Acura dealers are finally getting the fresh products they have been waiting on for the past several years. And they want more.
After a year in which inventory and profitability held up fairly well, given the circumstances, retailers are ready for a brighter 2021 with the new-generation TLX sedan now on dealership lots and the redesigned flagship MDX crossover arriving this month.
In fact, dealers are eager to get the performance Type S trims sooner rather than later as Acura leverages an updated portfolio to take on the luxury leaders.
“Acura wants to be in the same conversation with the Lexus buyers and the Mercedes buyers and the Audi buyers,” said John Connelly, chairman of the Acura National Dealer Advisory Board and owner of Acura Columbus in Dublin, Ohio.
Acura retailers would also like the brand to maintain its light touch on facility requirements and continue to push forward with an aggressive certified pre-owned program. And like most auto dealers in the U.S., they’d like more crossovers.
Connelly, 49, spoke with Staff Reporter Laurence Iliff. Here are edited excerpts.
Q: Are Acura production and inventory levels coming back in line with demand? If not, where are the shortages?
A: Acura never really had a problem with inventory levels throughout the pandemic. They did a very good job. Anything you wanted, you could get. If you look at the inventory levels for Acura compared to other brands, ours is on the higher end. There are plenty of different models to go around.
If you talk about product mix, that’s a bigger question, and they’re addressing that coming up. They came out with the new TLX and soon the MDX. They are introducing more higher trims, which is nice. And then everyone is waiting for the Type S variant of the TLX and the MDX. So if anybody had a gripe, it would be that they’d want to have the Type S variants right away in order to compare it with the normal model.
How is the new-generation TLX doing in showrooms?
It’s doing well for a sedan coming in right now. Our dealership sold 24 of them [in December], which is a good number. It’s gotten really good reviews — the automotive journalists like it. And with a lot of manufacturers pulling out of the sedan business, that opens up a huge runway for us. There’s a lot of people looking for a sedan, so it does fill that need. But I think it’s going to be even more successful when the Type S arrives because a lot of buyers really want to see that.
Are you worried about higher sticker prices for new generations of vehicles as Acura rebuilds?
Acura wants to be in the same conversation with the Lexus buyers and the Mercedes buyers and the Audi buyers, so there’s no sticker shock with those buyers. So what they are looking at is, they’re not necessarily trying to conquest our current buyers, they are trying to get new blood into Acura, new customers. So maybe if you bought a TLX a few years ago, you can see this as a bump. But what we’re looking for is new customers — trying to grow our base and sales. And you have to take on the leaders in the market to do that, rather than just regenerating your own customers over and over.
How are Acura dealerships’ profitability levels at this point in the pandemic? How sustainable are current vehicle margin and profitability levels as inventory improves?
Obviously, everybody was really concerned in March through April. But profitability snapped right back. But we’ve been very fortunate. I consider myself, every day, very blessed that that happened, that we were able to bounce back. Profitability levels are good for 2020 considering the pandemic. The buyers were still there; the certified used-car market was really strong for dealers. Profitability levels are going to increase now that we have the new models and the new variants coming. Especially with this new MDX coming, dealers should be looking forward to a more profitable enterprise.
Is Acura doing enough to promote CPO sales? Has the brand made changes to the CPO program?
The CPO sales keep going up and up the last few years. And Acura is getting more and more involved trying to take on the bigger players in the market like CarMax and Carvana. They are listing all of our certified, and now all of our used cars, on the certified website. And they are putting incentives on the cars, good APRs. If you are going to list priorities for Honda and Acura, CPO is right at the top of that list. And the numbers have shown it.
Is Acura adequately advising its dealers on how to prepare for such changes as new mobility services, autonomous vehicles and electrification?
If you read the strategies for the next decade, they’re saying they want a certain percentage of electric cars. And you read in the paper that Japan is going to ban gas cars, so you can guess that we’re going to have a full slate of electric or fuel cell or different types of motors coming soon. It’s already 2021, and 2030 will be here before we know it. Honda and Acura traditionally have been reticent to give much of a peek into the future. I know that other brands that I read about in Automotive News, you see the next 10 cars that they want to do. But that hasn’t been the Acura or Honda way. They are not technologically behind by any stretch of the imagination. I think they are probably ahead. When autonomous cars are running on the street, Honda will be right there.
What’s missing in the product lineup? Do dealers want another crossover?
Of course, we do. When you look at the MDX and RDX and you see those sales, they’re consistently selling 50,000 to 60,000 per year, and people love and trust them year after year. Acura has so much equity in their SUVs that it would make complete sense to have both a crossover that would slot below the RDX and slot above the MDX. I think there is plenty of room there for that.
Has Acura helped dealerships navigate the changes brought about by the coronavirus pandemic? What more do dealers want to see it do?
I think dealers are pretty self-reliant for that. Acura and Honda were good partners through it. They tried everything they could to help us continue our sales, continue our service. I’m hoping that beyond the first quarter, hopefully the vaccine works, and we can get back to business as before. Acura has good people working for them who are really accessible. That’s the difference maybe between an Acura and a bigger company. It makes it easier to get done during something like a pandemic.
What is Acura doing to direct dealers on the digital retailing front, particularly with regard to omnichannel capabilities? Is Acura imposing or considering imposing digital retailing standards the way it would facilities?
No, they are not mandating anything, nor should they. We’ve been working for years putting together our digital retailing. And it’s just magnificent how quickly everything coalesced around being able to offer an omnichannel to our customers. At our store, and at most stores, you can buy a car, you can buy parts through our Amazon store, you can buy accessories, you can do anything completely online. There’s nothing a public group can do that we can’t do. There’s nothing that any enormous private auto group can do that we can’t do. As far as the manufacturer goes, it’s nice to offer some assistance or offer their thoughts on it or share best practices, but dealers know how to sell, and they’re going to go where the customers are. Acura and Honda do have a program and digital retailing company that they partnered with, but we don’t have to use them. And that’s the tricky thing with manufacturers and software and technology: Things change nearly every month. One company can be fantastic, then half their staff leaves and they’re horrible. And if you’re stuck in a manufacturer-mandated program, you’re going to be left behind.
How much emphasis should be placed on eliminating wet signature requirements in 2021?
There should be a complete elimination of wet signature requirements. It has a lot to do with your state. So I’m in Ohio, and fortunately, since March, they’ve completely relaxed a lot of their requirements. At our store, we can sell cars anywhere in the United States to anyone without getting an in-person signature. Our people in finance became online notaries. And Acura Financial Services is completely on board. They want us to be 100 percent e-contracting. They don’t want paper contracts anymore. And it’s incredible how much quicker you get the money. [In December,] we were at 83 percent e-contracting. There’s some people that you just have to do paper with. By and large, I hope within a year we’ll be at 95 percent e-contracting.
Is Acura de-emphasizing physical facility requirements in favor of elevating digital ones? Has the pandemic resulted in any change in facility image programs? What do dealers want to see with regard to these programs?
Acura hasn’t said anything about requirements. And you never know when that could happen. But I’m hoping that everything that they’ve seen in the last nine or 10 months has let them know that the ways of the past need to be changed. I can sell a car to anybody, and they don’t care whether I’m in a cornfield or the middle of a shopping mall. The investments need to be making things easy for customers, investing in the website, investing in the omnichannel capabilities.
I’m going to continue talking to the manufacturer to reimagine what a dealership should look like. I’m going to ask them to keep an open mind because everything has changed, and it’s for the better.
Is Acura looking into how it can assist dealers with selling used vehicles through a national platform, given the success of companies such as Carvana? Is a brand-level national platform for used-vehicle sales something that dealers support?
Obviously we want our inventory to be shown wherever we can, and Acura now does that. We pay third parties a lot of money to show our inventory, and Acura is trying to use their brand to sell our used cars, and we don’t pay a monthly fee for that. They’re trying to help us get a bigger audience, which is nice, because they want to sell more used cars.
How are Acura fixed operations doing? Has revenue returned to pre-COVID levels? If not, what areas remain a concern, and how are dealers and Acura adjusting for that decline?
Fixed operations took a hit, and I think you’ll see that across manufacturers because people have been working from home and not traveling as much because of lockdowns and such. I think fixed operations will return. It’s going to take awhile for it to get back to its pre-COVID level. A lot of people who have cars that need service, maybe they’ve lost their jobs or they’re saving money. It seems like the wealthy people have a lot more money, but people who aren’t wealthy have less. I think a lot of people are putting it off for a couple months. Franchised dealers are really going to have to take on an independent service business mindset in order to continue to be successful and make money out of their fixed operations.