NADA Special: Proactively Approaching the Tire and Wheel Market

Greg Hi, I'm Greg Uland with Reynolds and Reynolds and this is Connected. Right now, I get to talk with Alan Hagerty, who's a product manager at Hunter Engineering. I'm really excited because I swear every year at NADA, the Hunter booth is one that I have to go to because they have the coolest stuff. This year they have a van down there with a tire changer in the back of it. So I got to go mess with that probably tomorrow. But Alan, thanks so much for joining.

Alan Yep. Thanks for having me, Greg.

Greg Absolutely. So how has traffic been down there at the Hunter booth? What's been the most popular items at the show for you?

Alan I think it's been a great show so far and we're really excited for all the dealer support. We've got lots of great new technology innovations on show, and it's a pleasure to be here. So thanks for having us.

Greg Yeah, for sure. So a lot of what you do and I'm sure I'm going to miss about 70% of what you guys do, if not more. But the two big focuses that I'm aware of and we kind of dial in on are tire tread depth readers, right? The drive over ones and then alignment checks, all those machines that go into that. So two big products there. And how long has Hunter been in that space? It's been forever, but it's obviously evolved over time. So how long has it been and what's the latest kind of latest and greatest? Is it all about size?

Alan We've been in business for over 75 years, just celebrated our anniversary a few years ago, and we focus on serving everything around the wheel. So whether it's tires, alignment, brakes, we want to provide the best workshop equipment to quickly service that and do it right. And we've been fortunate to serve dealers for many years and look forward again to do that. So our inspection lane, particularly like you mentioned, we can quickly check the alignment and tires of a vehicle as soon as it arrives and inform the customer and then help deliver opportunities for the service department to serve and communicate the need and the health of that vehicle and get it back on the road quickly.

Greg Yeah, it's one of those things in a climate where hardly anyone probably comes in to a dealership and says, I need an alignment today. It's just not a common thing for somebody to even know what that is. So having a proactive tool to help sell is obviously very important.

Alan Tires aren't cheap and they keep getting more expensive. So if you can detect the need before it's too late, right. When the tires are worn, you miss the opportunity. So let's check the alignment, communicate to the customer, get that vehicle going down the road, smooth straight, and those tires last longer. And it's better for the environment.

Greg There you go. One of the things I wanted to talk with you about today, though, while I have you, is as we move forward and we look towards the future and drivetrains and things like that, pretty much every manufacturer at this point has put out a plan to move to an EV drivetrain, whether they've stated a date where they're going to be all electric or they're just rolling out vehicles one by one. Pretty much everybody has something in place today. And as we look at that, there's a little bit of, maybe fear is a strong word, but at least uncertainty around what does that do to the service drive. So there's 80% fewer moving parts in an EV than there are in a combustion engine or a nice vehicle. So what does that mean? Does that take away opportunities? Are there fewer opportunities? And when there are opportunities, are they less profitable or smaller? So thinking about that, though, with that as a backdrop, and then I look at things like tires and I look at things like alignments. Best I can tell, cars are going to have rubber tires on them for quite a while and they're going to need to be straight for quite a while. So what are your thoughts on that and kind of the future of the service drive, maybe the importance of services like alignments and tires and things of that nature?

Alan That's a great question. If we look back 50 years ago, dealers weren't in the tire business, as I'm sure you had a few exceptions here and there, but if you needed tires, you didn't go to the dealer. You go to the tire shop down the road. And that mindset is changing and evolving. As you mentioned, there are some dealers that have really gotten ahead of the curve and invested in technology to be able to, like we talked about, quickly check the alignment of the entire vehicle as soon as it shows up at the workshop. And then they've equipped themselves in the back shop with the right technology, but also the right processes and partners to be able to quickly and effectively service those vehicles and get those tires swapped out and changed. So it's definitely an area and you think about EVs, they're heavier, they have a lot more torque and so far as the studies are showing that they're going to wear tires faster. So it's going to be where many things are shrinking. Do you think fluids ride or other mechanical moving parts, those will shrink as far as share of dollars for repair order. But tires is going to grow. Currently tires, if you look at the whole market, it's the biggest dollar service of a vehicle over its lifetime especially if you may replace the tires four or five times while you own it. So the dealers that want to continue to thrive, they're going to need to lean into that category and keep that business in-house. And there's other benefits from that. Do you think, if I keep the customer coming back to me for service then I can have them for the life cycle and if they're servicing with you, they're more likely to buy the next vehicle from you. It's that whole lifecycle, customer for life mentality. The ones that are successful will get it and they'll go after it.

Greg Yeah, for sure. And best I can tell too, I don't think that wheel sizes are going to go down anytime soon. So the size of the tires and size of the wheels, to your point about the price, is just going to continue to increase. We're not going to see 14 inch wheels any time soon.

Alan With the fuel economy, whether it's trying to get more miles per charge or gas, the designs are going bigger and bigger and people will have that esthetic. They like the look of it, too. It's shinier. It's flashier. So it's not uncommon to see. 19 is the standard on some vehicles nowadays, even up to 20.

Greg Yeah, absolutely. So it'll be interesting to see. I definitely see it too where these types of services are going to become more and more important because they're going to be there. And you're not going to have some of the same maintenance that maybe you have in the past, but this needs to turn into some of that maintenance. It really does, especially when you think about alignments and preserving those tires and everything else. So it's definitely an important part of what will be the future for fixed ups.

Alan Absolutely.

Greg So let's talk a little bit to when you think about somebody coming in to the service drive and alignments, one of those things where you need to do it right, it's not, hey, this is getting a little bit off, so maybe next time you should do it. It's, you probably need to do this. Your tires are going to wear funny, but tires are another one where it's like, you know what? Next time you're in, we probably are going to need to change these tires. Let me get you a quote, that sort of thing. But I wanted to get your thoughts and maybe what you've heard from dealers or something like that where customer comes in, they drive over your tread wear detection machines and they either say no, because they're not ready. They don't have whatever the dollar amount is, which is not small, in their pocket to do it today. Or the service advisor said, hey, look, you're getting close. You don't need them right now, but let me get your quote. In either instance, that service advisor needs to follow up with the customer to get them back in at some point. You don't want to just leave it in their hands. So what are your thoughts on following up on declined services or services that were recommended and not actually completed at the dealership?

Alan I think that's really important. You also have to keep in mind, like we talked about with the trends, EVs on average, it looks like they'll have less service visits. So they're going to have more miles between each time they're coming to see you. So you could have a customer, especially knowing the tires are going to wear faster when they come to visit. Their tires are maybe marginal, right? They're not quite worn, but they will be needed soon. You probably won't see them again by the time those tires need to be replaced. So if you have the right process and technology integration in place where every time that customer does come in, you're checking the tires, you're documenting that, and then you're saving it and sending follow up communications and invite them back. That's be a key to success because, again, you're retaining the customer for life. You'll keep them as part of your lifecycle.

Greg Yeah, and that's a really good point. I hadn't really thought about is the amount of at bats you're getting are just fewer, right? And they're further between. So you're right in that it used to be, hey, another six months, you're going to need tires. You're almost guaranteed to see that customer within six months.

Alan That's an oil change interval. That's not the same anymore.

Greg Exactly. Yep. That's a good point. I hadn't thought about that. I like that. So I'm curious because I've heard a few different dealers describe their process for alignments, because explaining that to a consumer, especially if their tires aren't wearing bad yet. Why they need to do that service work can be a little bit of a struggle. So what have you seen work presenting the alignment to the customer most effectively? Or maybe it's in different ways to do it.

Alan Yeah. From what we've learned over the years, the best way to communicate that is you check the alignment, you measure the alignment angles, you compare it to the manufacturer's specifications, and you show the customer in a simple report with green or red. Hey your vehicle looks great. Everything is good. Peace of mind. Or hey, when you came in today, we did a complimentary check. Looks like your alignment's out. We can go ahead and take care of that for you today if you like. So being able to show a simple visual color coded report, it's the best way to communicate that and describe what's going on with their vehicle.

Greg Yeah. I was talking to somebody earlier today actually, and they were telling me they ended up installing a touchscreen monitor hooked up to a PC where it's a big 42-inch monitor right beside the alignment machine hanging on the wall. And basically they installed that so they can take the customer over to it and show it to them in a very impactful way.

Alan Exactly. Yeah. And we integrate with the GoMoto kiosks. So as the customer arrives and they check themselves in, that information is automatically presented. And it's a very simple, hey, here's your alignment, it's color coded, and they can add that right to the service request and off they go. So we make it convenient, we automate it, and it drives value for everybody.

Greg I do love that integration because then it gives you really almost two passes at it, right? If the customer's at the kiosk checking in, they see it as presented to them. Maybe they don't understand it. They say, no. The advisor gets a second pass when they call that customer back to recommend the work and they can explain also why it's important.

Alan Yeah. You always have that follow up, the human touch if you need to.

Greg Once you're told no face-to-face, it's hard to follow and be like are you sure. So having that second pass in a different medium is kind of nice. Absolutely good. So with everything else you're doing, what's anything else new down there? I saw the van with the tire changing machine and it seems like the machines continue to get smaller and smaller and smaller and more versatile. So anything else in that world that's kind of new, different, a different size or whatever that you're looking at.

Alan Yeah. So customers have different preferences on how they want to service. Traditionally they bring their car in. That's changing and evolving. There's some customers that want you to come to them. And if you can have that omni-channel strategy where you meet the customer, where they want to meet you, that's another way to set yourself apart and differentiate. So we've worked with dealers and customers to build out basic mobile tire solutions so you can have a mobile tire van, but you can also use it for other things too. So maybe you're doing tire work on Tuesday. This is a modular system. You can pull the tire changer out and you can put in a fluid exchange system. So if you want to do an AC recharge for that day, I know it's hot in summer in Dallas. Not so much today in the winter, but you can have different services they offer. The next day maybe you go out and you do an open recall campaign where you're going to reprogram some cars. So you have that. We'll come to you and you can drive additional value and profit and you're not actually clogging up your service base. So it's a way to get more value out of the same rooftop.

Greg Yeah. That's great. What else? What else haven't we talked about that we should or that you want to talk about while we have a minute here?

Alan We certainly have the integration with Reynolds right into the dealer management system where when the customer pulls in, the data is populated right there for the advisor. So they can easily see that. I think that's been really impactful. We had a great testimonial from Parkway Auto Group where they've been able to utilize that integration as well as the GoMoto kiosk in our inspection lane. And one advisor, her name's Brianna. She was selling ten alignments and with the integration and the consistency, she was able to sell up to 24 a month, which is great. So we're able to easily identify, communicate and close the loop on the needs on the service drive because otherwise it just sort of goes by and evaporates, right?

Greg You're right. And you mentioned that integration, the MPI integration to where if it's red, it's marked red on the MPI and all the information flows in. The tire tread depth as an example, I'm going to go right in there. So the advisor, the technician doesn't have to record anything. They don't have to do the measurement. That's what I get excited about it. I think it's pretty cool.

Alan When you're working in the shop every day, having that automation, that flow, it saves you a little bit. You think about it; it just saves you a minute each time, but that adds up, right? And we all know there's a labor shortage out there. It's hard to find good people, to retain people. So if you can have a solution in an environment that lets them get the job done easily as possible, it's a win win for everybody. So the customers that had the integration. If we took it away I think they'd be screaming and fighting. So that's when you know you got something good.

Greg Right. Do you think either your hardware or sometimes the integration pieces and some of that ease of use type of stuff that you're talking about, have you seen or maybe heard from dealers that has any sort of impact on retention of their employees? You mentioned tech shortages and trying to hire people. I wonder if providing these tools, if you've had whether it's a real study or just anecdotal, had any effect on retention.

Alan So there have been industry organizations that have done studies and they do surveys with technicians and with advisors and shop managers. And one of the key sort of takeaways from that is that shop equipment makes a big impact on their quality of work. If you have equipment that allows you to get the job done right quickly and efficiently and you don't have cut backs, that makes your life a lot better. But if you don't and you have outdated or equipment that's broken is not working and you can't do the job, you're not going to sell alignments, or if you do it, you're worried about, hey, I'm not going to do it right. And then I got to deal with a comeback. So maybe I'm just not even going to talk about that. So having the right technology up to date, it makes a big impact in the quality of life for the dealership employees.

Greg That's great. All right. Well, Alan, I appreciate you coming down. Anything else you want to touch on before we before we wrap?

Alan Well, I appreciate the opportunity to chat and it's been a great partnership with the Reynolds and GoMoto team and we're excited to continue that forward and see where the future takes us. So thanks for the chance to chat.

Greg Of course, definitely appreciate it. All right, Alan Hagerty, product manager from Hunter. We'll talk soon.