By Sam Mace
Oil is critical to the motor trade – quite literally the life-blood of any business that works with cars.
It is the highest-margin item on your customer’s service invoice, so it’s important that you chose the right supplier and negotiate the right deal – like any other purchase.
That is, of course, if you have a choice. Many franchised dealers will have to use a manufacturer’s own branded oil – often supplied by some of the industry’s leading names.
A large number of car manufacturers have relationships and technical partnerships with such oil suppliers.
Jaguar, for example, has been in partnership with Castrol for almost 30 years, and Ford has been working with the company for a century.
The oil industry today
The oil sector is a turbulent place to be right now. According to the International Energy Agency, oil supplies have been growing fast enough for supply to outstrip demand.
The rate that supplies are outstripping consumption has reached three million barrels a day – the highest in 17 years.
Experts predict that the situation is unlikely to change, with demand not re-balancing the surplus supplies until 2016 at the earliest. The result is depressed prices.
Brent crude, the worldwide benchmark of oil prices, has dropped from $115 a barrel in the summer of last year to less than $50 this summer.
“It’s difficult to make oil technology interesting for customers, but training service advisers to explain the benefits in terms of how much money the motorist will save is a good start”
It’s clear that oil companies are going to have to work harder than ever to turn a strong profit, so it pays for them to think outside the box to win business with dealers and manufacturers.
Much of this is focused on supporting the dealer at the point of sale. It’s difficult to make oil technology interesting for customers, but training service advisers to explain the benefits in terms of how much money the motorist will save as a result of choosing the right oil is a good start.
Using the right lubricants can save customers money. A modern synthetic or semi-synthetic oil can lead to a 3-4% fuel saving between services.
Although car manufacturers and engine oil manufacturers seem to be maximising the demand for low-emission vehicles, going green could see dealerships out of pocket. The higher-performing engines and oils can lead to a longer intervals between services. However, in the dealers’ favour, those longer intervals make the up-sell of a one-litre top-up bottle into a stronger opportunity.
Total Lubricants has strived to become more than an oil supplier and says it can help franchised dealers beat the fast fits.
By positioning itself as a “genuine business partner” to dealerships, Total hopes to expand its customers’ business as well as its own. It has several manufacturer recommendations including Renault, Nissan, Citroën, Peugeot and Mazda.
Total also offers dealers services such as oil disposal and database cleansing – to help dealers make sure they have up-to-date customer details and are targeting the right prospective aftersales customers. The company also offers ‘Total Hub’ to its clients, which aims to help dealerships increase their aftersales business and car sales.
The hub was created two years ago, and offers a range of information and tools on a range of subjects, from waste disposal and advice on the installation of equipment.
Many manufacturers have long-standing relationships with oil companies, with technical partnerships that extend beyond the dealership, and some premium-brand dealerships will be sticking with those suppliers.
Those relationships cannot be taken for granted, however.
BMW recently ended a long-standing relationship with its former oil supplier Castrol, which began in 1999. The German manufacturer now uses Shell as its only recommended oil supplier.
Part of BMW’s decision to choose Shell as its supplier of branded engine oil was driven by the oil company’s new PurePlus product.
The product is derived from natural gas, which goes through a patented process to create a base oil, and, according to Shell, reduces maintenance costs, and oil consumption. If this works in practice, it could translate into less frequent oil changes having the potential to reduce a customer’s service bill.
Shell, which is already the recommended oil partner for Ferrari, Maserati and Hyundai, says it is able to tailor its services to dealerships’ needs, and to work with them in a number of ways to help develop their business.
The oil supplier can work with dealerships to develop marketing initiatives in areas such as up-selling, to help boost margins. Shell also offers its help to attract new customers and retain existing ones, through programmes such as loyalty schemes.
Castrol, meanwhile, has extended its century-long partnership with Ford, meaning the two brands are committed to working together for at least a further three years.
Castrol and Ford are continuing to work together, co-engineering a range of oils that are available only from Ford franchised dealers.
According to Castrol, the partnership helps to bring quality-conscious motorists to Ford workshops.
It is also the oil partner of several other manufacturers including Audi, Jaguar, Land Rover and Volkswagen.
Another large oil supplier, ExxonMobil, has been working with manufacturers – Bentley, Porsche and Mercedes-Benz, among others, have long-standing relationships with the oil supplier – and dealers, including Listers, Renrod and John Clark Motor Group.
ExxonMobil strengthened its relationship with Bentley recently, becoming the technical partner of Bentley’s motorsport division.
In terms of its dealership activities, ExxonMobil has launched a new scheme called Mobil 1 Workshop Programme to help dealers attract more customers.
The programme will provide dealers with a set of tools, such as training and signage, to help boost their footfall.
The programme is designed for smaller, independent dealers and ExxonMobil does not have any immediate plans to roll out similar schemes for larger franchised dealers.
Fellow major oil supplier Q8 Oils was asked about developments in its business, but declined to comment.
In July, it announced a restructuring of its UK operation, with a new headquarters in Leeds. Its clients include car supermarket group The Car People, which it has supplied for 15 years.