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Mitsubishi sets new dealer targets

Dealer profit: Mitsubishi Motors Australia is keen to retain a strong relationship with its dealer network.

Dealer profitability is top of mind for Mitsu but four per cent return ‘idealistic’

3 May 2011

THE new chief of Mitsubishi Motors Australia has vowed not to drag his dealers into the maelstrom of bullying and strongarm tactics being experienced within a wide range of new-car franchises across Australia.

Incoming president and CEO Genichiro Nishina told GoAuto the company was pursuing a policy of steady growth and that its goal was to make sure all its dealers were making a strong net profit on sales.

His predecessor, Masahiko Takahashi, told GoAuto: “We want Mitsubishi to be the most preferred franchise and this concept will be passed to Nishina-san.”

The two MMAL chiefs were commenting on recent presentations to Deloitte Motor Industry Services’ clients in each mainland capital city by GoAuto publisher John Mellor, who revealed widespread discontent among dealers from pressure being placed on them by car companies.

Mr Mellor’s research for the presentation involved interviews with leading dealers in a cross-section of markets. It revealed: massive pressure to take excess stock underhand tactics to prevent dealers from taking on Chinese franchises unrealistic expectations for dealership upgrades and failure to understand mounting cost pressures across all dealership activities which are collectively making a large number of Australian dealers unviable.

Mr Mellor warned that many dealerships were unprofitable and the owners were trapped in their businesses while looking for an exit from the car industry.

 center imageFrom top: Mitsubishi Motors Australia president and CEO Genichiro Nishina, outgoing CEO Masahiko Takahashi.

He said the car industry was facing the loss of key dealership sites as dealers placed under pressure by the car companies sold or leased their facilities to other retail sectors – especially the rapidly expanding hardware sector for which dealership sites are especially suitable.

However, Mr Mellor told the Deloitte audiences that one franchise was setting out to be a model of factory-dealer relations and was working with its dealer group to achieve a retail structure where all dealers could achieve a four per cent net return on sales.

Asked if Mitsubishi was that franchise, Mr Takahashi said: “Four per cent profit is probably a little idealistic. We have not talked about that as a concrete target for our dealers, but we are very keen to improve the dealers’ profitability.

“We are seeing that our dealer profitability on the Deloitte (Profit Focus) database is so-so and we have set a target line as an ideal position, but it is not four per cent.

“We are not trying to totally change the (dealer) structure. We are taking a mild approach where we know that dealers’ investments should be covered out of their free cash flow. So we are keen to improve their free cash flow, but it can’t be achieved overnight.

“The easiest way is to allow them to get more gross margin, but that is not so easy because there is a trade-off in sales and market competition which is very severe at the moment.

“We need to secure profitability first of all. In order to make that happen we are trying to support dealers by increasing their parts and service revenues.

“So there are no such enforcing requests to our dealers. We are trying to approach them in a very mild way and we are emphasising that dealer profitability is the first priority.

“The relationship is very important and we are not enforcing some things on dealers and we are very keen to listen to our dealers. This is totally the opposite strategy from some of the other car-makers operating in Australia. I will not say who they are, but we are totally the opposite.

“In the long term, the relationship and the mutual respect (with MMAL dealers) will grow our business. Maybe not in the short term but long-term growth will be the best way … and MMC itself is running the business in that concept,” said Mr Takahashi.

Mr Nishina said he would continue to pursue the current policy of co-operation with the dealers: “Business continuity is very important and so is sustainable, step-by-step growth. That is what we are aiming at and I will continue that strategy because in the long-term that is very important.”

Mr Takahashi said those dealer policies were established by former president Robert McEniry. “I have maintained and grown that and Nishina-san will continue that because you need to be consistent,” he said. “That should not be changed.”

Mr Nishina, who has been with Mitsubishi for 30 years, mainly in overseas sales and marketing operations, said he was well-placed to help MMAL’s growth because he was well-connected in Japan.

“Of course I have lots of friends in headquarters,” said Mr Nishina. “Those friends are already senior level so, by using my experience with MMC and my overseas experience, I strongly hope that will be a benefit to the operations here.”

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