automotive industry webinar - deloitte us · 2020-05-15 · joe vitale automotive sector leader...
TRANSCRIPT
Automotive Industry WebinarCombating COVID-19 and bringing the business back to normal – lessons learned from China’s OEM experiences
16 April 2020
© 2020. For information, contact Deloitte China. 2Delivering an impact that matters - Deloitte China
Webcast Agenda
China Time Topic Speaker
20:00–20:05 Welcome and opening address
Joe Vitale
Automotive Sector Leader
Deloitte Global
20:05–20:20
Lessons learned from China Auto
makers’ response to COVID-19
Frank Li
Vice President of Geely Holding Group
Geely Auto
20:20–20:35
Yang Min
Data and Information System Director
SAIC Group
20:35–20:50How do OEMs support dealers to
combat COVID-19?
Pence Peng
Partner, Auto Dealership Practice
Deloitte China
20:50–21:00 Q&A
© 2020. For information, contact Deloitte China. 3Delivering an impact that matters - Deloitte China
Welcome & Opening
Joe Vitale
Automotive Sector Leader
Deloitte Global
© 2020. For information, contact Deloitte China. 4Delivering an impact that matters - Deloitte China
Webcast Speaker
Frank Li
Vice President of Geely Holding Group
Geely Auto
* No slides are shared *
© 2020. For information, contact Deloitte China. 5Delivering an impact that matters - Deloitte China
Webcast Speaker
Yang Min
Data and Information System Director
SAIC Group
* No slides are shared *
© 2020. For information, contact Deloitte China. 6Delivering an impact that matters - Deloitte China
Webcast Speaker
Pence Peng
Partner, Auto Dealership Practice
Deloitte China
How do OEMs support dealers to combat COVID-19?
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What COVID-19 brought to us…
COVID-19 was affected the health of dealer network, especially give a punch to those bad performers.
Decrease of New Car Sales in Short Term
Consumers' purchase intention and purchasing capability have declined
Consumers have low willingness to go out and are inconvenient to purchase cars
Reduction of Aftersales Business
During the epidemic, the driving mileage is low, and the demand for maintenance and repair is weakened
The customer's willingness to back to the factory decreases for their own safety
Affected by the outbreak, the sales fell, and the aftersales of back to the factory will be further reduced in the next year
Difficulty in WS and Stock Management
Some dealers currently have high stock, which is difficult to deal with due to the impact of the outbreak
The duration of the outbreak is difficult to predict, and in order to meet the market supply and demand balance, flexible Wholesales plan is needed.
Dominant symptoms
Hidden effects
Possible termination of
operations of bad
performing
dealers/groups…
… as well as predictable
short-term impacts on
profitability of the whole
network
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A combination of proactive “weapons” to win the battle
Impact Measures
Cash flow monitoring & steering
Dealer cost down plan
Profit model adjustment for small market
dealers
Profitability Risk:Profit Decline of The Whole Network
In mid-term, the market will fluctuate greatly in the future, supply and demand will be out of balance, and price competition will be further intensified
Meanwhile, the operation cost will be amplified due to uncertain trend of retail market
Liquidity Risk: The Risk of Capital Chain Break Increased
The cash inflow is reduced or reduced to zero, and the current cash balance is difficult to support loans and daily expenses
ROS forecasting and target re-assessment
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Measures to mitigate Liquidity Risk (1/2) – overall strategy
2. Stress test 3. Response actions4. On-going monitoring
1. multi-channel risk info collection
Comprehensive info
source
• Retail and
marketing
performance
• P&L info
• Risk signals from
financing
company
• Dealer survey on
financial and
operation status
In terms of
recognized
potential capital
gap:
• Dealer cash flow
forecasting and
verification
• Worse case study
based on different
business recovery
assumptions
OutcomePotential capital
shortage dealersHigh risky dealers
Actions from OEM:
• Customized support
plans for each risky
dealers, cover resource
reallocation, speed-up
payment of rebate,
floor plan extension,
etc.
OEM/dealers actions
• Network business
recovery and
monitoring
• Consecutive cash flow
tracing
Actions from dealers
• Group support and fund
isolation
• Improvement of
business, focusing on
long-aging stock
clearance
Dealers business recovery
Content
Stress Test + On-going monitoring
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Measures to mitigate Liquidity Risk (2/2) – OEM specific support plans
Capital
Occupation
Invisible Cost
The
manufacture’s
actual cost
increased
progressively
Cancel sales and wholesale target in February
Cancel the inspection of business standard temporarily
Lower Requirement for business
Provide the new car / parts wholesale floorplan support
Extend the repayment period Extend the interest-free period
Release financial burden
Speed up the past confirmed rebate payment
Fully prepay the current assessing rebate
Return dealer’s advance payment Accelerate the claim payment
Accelerate incentive/
bonus payment
Actions of releasing short-term cash flow
pressure
Cost transferred from dealer to OEM
Considering actions with different cost scale
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Measures to improve dealer profitability
2. RoS target re-setting
3. Cost down measures
4. Small market profit model
1. RoS forecasting
• Business case
study based on
different market
trend assumption
to forecast
different RoS
results
• RoS target re-
setting
• Identify prioritized
improvement
areas
• KPIs target for
members of OEM
dealer profit
committees
• Issues analysis for
small market dealer
profit
• A set of actions
ranging from market
development, NV GP
improvement,
franchise cost
optimization, dealer
format re-planning
Content
We also need to pay attention on Profitability
• Cost down as one
of improvement
area, consider
majority of small-
scaled dealers
• Identify
Mkt./labor/financia
l cost efficiency as
potentials by
benchmarking
with competitors
• Joint efforts and
actions from all
BUs of OEM
© 2020. For information, contact Deloitte China. 13Delivering an impact that matters - Deloitte China
Q & A
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