It may sound like a broken record that the discussion of automotive technicians has once again surfaced in one of the largest auto group’s quarterly conference calls.
But Lithia Motors president and chief executive officer Bryan DeBoer touched on another interesting angle regarding how fuel prices affect the automotive industry — the service side.
When asked how the lowering fuel prices affected Lithia’s sales in fuel-producing states, DeBoer said his company is seeing a bit of a “yin-and-yang benefit."
“In Q4, I think what we really saw was a mix shift from new vehicles to used vehicles. The oil states performed slightly lower than the rest of our states in Q4,” DeBoer said. “If you want a little more color of what’s happening in January — Alaska was up 28 percent year over year in total revenues. North Dakota, which is highly based energy state, even though we’re (selling) in the eastern part of the state, was up 4 percent. And Texas was up about 3 (percent), which is a little bit behind. It still seems strong, though, we’re still pleased.
“It’s a robust economy, there’s no question about it. And if there’s one thing we could say is an opportunity (it's that) some of those pump jacks are now not running, which means that those technicians that aren’t fixing the broken ones are coming back into our company and can now fix the cars that are now in service,” DeBoer continued, “which we all know the throughput in service in cars is a much higher rate than what it is in new vehicles and used-vehicles sales.”
Lithia experienced a 12-percent growth in service, body and parts sales on a same-store basis in Q4 of 2014, which DeBoer said was by no means an unexpected jump and should be expected to increase further in the future. When asked what prompted the strong growth in service sales, DeBoer pointed to an increase in customers simply choosing to come back to Lithia for work on vehicles they had purchased from the company.
“It’s primarily driven solely off of units in operation,” DeBoer said. “Despite us being up 12 percent in aggregate in fixed operations — yeah, it’s (sales) driven off warranty, and it’s driven off customer pay — primarily still we have probably half of our stores that are considerably below that 12-percent level (in service sale growth) and that haven’t reinvented themselves to be able to attract our consumers back to our stores and be able to meet their needs when it comes to a cost proposition or a time proposition.
“To us, 12 percent is just keeping pace with the units in operation growth,” DeBoer later continued.
For DeBoer, he thinks his company can still do better when it comes to convincing customers to bring their vehicles back for service.
“We believe that there’s still a lot of opportunity out there within our existing Lithia stores," he concluded.