A new future for absorption rates

  28 May 2013

While sitting in BCA’s Tomorrow’s Technology Today conference last week listening to speakers extolling the virtues of hybrid and electric cars and how their running costs are lower and therefore more attractive to customers, I couldn’t help but wonder how this is going to impact absorption rates.

It’s all very well saying a car will need less work doing during a service because its electric motor is a sealed unit and its brakes haven’t worn as much because of energy regeneration tech, but what does this mean for the retailer servicing it?
I did think that improved vehicle reliability had been the reason for the steady drop in absorption rates over the past few years.

After all, Toyota, which builds incredibly dependable cars, has a network average absorption percentage in the ‘mid- to low-70s’. And with that I thought that these rates would therefore eventually stabilise. However, now it seems I may have to revise my thinking.

Coincidentally, I’ve also recently spoken to Richard Balshaw, who apart from being a Auto Retail Agenda reader, is also director of Lexus in the UK. With Lexus being a brand that’s heavily into hybrids, I asked what the network’s average absorption rate was. If you’re a Lexus franchise holder you’ll know this, but it was 50%.

While I thought it would be low, I also thought the higher customer retention on hybrids would balance this out. It seems not. Now imagine what if more and more cars were purely electric with no engine at all? How would that alter absorptions rates?

Will that mean a new even-lower rate, and what are you planning to do to combat it?

Tristan Young

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