Elon Musk, Tesla making auto industry think about its business model

TeslaLove him or not, Elon Musk continues to give everyone in the auto industry reason to think about the way they do business.

Hardly a week goes by without some development related to Musk’s car company, Tesla Motors. And that’s two years after the first deliveries of Tesla’s revolutionary electric vehicle, the Model S.

The founder and CEO of Tesla, Musk “is exerting an inordinate influence over the auto industry,” according to Automotive News. His cars have altered the perception of electric vehicles, and sales success in the premium segment is “reshaping the conversation about the customer experience.”

“But he is creating the biggest waves in the area of factory-dealer relations,” reported Automotive News a few days ago in a story headlined, “Musk makes auto industry rethink basic assumptions.”

AutoTrader suggested simply, “Tesla is turning the car sales model on its head.”

In state after state, said the Automotive News article, Tesla’s attempt to sell cars from its factory-owned stores and online directly to consumers has generated debate over the merits of the dealer franchise system and the laws that protect dealers from automakers.

Two recent examples are Tesla’s victory in New York State that allows it to continue selling from its five stores there, and the turning tide in New Jersey, where Tesla wants to open stores.

But dealerships also are coming to understand the new sales environment in which customer experience and service are at or near the top of vehicle purchaser’s priorities when choosing where to buy.

The National Automobile Dealers Association (NADA) approached the discussion head on with results of a recent study suggesting several benefits franchised auto dealers deliver:

Fiercely competing for shoppers’ business and drive consumer prices down.

Taking the side of consumers in warranty and safety recalls.

Creating good-paying local jobs and significant tax revenue for communities in which they’re located.

Simplifying the complex car-buying experience for shoppers.

Of course, Santander Consumer USA and our brands Santander Auto Finance and RoadLoans have an interest in any significant development in the vehicle sales arena, because the ripples could affect our business with around 14,000 auto dealerships nationwide.

But the main lesson from Tesla’s activities is that the automotive industry – any industry, really – cannot afford to stand still in a rapidly evolving marketplace.

And, right or wrong, thinking such as Musk’s is notable for pushing the envelope.

Car shoppers’ mistaken perceptions getting in the way of business?

car shoppersWhat car shoppers think about the car-buying process is important to both dealerships and finance companies such as Santander Consumer USA.

That is especially true if those car shoppers have misperceptions that could hurt business.

What is abundantly clear in the 2014 TrueCar Buyer Study commissioned by TrueCar Inc., the negotiation-free, buying-and-selling platform, is that dealerships suffer from a “trust gap” with respect to the amount of profit they earn on vehicle sales. In other words, car shoppers think dealerships make a lot more money than they actually do on the sale of each vehicle – about five times more.

What’s also interesting about the study findings is that car shoppers apparently would be willing to pay more than dealers currently are making in profit if shoppers’ perceptions matched reality.

The study says consumers believe dealers make about 20 percent profit ($6,000) on the sale of a $30,000 new car when, in reality, new car profit margins were only about 3.8 percent ($1,140) in 2013, down from 5.5 percent a decade earlier, according to the National Automobile Dealers Association.

That profit margin is a lot less than the 10-12 percent consumers would consider fair.

Consumers actually would be willing to “tip” dealers around 8 percent ($2,400) – double what they are profiting currently – if the dealership made nothing on a transaction, according to the TrueCar study.

“The TrueCar Buyer Study results show that fear and mistrust have a cost in the car-buying process,” said Scott Painter, TrueCar founder and CEO, in assessing the survey results.

“The survey showed that roughly 26 percent of car buyers feel that they overpaid for their purchase and that 32 percent stated that they would not return to the same dealership due to low customer satisfaction with the purchase process,” reported TrueCar.

This data is of interest to Santander Consumer USA, as the company has relationships with nearly 14,000 dealerships nationally.

Fortunately, there is the possibility of changing perception, as noted by TrueCar’s Painter.

“If consumers believed that they were getting information that they could trust as part of a more transparent process, they would be willing to pay dealers more,” said Painter. “These survey results are consistent with the idea that increased transparency in the car-buying process can result in higher margins for dealers and greater consumer satisfaction – everyone wins.”

The study surveyed more than 3,000 consumers across the country.

SCUSA Summer Internship Program Offers Valuable Experience

Tom DundonReal world business experience.

It’s the thing many college students lack when they graduate – the thing that, for prospective employers such as Santander Consumer USA (SCUSA), sets apart those who have experience.

Especially when employers are as large as SCUSA (with about 4,000 associates in several locations).

Santander Consumer USA recognizes the value of college students getting that experience. The company is in its second year of providing a robust summer internship program experience to a select group of students, who have the opportunity to demonstrate their value as possible future employees of our company and others in Dallas and beyond.

The 2014 SCUSA summer intern program is comprised of 42 students from 11 schools. Some interns come from campuses as near as SMU, the University of Texas at Dallas and University of North Texas and as far away as the universities of Arizona, Illinois and DePaul (in Chicago). That’s more than three times as many students as participated last year, some of which were hired at SCUSA after they graduated.

The interns, who began their 12 weeks of paid work experience in May, are working hard on assignments in more than a dozen departments from information technology and decision science to human resources, marketing and corporate engagement.

And, as one intern said, the work is challenging.

“If there’s one thing that’s surprised me so far in my SCUSA internship experience, it’s how quickly I’ve been able to produce meaningful work,” said that student, a marketing/communications intern.

Students interested in next summer’s opportunity should review our Career Center website, Division of Opportunities, which provides a description of the experience:

“In a fast-paced environment like ours, anything is possible and the expectations are high. But if you’re the type of person who sees possibilities where others see obstacles, your potential for success is almost endless. Build your career at SCUSA and do more with your talent than you ever thought possible.”

Taking inspiration from soccer’s World Cup in Brazil

World Cup Trophy - Tom Dundon

Players hold aloft the FIFA World Cup trophy.

The whole world is watching.

No more popular – or competitive – sport exists on the planet than soccer, and the peak of that competition and achievement is the World Cup.

Known as “the beautiful game,” soccer, or fútbol, is an inspiration to hundreds of millions of people worldwide. Whether you play the game or watch it on television or couldn’t care less, soccer’s premier event can teach us a lot about the singular focus it takes to be world class.

It’s a lot like one of my favorite sports, basketball, which, at its best, also can command the world stage.

A dozen matches already have occurred in Brazil, host nation of this year’s World Cup, but today the U.S. men’s national team faces its first challenge, Ghana, in Estádio das Dunas in Natal.

The United States isn’t expected to go very far in a “Group of Death” that also comprises European powers Portugal and Germany – the latter is considered by many to be a potential winner of the tournament – but that didn’t stop the 23 members of the squad from fighting hard for their spots. And how they finish the tournament doesn’t diminish their world-class status as players.

That’s what this blog post really is about: dedicating oneself to working hard, regardless of the odds, for something in which you believe in order to achieve a world-class level of team performance.

We at Santander Consumer USA have a good perspective on what it takes to perform at a high level.

Our parent company, Santander Group, is based in Spain, home of the defending World Cup champions, and it does business in some 40 countries, including host nation Brazil. More than half the teams in the tournament represent countries in which Santander Group operates.

Members of the 32 national teams must function at the highest level over four-plus weeks to achieve the pinnacle of the world’s game, the World Cup final on Sunday, July 13, at the fabled Maracanã stadium in Rio de Janeiro. And then fight once more to take home the familiar gold World Cup trophy.

Is it really so different in aspects of your own life – whether that’s as a parent, a professional, an amateur athlete or weekend warrior? The ultimate achievement may not be the Maracanã, but each day provides another opportunity to strive to be the best.

The whole world may not be watching, but that doesn’t make the effort less worthwhile.

The lessons we’ve relearned from this year’s auto recalls

recallAs the chief executive of an auto finance company, Santander Consumer USA, I took notice when I heard about the recall of millions of General Motors vehicles.

But GM is not alone.

Toyota has recalled about three million vehicles, and other major automakers have elected to recall vehicles as well. In fact, “the auto industry has already recalled almost as many vehicles as it did in all of last year and is on track to break the 30.8-million record set in 2004,” the Los Angeles Times reported.

Interestingly, the spate of recalls has not stopped shoppers from buying more new vehicles than they have in years, with sales on track to top 16 million for the year.

Everyone in the auto industry and beyond can learn from the automakers and create a positive outcome.

Here are some insights from the recent wave of recalls:

–          No detail of product or service can be overlooked – Recalls this year have involved issues from faulty ignition switches that are only 1.6 millimeters less “springy” than they should be to faulty seat belts, gearshift cables and generator fasteners.

–          The quicker you deal with a major business issue, the sooner you can move on.

–          Accepting anything but excellence is not a good idea – Failing to achieve high standards can affect businesses where it hurts the most, the bottom line.

–          The customer comes first, even if you have a lot of them – Business is based on relationships, whether that involves one or millions of customers.

Our mission at Santander Consumer USA is to provide best-in-class service to our customers, which means we strive daily to embrace such principles, whether that’s in our direct-to-consumer finance program – RoadLoans – or indirectly through our Santander Auto Finance and Chrysler Capital brands.

We may never be perfect, but we will always strive to achieve that standard.

 

Topgolf has successful opening in The Colony

Topgolf

Topgolf opening in The Colony.

Six months ago the Topgolf entertainment center had its grand opening in The Colony, TX. That location has experienced great success.

Nearly 200,000 people have enjoyed hitting off the tee boxes and socializing in other parts of the facility, exceeding performance expectations for the entertainment center. The company, which also operates Dallas and Allen locations, will open its 13th center by mid-June.

Here are some other interesting facts about the Topgolf location in The Colony as of mid-May:

  • The system includes about a quarter-million golf balls.
  • Visitors have struck approximately 11 million balls.
  • Nearly 700,000 games have been played.
  • Repeat customers represent about 60 percent of visitors.
  • There are 450 associates, among 3,400 worldwide.

“If God is a golfer,” wrote Alan Peppard on The Dallas Morning News GuideLive blog after the opening, “then the new Topgolf facility in The Colony is his megachurch.”

“The massive complex features 102 climate-controlled hitting bays on three floors, a restaurant and bar, 225 flat screens and a rooftop terrace with a stage,” wrote Peppard. Golfers hit their computer-tagged balls at large target areas. The electronic system tracks scores digitally and sends back real-time results, even to a phone app, for seven different games with names such as TopScramble, TopShot and TopPressure.

Topgolf also has gotten a lot of media coverage.

If you want to read more of Peppard’s coverage, which includes people such as Dallas Cowboys quarterback Tony Romo, former Cowboys quarterback Troy Aikman, professional golfer Hunter Mahan and Dallas Mayor Mike Rawlings, you still can find it online. And you can read my previous post, “Golf Digest, D Magazine, PGA recognize Topgolf,” on the blog (www.TomDundon.com).

The location in The Colony also has generated positive reviews on online sites such as Yelp and TripAdvisor, with results in the 4- to 5-star range (out of five) and great comments.

“I’ve been here a couple times and regardless of my ‘lack of game,’ I always have a blast here,” wrote a typical Yelp reviewer who conceded he wasn’t “into the golf part of Topgolf.”

“If I could copy and paste [The Colony location] all over the country, I’d do it,” said Zach Shor, Topgolf’s real estate director. “I’m in 40 markets, and they are atypical.”

 

We Are Santander week embraces spirit of success

Santander

Shooting the Santander week video.

The first week of June is always a big deal around Santander Consumer USA.

Previously known as “Santander Is You” week, this year’s “We Are Santander” events, scheduled June 2-6, are five days during which we will celebrate our ties with thousands of associates around the world.

The week’s events are organized around themes that make Santander Group, headquartered in Santander, Spain, and Santander Consumer USA Inc. of Dallas great places to work – learning and knowledge, commitment to community, recognition as a leading company, an international business profile, and work/life balance for associates.

Those themes lend themselves to a wide range of possibilities for our associates and our company.

Those possibilities include associates approaching their jobs with purpose and an attitude of ownership and professionalism as suggested by guest speaker Michael Hoffman. Those are ideas we should embrace as we strive to deliver best-in-class products and services to our customers.

“We Are Santander” week also will give associates an opportunity to demonstrate commitment to the community by contributing to Blue Jeans Go Green, which turns unwanted denim it into insulation.

And we’ll represent Santander’s international profile by creating, appropriately, a Spanish village with fútbol (soccer) and flamenco dance demonstrations, tapas, and a tomato toss in honor of the La Tomatina Festival – tomato battle – held annually in Buñol, Valencia, Spain.

The SCUSA Source, an internal website, captured the essence of the “We Are Santander” week’s meaning: “Through this event, we support, promote and unite in the success of a global financial group’s unsurpassed achievements. We recognize the importance of our corporate advantages as a key contributor to our success and encourage our associates to celebrate them as well.”

Consistent with that Santander spirit is an enthusiastic video created by our own team for the week.

Like the associates appearing in that video, let’s all make sure that when we look back we’ll remember the first week of June as the one that WAS representative of all things possible at Santander.

Maserati Capital represents opportunity through excellence

Tom Dundon

Photo: www.listofimages.com

Excellence through passion.

The slogan of legendary 100-year-old automaker Maserati speaks to the reasons it has earned rarified status and longevity in the world of luxury automobiles.

Still, the Italian company sold only about 6,300 vehicles in 65 countries worldwide as recently as 2012 to “ultra-premium” buyers, mostly 55 years old or older earning about $150,000 a year. Of course, that also left a lot of room for growth in the United States (its biggest market) and worldwide.

And Maserati already is taking advantage of that.

The company more than doubled its 2012 sales to more than 15,000 cars last year, a record for the carmaker, and continued its streak of year-over-year, triple-digit growth to 11 months in April with an increase of 373 percent over April 2013. It anticipates more than tripling sales to about 50,000 cars by 2015.

Why does all this matter to Santander Consumer USA? Let’s call it opportunity through excellence.

Maserati North America Inc. and Santander Consumer USA are working on a private-label finance solution, modeled after our Chrysler Capital brand but exclusively servicing 86 U.S. Maserati dealers.  The finance program, which would be called Maserati Capital, expects to offer a full suite of products from consumer retail and lease financing to floorplan and dealer lending options.

Maserati’s sales expectations come with the success of a product line expansion that includes the full-size Quattroporte sedan and mid-size Ghibli sport sedan, which entered the market at the lowest price point among Maseratis, and is expected to compete with high-end BMW and Mercedes models.  A new Maserati SUV, named Levante, also is on the way to bolster the carmaker’s expanded lineup.

(Like Chrysler Group LLC, Maserati is part of the Fiat Group of Italy, which produces 12 different brands.)

Santander representatives already have begun visiting Maserati dealerships to lay the foundation of what our sales vice presidents in a letter called “an exciting and dynamic partnership.”

“We are committed to helping you sell more vehicles than ever before while providing best-in-class customer service neatly wrapped in an easy-to-use package,” wrote Matt Eskolin and John Paterson, “ to helping you grow your business and to being your financial partner every step of the way.”

Best-in-class service is an important concept around Santander Consumer USA.

It describes the quality of our service to Chrysler Group dealers – Chrysler, Jeep, Dodge, Ram, FIAT, Mopar and SRT brands – that has ensured a successful first year for Chrysler Capital and fits perfectly with Maserati’s philosophy of “Excellence through passion.”

Looking forward to Toyota HQ in Texas

Tom Dundon, Dallas

Photo: www.ibitimes.com

Toyota’s plan to move the headquarters for its North American operations from California and three other U.S. locations to Plano is a huge win for the Dallas area.

Toyota, the world’s largest auto manufacturer, said the move to a state-of-the-art campus of manufacturing, sales and marketing operations, and corporate and financial services will allow the company to serve customers better and position it for sustainable, long-term growth.

Of course, we at Santander Consumer USA appreciate the Toyota decision to move to North Texas. Our operations have long been a part of the Dallas-area business community and will only become more connected with our move to a new headquarters in downtown Dallas.

That being said, Toyota’s decision will have an even bigger impact on the area as the company expects to move about 4,000 employees starting this summer through 2017.

And many Toyota employees moving from California to Texas stand to reap big tax savings for themselves. For some workers, it could be more than a million dollars in tax savings over their lifetimes, according to a study by the National Center for Policy Analysis (NCPA) and reported online by Forbes magazine.

Here are some examples from the analysis reported by Forbes:

  • A 30-year old single California renter earning $75,000 annually could gain an additional $14,909 in discretionary income by moving to Texas. If that money is saved and invested this would amount to $1,513,727 over his or her lifetime.
  • A 40-year old married couple that owns a house in California and earns $150,000 a year, could gain an additional discretionary saving of $2,535 a year, translating to free cash to the tune of more than $209,000 over the couple’s lifetime, Forbes reported.

The NCPA computed the difference in federal and state income taxes, property taxes and sales taxes one can expect to pay over the rest of your life when moving from one state to another.

“With our major North American business affiliates and leaders together in one location for the first time, we will be better equipped to speed decision making, share best practices, and leverage the combined strength of our employees,” said Jim Lentz, Toyota’s chief executive officer for the North America. “Ultimately, enabling greater collaboration and efficiencies across Toyota will help us become a more dynamic, innovative and successful organization. … We are excited for what the future holds.”

Santander Consumer USA looks forward to welcoming Toyota to Texas.

Golf Digest, D Magazine, PGA recognize Topgolf

Tom Dundon, TopGolf

Photo: www.statesman.com

Golf Digest’s May issue includes a story on Topgolf, a compelling and exciting business venture. It is an excellent combination of sport and socializing – all in state-of-the-art facilities.

And indications are that this new spin on golf is the sort of thing the game needs.

“Not your grandfather’s driving range” by writer Luke Kerr-Dineen captures the spirit of the place.

“ With bright lights, thumping music and a smoking-hot bar scene,” a Golf Digest headline suggests, “fast-growing Topgolf might be just what this stuffy game needs.”

“At Topgolf Austin, the waiting list to use its hitting bays often stretches to four hours,” Golf Digest says in a caption accompanying a photo montage of visitors getting into the swing of things.

Topgolf has 19 locations either operating, under construction or planned, including seven in Texas – three in the Dallas area, two in the Houston area and one each in Austin and San Antonio – as well as three in Great Britain. Topgolf boasts more than 2.2 million visitors annually worldwide.

But Golf Digest isn’t the only recognition Topgolf has garnered recently.

The D CEO magazine’s Commercial Real Estate Awards program recognized Topgolf in The Colony as the 2014 “Retail Project of the Year,” according to Christine Perez on D Magazine’s Real Estate Daily blog.

Topgolf’s new prototype entertainment facility in The Colony opened just about six months ago (November 2013), and we can report that performance already is exceeding expectations.

“If I could copy and paste [The Colony location] all over the country, I’d do it,” said Zach Shor, Topgolf’s real estate director. “I’m in 40 markets, and they are atypical.”

Topgolf evaluated 15 locations in the northern path of growth in the Dallas area – looking at market statistics and demographics – with a goal of finding a site that would not hurt Topgolf’s Allen facility. The success of that effort has shown in the exceptional results.

And then there is the PGA of America involvement.

The organization announced in mid-March the formation of a 10-person “Growth of the Game” task force, including myself, that will seek ways to bring back golfers who have stopped playing the game and make it more attractive to newcomers, especially young people.

(The number of golfers in the United States declined by 4.6 million in the decade from 2002 to 2012, the most recent figures available from the National Golf Foundation.)

“The golf experience needs to be redefined,” Ted Bishop, PGA president, told the The Palm Beach Post “From the Bunker” blog. “For many people, the traditional 18-hole round simply doesn’t work.”

That brings us full circle. It seems that innovative approaches like Topgolf – and its unique games and tournaments – can help accomplish exactly what the PGA has in mind.

But it’ll take a great long game to succeed.