ask. I'll do my best to help you.”

The above was also generated with ChatGPT - www.openai.com

From today, it is now possible for a dealer or dealer employee to search for a document in their dealership as though they had the power of Google within their dealership.

But how does it work?

Unlike many other options, drivible doesn’t require specialised scanners or bespoke solutions. Each dealer is issued unique drivible email addresses for their documents which are ideally pre-programmed into your network scanners. Therefore, your users simply have to press the pre-programmed email address and send your document to the drivible end-points.

Once retrieved, we use Optical Character Recognition (OCR) to read all the text and handwritten notes on your document and then pass those words into our Machine Learning models, which utilises Native Language Processing to label your data.

In addition, we then parse all the text from the OCR, and then combined with the labeled data we create a unique search index in an Apache Lucene search engine. This allows our users to search and find any word, within 100,000’s documents within a second.      

Why is this important?

Physical documents, such as Repair Orders and Deal Packs take up an enormous amount of space at dealerships, located on land that is increasingly expensive and uneconomic. In addition, when a document is needed it often wastes many hours of employee’s time.

Some other document storage solutions, require an employee to manually label or stamp documents, however, drivible requires a minimum amount of employee effort as all the labeling and search functionality is automated.

Incorporating a Native Langauge search, also allows users to find documents and ask questions that are more intuitive to their normal way of working. For example, instead of trying to find a service repair order via the RO number (which must be known beforehand), a user can simply search via the prompt - “joe bloggs invoice” and can also refine their search by including “joes” car model or colour - “blue Crv”.

Currently, dealers can trial our document storage solution for 30 days and with the benefit of our cloud solution only pay $25 per user.

drivible will be at the 2023 NADA conference in Dallas, Texas between the 26th and 29th of January. It’s going to be great to experience all the new and exciting technology available for the modern car dealer. To book a personalised demo of the drivible platform, please email us at hello@drivible.com.au

Drivible recently launched our network prices feature where we collate the sales transaction data across all our participating dealers to get a rare insight into the actual sales transactions happening at dealerships across Australia.

Unique to drivible, we can collate actual sales transactions at a retail level and give our dealers unprecedented insight into the car market. Recently, we have been studying the inflation effects on the car market in Australia which has been caused by an undersupply of new vehicles and strong demand.

One example is a used Mitsubishi ASX XC LS MY17 2WD which recently sold at one of our dealer partners for $21,695. This vehicle model sold with 99,441 km’s on the odometer and an identical model about 2 years ago sold for $20,980 with only 28,915 km’s.

Hypothetically, you could have bought this car and travelled over 70,000 km’s and in two years made a profit of $715. When adjusted for kilometres travelled, an ASX LS MY 17 has increased over 3x.   

The bad news is this trend doesn’t look like reversing for some time, the good news is you might already own an ASX.

It ‘s free to access network prices on the drivible platform. Contact us to find out more.

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network prices are obtained from our participating dealers across Australia. drivible prices exclude on road costs

My wife and I recently had a baby boy and after getting over the realisation that we now have 3 children to keep alive, we set out on the expected chore of registering his birth. My expectation was that dealing with a government department was going to be a painful ordeal – but in reality, it was an efficient delight.

The hospital gave us a handout – which explained that birth certificates are now issued completely online. My expectation was that we would fill in a glorified form, we would then print, scan and send in the mail. But to my surprise after entering in both mum and dads details we were sent a text message and we simply had to reply with ‘Yes’. A week later his birth certificate was in the mail. 

We literally created the most important document in a person’s life - Medicare, passports, tax file numbers, driver’s licences can’t be obtained without a birth certificate and we did it with a simple ‘Yes’. Yet, relatively mundane agreements like borrowing a car or receiving a parcel needs a scribble on a piece of paper or screen.  

A reply via a mobile phone at least guarantees that the holder of the phone agreed to a contract at a precise time and that they at least gained access through the phone’s security – which a signature scribble can’t provide. In more serious matters, a court order could also obtain the location of the phone user.

If a text message is good enough to create a legal human, then I believe a text message should be good enough for most commitments we make in society. The important aspect of a contract between parties is that they all know they have made a legally binding commitment – people have been conditioned to accept that the act of writing their signature is important – the challenge is to replicate this with an SMS reply.

For a while now, test drive and loans cars on drivible are agreed to via an SMS reply and in a few months, drivible will make it possible to agree to buy a car via text message. Not as important as having a baby, but still important.   

Dealers are increasingly focused on expense reduction and it is obvious that document storage and document scanning is a great place to start, but may not have considered that proper implementation requires some process and cultural changes.

You’re investing in the future.

Many people place more emphasis on their current time, rather than time saved in the future. Other than the space saved due to digitisation of documents, the main efficiency gained from document storage is the speed to search and find a required document in the future.

With a good document digitisation solution with OCR and advanced search capabilities, the speed to find a document is well understood. But what a dealer and their employees need to recognise is that some time and efficiency is sacrificed upfront which is expected to yield a more productive business in the future.  

It is difficult however, for employees to understand that an added task such as scanning documents is worth it – the key is to make it as easy as possible with slick processes.

Staples are the devil.

There is no room for staples in a workplace that intends to scan documents, they simply take too much time to remove and often tear the corners of documents which often creates paper jams. Staples can easily be replaced with removable and reusable clips or plastic sleaves.

Keep scribbles to minimum.

The main attraction for dealers using a document storage solution is the ability to capture notes which are often written by admin staff or technicians. However, advanced document solutions employ OCR and may also use machine learning which may be affected by notes and scribbles. For example, employees might highlight a mobile phone number by circling the contact details, but if that circle obscure’s part to the text, then the ability to search via that number is lost.   

Invest in a good scanner.

For the typical dealership, the quality of a document scan does not have to be photo quality – however some OEM’s may require technician notes on warranty claims to have specific colour pen for example – so this must be considered. The scan should be legible – especially if you are using a solution that uses OCR. 

The greatest consideration should be on pages per minute and the number of sheets the tray can handle. The scanner you purchase should maximise the speed (ppm), ideally 80ppm or greater and you should spend as much money as your business can afford – as time saved in this area is valuable.

Process, process, process.

It is not economical to employ the resources of an employee to solely scan the whole days documents at once, therefore the scanning of documents must be incorporated into your departments task flow. For example in the service department, it is important to have the service advisor or costing clerk place the repair order in a scanner directly after finalisation. If you have purchased a good scanner, then all the settings can be defaulted and documents are scanned while the user is processing another task - such as costing the RO.  

Is your head in the clouds?

Your document archive is your last line of data storage – for most dealerships, the DMS is the source of truth of the dealerships data – and still most DMS are hosted on-premise. It is a key risk to also store your archived documents at the same premises as your database. Therefore, it is essential risk management that you choose a solution that is cloud based.                                                                          

Document storage is one of the best long-term investments you can make in your dealership – but it is important that you consider the process changes and solutions that are needed to maximise success.

It is generally the case that over time, a competitive industry gradually improves their processes and input costs to become more productive and efficient – but that has not occurred in the car retailing space.

At drivible, we have spent some time going through the Key Performance Indicators from 2001 and we have found little to no change in the key figures that drive dealer productivity and profitability. As a great comparison, the key indicators that were important to dealers 20 years ago are also considered important today. Most of these KPI’s are measured as output per employee in both a physical measurement or financial comparison. To remove the effect of inflation, we have focused on the physical output of a dealership employee – for example cars sold per salesperson and made use of the industry definition of a benchmark figure – the top 30% of dealers.

In 2001, the best dealers in Australia had a new car sales output of 11 cars per head. This figure has consistently included the sales manager and aftermarket salesperson and today that same measurement is now 12 (a puny increase of 1). The same comparison in used cars has only slightly bettered from 10 to 12 over 20 years. Notwithstanding the current improvement in gross profits caused by stock shortages, this mediocre increase in productivity is not sufficient to alleviate the narrow margins and increased wages in the sales department. The increased use of technology in the top 30% dealers have failed to improve their productivity.

It is a similar story in finance penetration, parts per invoice and RO’s per advisor all have stagnated or improved little. Certainly not enough to outweigh the increased costs and wages that dealers have experienced over the past 20 years.

It is even more concerning when looking at the key workshop productivity metric of chargeable to non-chargeable. In a nutshell, this indicator looks at the productive personnel (workshop technicians) in a service department versus the support staff that are needed to allow them to work on cars. In 20 years, this has dramatically worsened from 1.6 technicians per support staff to 1.1. All else being equal, 45% increase in support staff – with little increase in technician productivity (95%).

Remember, these are the metrics of the best dealers in Australia. What is happening to the typical dealer?

Thankfully, dealers have been in the fortunate position that they have been able to increase their labour rates to compensate for this stagnant productivity (like many other service businesses) – however with capped price service programs now entrenched in the industry – this is highly reliant on the OEM’s.

So why is this happening?       

Like a hairdresser or teacher, most of the front-line employees in a dealership are required to spend more quality time with customers and this is very difficult to scale into more clients per employee and while the use of technology has accelerated, this is primarily from lead generation volume rather than efficient sale fulfilment. This form of customer interaction is very labour intensive and without a dramatic shift in the way people buy cars, it is difficult to see the necessary improvement in sales productivity.  

The other concern is that recent technology solutions provided to car dealers have mostly focused on existing processes and incremental improvements in lead generation, rather than quickly and efficiently processing clients through the sales and service funnels – while also providing a more satisfying experience for their client.    

November updates bring one awesome productivity update and a new feature to the drivible platform.

Surveys

All dealers know of the importance of getting constant feedback from their clients, however they must also balance the requirement of not unnecessarily pestering them with constant survey requests. That is why we have created drivible surveys which quickly and casually asks dealership clients for their opinions during key milestones. 

Drivible automatically uses SMS after test drives and delivery to garner a short response from the client regarding their opinion on their recent experience. In addition, the client also has the option of sharing their experience directly to the dealers facebook and google pages which will inevitably increase social media reviews and SEO for the dealer.

All reviews are collated into the drivible CRM platform and are referenced against the client file, so a history and story can be formed over time.

Notes:

• All dealerships are automatically included in surveys unless it is switched off. This can be done from the dealership settings, by un-selecting ‘Test Drive Survey enabled’ and the same for deliveries.

• You also have the ability to add your Facebook Page review URL location and your Google Place ID. Unlike the facebook link, the Google link is created automatically but it should be checked by you to ensure it is correct. Only if a URL exists, will a client be prompted to visit your social pages.

• Average ratings are listed against the client in the main screen. You can also look at the survey detail by expanding the client screen.  

Scan to email – delivery docs

One of the frustrations with many document storage solutions is the need to have specialised scanning equipment, which is used to reference and categorise dealer documents. This can make adoption in the dealership slow and can also lead to huge upfront costs.

But with the power of machine learning, a model can be trained to learn fields and categories across many different dealership documents. In addition, most dealerships have scanners capable of directly sending a scanned document via email so drivible has combined these two technologies into the perfect dealership solution.

Starting with delivery docs (deal packs), a dealership administration can now scan directly from the scanner via email and directly into the drivible deal Log. All data is automatically extracted and categorised based on our machine learning models. Therefore, you can be up and running on the drivible document storage solution within minutes and there is no need to buy expensive and dedicated scanning equipment.

Notes:

• This feature will need to be enabled to work correctly.

• Your unique email address can be found by visiting the Deal Log and clicking on ‘Delivery Email’. Deal packs can be sent to this unique email address.

• This email can be programmed into your office scanner and all deal packs sent to this email will be logged into your Deal Log automatically due to the wonderful magic of machine learning.

• All files sent to this address will be labelled as Status = Delivered. So don’t send deals to this address that haven’t been delivered.

What else?

• We have suspended accompanied tracking due to limited use. Users now have the ability to manually ‘Finish’ an accompanied test drive via a link sent to the users mobile phone.

• The ‘Finish’ button is also now added to the main Test Drive Log screen for easy management of test drives,  

We don’t stop

In addition to the exciting features above, we have also added paper test drive forms, default user departments and upgraded our server platform for an even quicker user experience. 

Stay tuned, because our next update will be our biggest one ever! – Service docs & Invoice Payments.

In almost everyway you look at it. The public float of Rivian (an electric vehicle startup currently focusing on recreational vehicles) was monumental, ground breaking and head-scratching. The startup floated at $US78 per share and within days reached $US179, which equals a market cap of $US183 billion, which is more than Ford ($US79 billion) which owns 12% of Rivian and produces 10000000000% more cars, revenue and profit (Rivian has not delivered any cars, booked any revenue and will not have a profit for the foreseeable future).

As an aside – the market is saying that $22 billion of Fords market cap (or a quarter of their total) is because of their 12% ownership of Rivian. (doesn’t make sense).

But obviously, the stock market isn’t just about a moment in financial time. The price of a share of a company is based on the expectation of future returns. Therefore, the public consensus is that Rivian is going to be bigger and have greater cashflows than Ford in the future (when, nobody knows).

The Tesla market cap is even more extraordinary. Currently, Tesla has a market cap of $US1.15 trillion, which is greater than the next 9 automakers combined. In this instance, the market is expecting Telsa to one day be the ‘Apple’ of cars, where they capture the majority of marketshare and profits generated in the industry. This is possible – but not guaranteed.

The new EV entrants have gained the attention of the legacy car makers and they are collectively out spending Tesla & Rivian by a massive margin on EV motor, battery and autonomous technology. Traditionally, the car industry has been dominated by the companies that spend a greater share on investment and R&D in the technologies that end up being the future. But the current outspending may not last.

With such an extraordinary market cap, Tesla can easily raise a lazy $100 billion for a new project or ‘Elon’ vision and only have a mild dilutionary effect on their shareholders. In addition, this cost of capital would almost be free, which is an advantage that the other car makers simply don’t have. In addition, Tesla has no debt and a financial crisis or rate rises would have a huge effect on the indebted legacy brands, which would be forced to cut R&D spending to shore up cash.

VW have recently tried to remarket their company image as one that would be the worlds largest EV brand – the speculation they are trying to gather some of the magic dust that Tesla, Rivian and Polestar can capture. But so far it has little effect on their market cap of $US137 billion.

The legacy car makers have the factories, supply chains, knowledge, distribution – but Tesla and the other start ups have a story – and in this environment they are getting free money in return.

Every dealer knows that the business manager is one of the most important positions within a sales team, not only because of their ability to generate significant income but also as a link between the sale of the vehicle and other important areas such as aftermarket and pre-delivery.

To be as effective as possible, a business manager is best placed if they are intimately involved in the sale of vehicles and imbedded into the showroom processes. An important trend over the past decade has been for savvy dealerships to get their business manager introduced to the prospective client as early in the sales process as possible. Once such technique is to have the business manager process test drives, this is especially handy if there is a trade-in involved.

When processing the test drive, business managers have an informal opportunity to ask qualified questions relating to the financing and insurance of their current vehicle, encumbrance queries, invoice requirements and finance options with their prospective car. In addition, if the client does progress with the sale, the client is likely to be much more comfortable and open to personal questions when sensitive finance related questions need answering.    

However, dealer test drive applications are making this more and more difficult as they are often designed specifically for salesperson tracking and require the user to be the assigned salesperson.

That is why drivible has endeavoured to be as flexible as possible around many dealers’ sales processes and road to sale.

The first feature of drivible that allows this is the ability for a specific user (Business Manager) to assign the client or test drive to another user (Salesperson). The client accepts the terms and conditions on their own smartphone (not the salesperson) so anyone in the dealership can process the test drive.

While the business manager is best placed to process the test drive and explain the terms and conditions, they are not the best resource to have accompanying the client on the test drive. With many test drive applications, this is not possible because the application forces the user to track the test drive through a native smart phone application. Some vendors, encourage the salesperson to hand over their personal device to the business manager for processing, but this ignores that someone’s phone is often a personal possession of the user and this recommendation rarely is acted upon. The drivible test drive application works on any browser both on PC’s and smartphones and doesn’t require the user to use their own personal device.  

The second feature that encourages the business manager as the focal point, is the ability to upload a dealerships existing test drive form into drivible for cataloguing, search and reports. Many dealers have been using physical test drive forms forever and in many cases there isn’t any need to ditch them for a restricted test drive application. With drivible, there is no reason why your business manager can’t continue processing the test drive forms and they simply upload them securely for all the dealership reporting.

And finally, the third feature is the ability to automatically track if the business manager has had contact or an introduction to the prospective client. In drivible, the business manager has a special login which records every time they view, edit or process a client in the system. This then is used in many reports which can represent which clients are being seen and introduced to the business manager. Many other CRM applications, require a physical box ticking by the business manager, whereas in drivible it is automated.

Drivible is the only test drive application and CRM that encourages finance performance.

It is one of the most common questions of anyone looking to buy a car at the moment.

In the last 12 months there has been a 34% increase in used car prices and a 5 - 20% increase in new (depending on the segment).

Like the complexities of cars themselves the reasons are many and varied, we will try and go through them all here.

Safety Tech, 5 star safety ratings & 5 year warranties

In 2019, ANCAP advised OEMs that in order to qualify for the maximum 5 star rating then they would need to fit advanced collision avoidance technologies. In addition, consumers were also demanding these technologies along with motor industry journalists. Therefore, the OEMS felt they had no choice but to make these technologies standard across their model range -sounds good, right?

Well, these complex options are very expensive and can add anywhere between $1000 & $2000 to the cost of production. As the whole industry made the decision in lockstep it almost guaranteed an increase in vehicle prices.

Around the same time, the ACCC was also investigating several car brands for their consumer guarantees and their failures as per the ACL. It was determined by the ACCC that failures even outside a warranty period would still be liable to OEMS, where consequently many made the decision to increase their warranties to 5 years. Once a few OEM’s shifted their warranties, the rest followed – also sounds good, right?

Well, these coverages cost a lot of money and they had to increase their provisions for future claims, resulting a provision against the vehicles sold which eventually must be recouped by increases in car prices.    

Decreasing Car Parc

Prior to Covid, the Australian car industry sales (as reported by VFACTS) were down for almost 3 years, the longest downward trend since the finance crisis. Every year, around 800,000 vehicles are deregistered due to being written off or mechanical failure, and therefore unless a large number of new cars enter the market each year then the Australian car parc ages. In fact, since 2016 the average car age in Australia has increased from 9.8 to 10.4 years.  

When you also consider that the Australian population has increased from 24.3m to 25.7 million over the same time, then there has been a shortfall in the number of new vehicles coming into Australia.

TAKATA

The Takata airbag recall was the biggest recall in automotive history, with 100m airbags needing to be replaced worldwide. In Australia the number of affected airbags was 4 million. Towards the end of the recall (end of 2019) a number of vehicles were identified with another type of inflator issue and were categorised as alpha. The vehicle manufacturers calculated that it was cheaper to destroy the affected vehicles rather than engineer a new airbag replacement.

So in 2019 and early 2020 a total of 78,000 vehicles with these defective airbags were purchased from their owners and crushed, an unprecedented number of vehicles were taken off Australian roads just before the biggest supply constraint in Automotive history – COVID-19.  

COVID-19

As has been explained above, leading into the Covid-19 crisis the automotive industry was primed with huge cost increases, however huge factory outputs were keeping a lid on prices as OEMS struggled to find demand for their huge factory production. Some brands were starting to close factories and looking at ways to make their businesses more sustainable. But then along came Covid.

The initial reaction by many manufacturers was to dramatically cut production and cut costs. This involved a huge drop in inventories and orders and at first this seemed like the correct course as people stayed home and kilometres travelled reduced dramatically.

However, there were other outcomes from Covid; a drop in public transport, increase in local tourism, reduced interest rates and huge amount of stimulus resulted in only a temporary fall in vehicle sales and many OEMS were caught short of stock.

Many dealers went from massively oversupplied too massively under supplied within months.

CHIPS & PARTS

The headline at the moment is that the cause of vehicle shortages is the huge shortage of semi-conductors. The story goes that OEMS cut orders at the same time that electronics companies increased orders in order to fulfil demand for lock downed consumers. In addition over the past 3 years, car models have had an increased number of micro-chips because of infotainment and safety tech features. In addition, hybrids and EV’s have also increased in popularity which typically have 10x more semi-conductors. The specialist chip makers that supply car companies had no chance in keeping up.

So what is the future of car prices?

All these factors have led to a permanent base cost increase for all manufacturers and we can’t see new cars decreasing in price. Like safety tech before it, the mandating of EV’s in many dominant overseas markets will permanently increase the cost of cars and OEMS will be recouping the massive R&D spend for years to come.

Unfortunately, the price increases in new vehicles and likely supply constraints will likely last 12 -24 months. Cheaper alternatives (used cars) will only keep demand high and therefore used vehicles are unlikely to fall.

A growing business is often a time for celebration, however a major impact of a growing client base is often a deterioration in the quality of your client database. Over time, names are misspelt, addresses are not updated and email addresses and mobile phone numbers are often mistyped into your CRM or DMS.

Mistakes will happen and that’s why your CRM should validate a client before they leave your dealership. With drivible, test drives and loan vehicles are initiated through the clients mobile phone giving your business 100% verification that the number provided to your employee is correct.

We find that users incorrectly record a clients mobile number in 3% of interactions, for a large dealership this could amount to 300 incorrect details. There have also been circumstances where a dishonest visitor will deliberately give your employee incorrect contact details to steal a loan car. Drivible’s mobile validation will make sure that the phone number provided to you is at least the phone they have on them.

Emails are the most common mistyped client detail, often because of a misspelling or formatting issues. Some CRM applications, check the formatting of the email address to ensure that the structure is common - for example with an (@) and a (.). However, this logic doesn’t ensure that the email address entered is correct.

Drivible automatically ‘pings’ the server of the address provided to verify that the email address exists before allowing the user to save and continue. Giving your employee the opportunity to correct or confirm with the client.

These two simple, but effective features of drivible mean that you will always have accurate contact details for your clients.

Contact us for a free account to test drive for yourself

For many outside the industry, it is hard to understand why during a pandemic and acute vehicle shortage, could the typical dealership be so profitable.

Eagers Recent Profit  

But only a dealer insider understands that historically a vehicle margin is very slim, intensely competitive and how much sales target pressure a typical dealership is subject to. All these factors lead to a situation where a dealer is likely to lose a significant amount of money selling new vehicles and then depend on used vehicle department, finance, service and parts to recoup losses and then make a meagre profit.

However, with the semi-conductor shortage leading to unprecedented shortage of vehicle supply, the sales margin of most dealers have doubled – dealers are simply unwilling to discount vehicles that are near impossible to replace. Which means that many dealers are currently making a profit selling cars and are utilising the other departments to make healthy record profits.   

But this won’t last.

It could be 6, 12 or 18 months, but eventually the factories will wind back up and once again dealers will be under pressure to meet aggressive sales targets and to take on large inventories. This scenario will result in sales margins close to the historical small amounts. However, the last two years have also seen a huge pressure on expenses and employee shortages have also pushed up wages, which have lately been covered by increased margins.

Dealerships (like many other employee heavy industries) have had stagnant productivity for the past 3 decades and will eventually need to address this. Based on KPIs’; sales per salesperson, RO’s per advisor, technician efficiency, vehicles sold per sqm and deals per admin head, there has been little (if no) improvement and technology seems like the only option to improve dealership profitability long-term.   

The solutions that are needed to improve the sustainability of dealers must include; online car sales that require less salesperson resources, improved advisor/service client handover and more efficient admin processes.

Dealers probably only have a few years to get it sorted before lower margins will harm their business substantially.