Audi is fighting a major offensive to keep fleet aftersales business within its dealer network.
Unlike most manufacturers, Audi directs all of its fleet sales – some 60,000 cars a year – through its 119 dealers.
Now it is working to ensure the vast majority – 95% – of fleet servicing and repair work is carried out by its dealers.
Its National Fleet Service Pricing programme guarantees to fleets service levels, lead-in times and prices across its entire dealer network.
Three-year agreements have been signed with lease and contract hire companies that will see it direct 90% of their work into Audi dealers in year one, rising to 95% by year three.
But there is a challenge facing its dealers who must now deliver on Audi’s promises.
“We have to address the concerns of the contract hire and leasing industry over customer service levels – such as lead-in times, access to collection and delivery and more importantly about price,” explains Iain Carmichael, head of Audi fleet sales.
However, he admits that pricing is “significantly more” than the independents.
Therefore the challenge to retain that vital fleet business becomes even harder.
Lead-in times have been addressed and so have collection and delivery, and where dealers fail to meet the SLAs (service level agreements), Audi will intervene.
But the programme goes further
“So they have all the benefits of dealer service and they have labour rate consistency,” says Carmichael.
“But we are also offering enhanced goodwill support up to 100,000 miles over three years. So this is not just a commercial agreement. We have gone beyond to address all of the key issues.”
While the manufacturer is supporting the goodwill aspect, the dealers have also taken a hit – especially those in metropolitan areas where labour rates have been cut to match the agreement.
“It’s a swings and roundabouts conversation that we are having with the dealer network. It is for the greater good. If we don’t act – that’s us as the manufacturer and the dealer network – then we are danger of seeing what has happened to tyres and glass happen with service work.
"That was in dealer domain originally and a lot of the independents have grown up because the dealer networks or manufacturers haven’t held onto that opportunity.”
As all fleet sales are channelled through its dealers, they are fundamental to Audi’s fleet success yet the manufacturer takes a hands-off approach.
“All we are is an enabler,” says Carmichael.
“We set support levels to the end-user customer base – about 350 - and they agree to buy cars from Audi. They generally go to a contract hire company and they will speak to our dealer network.”
It works, but some dealers make more from it than others. All dealers are able to sell through this channel, but 20 of its dealers handle 80% of its contract hire business.
However, all Audi dealers should be looking to expand sales to local small businesses.
“We don’t sell as well as we could in this market,” says Carmichael, despite having 96 showroom-based local business development managers (LBDM), which are all employed by dealers.
This year they should sell 9,000 cars, up from 8,200 last year, and that 10% growth pattern should be sustained.
“There is a void here,” says Carmichael, referring to the decline in brokers, who traditionally handled this business.
“We see the LBDMs as the Audi brokers but not multi-brand. And this is where we see growth opportunity.”
Audi dealers are also likely to get access to a new fleet sales stream after the manufacturer teamed up with Skoda, Volkswagen and Seat in a joint tender to get the marque accepted onto the national police vehicle framework.
If Audi gets onto the framework it can push its cars into the important traffic police fleets, which are dominated by two of its rivals.
If it is successful, it will be the first time fully-liveried blue-light Audi police cars will be seen on the UK’s roads.
“The feedback we have had back from the police fleet managers is yes they are interested in having Audi product, especially the 3.0-litre diesel engine,” says Carmichael.
“They will have some concerns about where Volvo is going as it a core component of a lot of traffic fleets and they may want to diversify away from their current suppliers, which are predominantly Volvo and BMW.”