Technology forced changes
Technology changes have been talked about for the last ten years and probably more. Many of you have adopted newer technology by investing in new operating systems, CRM systems, marketing systems, and many apps to improve communication with customers, employees, and OEM personnel. And some of you have only made minor changes because of the cost involved and the lack of OEM suggestions that you do so. And some of you are just “thinking” about changes because you lack the internal talent and professional relationships to help lead the way. Quite frankly, this spread in the way management moves their company forward, where some dive in and move the bar upward, and others just keep juggling the issue until they MUST adapt to the norm, while others just wind up so far behind the curve that they just as well pass the torch on to a new owner with the means to play “catch-up”, and hopefully generate a profit on their investment. Unfortunately, these three levels of change management seem to be the norm.
And now there is 2023. And starting in 2023 there will be changes for just about 100% of equipment dealers that will take place whether dealers like it or not. You will either make the changes or stand to lose your business. The reasons for these changes are a result of inflation, interest rates, and a need to provide “green” products and services. Put them all together into your planning file and shake it up and I am sure you will find that changes WILL be made if you hope to stay in business.
Just to give you a little background of what is in store for the industry I suggest you go to U-Tube and find WEALTHION LUCKY LOPEZ. Wealthion is a site that provides quality speakers that deal with economic issues as well as specific industry discussions. In this case, Mr. Lopez is a car industry nut who not only loves cars but the industry as well. He owns dealerships, invests in car loan papers, spends a lot of time at auction houses, and studies new and used auto transactions to the point where he can pretty much foresee where things are going into 2023 and beyond. And after you listen to his comments you have to basically agree because it all ties together. I have to warn you that this is a 51-minute discussion, but worth every minute of your time. I have watched it three times and can’t stop thinking about it.
No, I am not going to tell you what Mr. Lopez’s final conclusions suggest. All I will say is that car dealers had the best years of their lives in the last couple of years. Made tons of money.
When discussing the lift truck dealer business, we always wind up saying that what happens in the auto dealer business is sure to find its way into the lift truck business. Sometimes these changes are positive and sometimes they are not. But no matter what, both sides share the issues we all do such as inflation, interest rates, lack of personnel, lack of inventory, and fears related to a “recession” that will turn everything upside down.
But the biggest issue every OEM and Dealer in the world had to deal with is the potential switch of the product line into EV. EV will change your entire business model, revenue streams, and costs while trying to figure out how to manage owned gas or diesel units, new units you overpaid for, and used units that everyone wants to buy (for now) when you have shortfalls in your rental fleet. The way I see it transitioning to a high percentage of EV sales and rental assets will be an expensive proposition for most dealers. BUT NOT FOR THE LIFT TRUCK BUSINESS.
Making a change to primarily EV from gas or diesel units will be a killer needing a lot of capital to reach the other side. Lift truck dealers do not have that issue at the same level as other dealers do. You are already in the battery business with the ability to make a switch to lithium batteries that puts you over the hump. Well, how about that? Are you now thinking you are in the clear because of the battery advantage? Maybe not.
All the equipment industry material I read leads me to believe that rental activity is going to increase because users do not want to deal with the “high cost” equipment, interest rates, personnel issues, and let’s not forget fixed costs and bank covenant issues. And, guess what, they don’t have to because they will let you keep the headaches. Rent they will do. Buying at this time is not high on the list. And don’t be surprised if customers prefer to rent as opposed to a long-term lease, or ask to pay for hourly usage of the units you have on their floor. A flat rate to cover the cost of ownership and a second rate to cover the cost to operate.
It may be that the OEM-Dealer agreements we are used to are about to change. There seems to be a number of OEMs buying other OEMs. There is also a strong consolidation taking place in the equipment rental industry. Companies are looking to expand their rental programs promoting units where dealer networks are not part of the program. In Europe, dealers are becoming service centers for various brands that no longer sell through dealer networks. They sell directly to end users as well as rental companies.
Maybe in the US lift truck dealers do not have to worry about the auto industry, but maybe they do have to think about what is taking place in Europe.
Make sure you closely review the TM Capital 2023 Equipment Rental and Dealer Report that Dean sent out.
About the Columnist:
Garry Bartecki is a CPA MBA with GB Financial Services LLC and a Wholesaler columnist since August 1993. E-mail firstname.lastname@example.org to contact Garry.