In 2022, we don’t have any new product coming. We would like to see the [redesigned] QX80 this year, but based on everything that’s going on with the supply chain, I think it will be 2023.
So all we can do this year is maximize what we have. And the best thing we have is the all-new QX60, which is still in limited supply.
On older models, Infiniti will need to ensure the incentives are competitive.
Are dealers more satisfied with the management of the Infiniti franchise than two or three years ago?
The brand’s NADA survey results have improved in recent quarters as our business has improved with new products.
The new QX60 is a winner, and if it’s representative of our future products, we’re headed in the right direction.
Infiniti management has maintained an open dialogue with the Dealer Council and made changes to help us negotiate a difficult 2021.
What is Infiniti’s plan to allow third-party off-lease buyouts in 2022?
The biggest challenge for most dealerships is acquiring used vehicle inventory. Last year, Infiniti Financial Services required that lease returns be processed exclusively at Infiniti dealerships. This allowed dealers to have the right of first refusal of lease returns which are then sold as CPOs or used vehicles. It makes a big difference because the supply of used cars in 2021 has been very difficult.
As a North East dealer, I have a large lease portfolio. We therefore have access to a rich supply of CPOs and used cars compared to dealers in a retail market.
I see a lot of guys from the Midwest coming to the East Coast to buy cars because they don’t have such a large rental portfolio.
After a decline in leasing volume for some automakers in 2021, what are Infiniti’s plans to promote leasing in 2022?
Infiniti plans to be conservative when it comes to leasing. They don’t want to have as high a lease penetration rate as in the past, because that means additional costs in terms of securing a residual value.
Before the pandemic, 90% of my business was rental. Now we’re probably at 60%, which is healthier.
In many cases, the retail buyer is much better customer service. It’s also easier for a retail customer to trade in a car anytime they own it. In most cases, if someone has a 36-month lease, they’re off the market for two or two and a half years.
How sustainable are current vehicle margins and profitability levels as inventory improves?
Infiniti dealership sales return last year was around 4%. But sales volumes have also declined. As the supply normalizes across the industry, I would expect to see a decline in sales performance and gross profit averages.
When do you think Infiniti’s production and inventory levels will get back in line with demand?
We expect production to increase in the first quarter of 2022, but it is unclear when inventory levels will return to pre-pandemic levels. Manufacturers have realized that the 90-day supply of new cars is hurting everyone. It’s costing the automaker too much in the incentive department. It’s too expensive for the dealer. We believe a proper inventory would be a 45-50 day supply.
How do dealers deal with tight inventory?
Dealers have re-learned to sell ordered and incoming inventory.
We also focus on CPO and used car sales. We asked Infiniti to produce TV spots specific to the CPO activity. Infiniti Financial Services should consider offering special financing on used vehicles and bundling maintenance packages.
Have sales incentives changed during this period of declining production?
The incentives have not disappeared, but they are nowhere near as generous as they once were because the production is no longer there.
Last year, average incentives dropped by at least $1,000 to $2,000 depending on the model.
As production normalizes, the dealer council focuses on maintaining price competitiveness. We worked with the brand to keep incentives competitive in particular segments. We are a challenger brand and we must be competitive with our transaction prices.
How do dealerships manage new vehicle pricing? Do they add market adjustments?
We have a brand new vehicle that could command more MSRP. I know dealers who mark up their products, but they should carefully consider this strategy. Eventually, the supply shortage will end, and I wonder how many customers will return for their next vehicle to the dealership that charged them on the sticker.
Most of my business is repeat business. Our customers have supported us for 30 years, and I couldn’t in good conscience present them with a new car at more than MSRP.
How is the fixed operating business doing?
Fixed operations revenue has improved over the past year as more consumers hold on to their vehicles longer due to the shortage of new vehicles.
But service revenue is still 20% below pre-pandemic levels at our store.
Dealerships using Infiniti’s Valet Pickup and Delivery service have seen an increase in repair orders and CSI scores. But shortages of technicians and parts affect the throughput of after-sales service.
Has Infiniti shared its electrification plans with dealers?
Retailers are eager to see where electrification takes us. But Infiniti holds its cards close to its chest. We want to see a five-year plan from the manufacturer. What is Infiniti’s vision for electrification? We can’t plan expansions if we don’t know what product to expect. Dealers want to feel comfortable about the future of the franchise.
Is Infiniti’s e-Power series hybrid technology coming to the US?
I believe Infiniti has shelved plans to introduce e-Power in the US and is betting on battery-only models. Based on the accelerating adoption of electric vehicles, Infiniti is making the right choice.
I understand that e-Power technology is underpowered for larger, more performance-oriented Infiniti vehicles. Also, I think the cost would be prohibitive.
What’s missing from the line-up?
A new entry-level model would bring younger consumers to the brand. The affordable G20 of the 1990s introduced Infiniti to young buyers. As they climbed the career ladder and started families, they moved on to larger, more cost-effective models in the line.
Infiniti also needs a flagship model over $100,000, whether it’s a coupe or a convertible. An ambitious halo model would create brand interest and help drive sales for the entire line.
If you have the right vehicle and it has the right contents, we can get $100,000 for a car, no problem.
What is Infiniti doing to steer dealerships towards digital retail?
Infiniti is investing in training its field team and retail network to transition to e-commerce. The Factory provides recommendations and best practices to streamline in-store action items and online sales processes. The Infiniti Now e-commerce program offers dealers a choice of authorized digital retailers. About 75% of the network has signed up to the platform.
Has Infiniti imposed any requirements on dealers regarding data protection and data security?
There are no formal requirements for dealers. Infiniti is monitoring this given the sensitivity of cybersecurity in today’s digital world.
Is there a change in the image programs of the installations?
Infiniti has worked with retailers to help reduce the cost of their fitment program from a design and size perspective. Most dealerships have invested in upgrading their stores over the past five years.
The brand conducts annual facility inspections, and they have become easier to pass. There was a long list of required updates. Now Infiniti needs some basic updates, mostly around customer touchpoints.
Infiniti isn’t pushing dealers to make major store changes. Those days are over because everyone is talking about how you are going to buy everything digitally. Previously, the bigger your establishment, the better off you were. I don’t hear that anymore.
How does Infiniti help with recruitment and retention?
The pandemic and the shift to electrification have exacerbated the industry-wide shortage of technicians.
Infiniti created the Empowered Performers program, which provides compensation opportunities to retail and service employees who achieve seniority and meet performance criteria. It’s been a great tool, funded by the automaker and dealerships, to help us retain and hire the right people.