Could an extended MoT-free period shorten your profit margin?

Could an extended MoT-free period shorten your profit margin?

In January the Government unveiled plans to increase the first MoT date for new cars from three to four years. If approved, the changes could come into effect as early as next year.

As reported by WhatCar.com, transport minister Andrew Jones has said that the proposal has been devised to ‘bring the MoT test up to date’ in order to help save motorists money and time. Indeed, it is estimated that with over 2.2 million cars having to undergo their first MoT test each year, the change in rules could create annual savings of more than £100 million for motorists.

 

Dealership concerns

While this is good news for consumers, the same can’t necessarily be said for those working within the automotive industry. The Retail Motor Industry Federation (RMI) is among those to have voiced concerns over the safety implications of a delayed first MoT. Speaking to AM-Online, RMI director Stuart James said: “…the benefits promoted by the government are seriously outweighed by the pitfalls. At the three year period alone this change will see 400,000 unroadworthy cars on the road for another 12 months and no official mileage recorded until year four.”

Safety issues aren’t the only concern; many industry representatives have raised questions over the impact that the new rules could have upon business. For many dealerships, MoT testing and related sales makes up a significant proportion of aftersales revenue. It stands to reason that a lengthened MoT-free period for new cars is likely to result in a loss of income, from both the test itself and any subsequent repair work.

In its consultation document, the Department for Transport concedes that any extension to the first test period is likely to have a negative effect on workshop revenue and advises that those affected “will need to look at options for utilising the freed up resource from doing fewer tests”.

The ability to offer new work or services will vary from dealership to dealership; however one area that can be improved ‘across the board’ is the conversion rate of work identified during regular vehicle services. Should the new rules be finalised, this, in part, would help to offset any losses associated with a reduction in MoT testing.

 

Improving conversion rates with eVHC technology

Incorporating eVHC technology into the servicing process can prove hugely beneficial when it comes to selling repair work, mainly because it improves communication and levels of trust between dealerships and motorists. By enabling service teams to provide customers with a thorough overview of car examinations, software such as autoVHC v2 allows for a greater upsell opportunity and higher conversion rates on Red and Amber work.  Customers are far more likely to agree to repair work if they can see exactly what has been recommended and why. As the latest version of autoVHC features enhanced parts and labour pricing functionality, service managers using the software can also show motorists how costs are configured, thus eliminating any concerns relating to overcharging.

When faced with a potential loss of earnings from a reduction in MoTs it’s vital that General Managers and Dealer Principles are able to scrutinise aftersales activity to ensure other revenue opportunities are not being missed. With the launch of autoVHC v2 we introduced a performance dashboard to enable users to configure their own targets and use these to evaluate business performance for key metrics; for example, the average number of health checks performed, vehicle health check completion rates and the average percentage of red work sold per vehicle health check.

 

Forward Planning

With the consultation period running until mid-April, it is likely to be a few months before we are given the Government’s final decision on the proposed changes to the MoT testing period. Should the changes go ahead, it will indeed bring a ‘testing’ time for dealers. Team managers should make the most of this interim period; use it for forward-planning to ensure that aftersales activity remains healthy and profitable, whether that’s through increased focus on quality of servicing or the introduction of alternative sources of revenue.