valunvesthere (< 20)

Why do some analysts base the number of units sold to be the success and profitbility of automotive manufacturers?

February 14, 2011 – Comments (0) | RELATED TICKERS: F , GM , HMC

***REMEMBER WE'RE ALL ON THE MOTLEY FOOL PAGE AND WE AGREED TO FOOL'S RULES

6. Conduct • Post or transmit any content that is disruptive, uncivil, abusive, vulgar, profane, obscene, hateful, fraudulent, threatening, harassing, defamatory, or which discloses private or personal matters concerning any person;

Like any other business the success and profitbility of the business is based on repeat business and not one shot sales. So technically analysts who base their number of units sold by automotive manufacturers is basically looking at THE GLASS IS HALF EMPTY. For those who look at THE GLASS IS HALF FULL they'll be basing the number of units sold as an entrance into the automotive manufacturing brand and calculating the number of factory OEM parts and accessories sold as the true profit indicator by repeat loyal customers who love their vehicle(s) performing like the day it rolled off the assembly line. 

Based on the structure of Automotive Dealers there's 3 departments and in my opinion the most profitable department from least to greatest is #3) SALES, #2) SERVICE, and #1) PARTS and ACCESSORIES

3) SALES DEPARTMENT

PROS -Automotive Dealerships makes most of their high profit margins from pre-owned inventory lot stocked with trade-ins (where they accept premium trade-ins at very low values and sell at very high prices) and occasionally from sources who are desperate for cash and will unload their vehicle for very low value.

CONS - with Automotive Dealers high-operating costs the Automotive Manufacturers new vehicles makes the least profits or near break even cost in this department because Automotive Manufacturers just want to get their units out into the market. Automotive Dealerships and Automotive Manufacturers at times don't get along!!!

2) SERVICE DEPARTMENT

PROS - 

• have all the expensive diagnostics equipment and tools from Automotive Manufacturers to easily diagnose and repair to factory specifications

• specialize in 1 brand and are factory trained

• unlimited access and use of factory OEM (original equipment manufacturer) parts and accessories

CONS - 

• after factory warranties expired customers may open up their hoods to independant mechanics(strangers who may not specialize in vehicle brand)

• at present many customers are focused on saving money and prefer to have their vehicles fixed cheaply and quickly from independant (may not perform all neccessary schedule maintenance work or repairs to factory specifications because they lack proper diognostic equipments, tools, or knowledge) than having their vehicles running mechanically sound by dealer (recommended schedule maintenance and repair to factory specifications)

• the days of long term vehicle ownership is fading. The majority of cars nowadays are leased for 3 to 5 years and returned. The pre-owned customers most likely aren't bringing in there vehicle to their vehicle brands dealer.

1) PARTS AND ACCESSORIES DEPARTMENT

PROS -

• factory OEM (original equipment manufacturer) parts and some OEM parts can't be duplicated or replicated to original specifications

• factory OEM (original equipment manufacturer) accessories some OEM accessories can't be duplicated or replicated to original specifications

• believe it or not supplies OEM parts and accessories to independant or chain mechanics because original vehicle owner customers asked for OEM parts and accessories to be installed

CONS -

• competes with aftermarket parts (a.k.a. job parts) that are fairly cheaper and are designed to be acceptable (touted as meeting or beating OEM standards, but the laws of economics and patents says otherwise)

• at present many customers are focused on saving money and prefer to have their vehicles fixed cheaply and quickly with aftermarket job parts (not worrying if the vehicle is running mechanically sound with OEM and recommended factory specifications)

• the days of long term vehicle ownership is fading. The majority of cars nowadays are leased for 3 to 5 years and returned. The pre-owned customers most likely aren't bringing in there vehicle to their vehicle brands dealer and may not be requesting OEM parts and accessories

In the end it all comes down to the types of customers. The customers who hold on to their vehicle(s) for long term, choose to have their vehicles maintained and repaired with OEM to factory specifications are hard to come by nowadays