Wednesday, January 5, 2011

The road ahead for gas prices and US dealers in 2011

Gas prices rose each week in 2010 compared to 2009. As we start 2011 we are falling into a false sense of security that it was just a fluke and that in the next month it will go down. Dealers have had so much negative news the last two years they aren't used to seeing the sun anymore. I'm here to tell you that 2011 is your year. Take it.

We are off to a good start. I already have clients stocking up on clothing, accessories and asking how we can help them promote scooter racing and rides at their dealerships. In all honesty, we support the dealers that buy from us and work with us.

I see the media jumping when the barrel of oil goes down for a day or two, but you have to look at the average over a 12 week or 24 week time frame. The fact is we will have $4 gas in 2011. Not a question of if just when that is my prediction, the administration can only keep the other economies of the world at bay for so long. Our economy is doing better, gas will go up. A day or two won't make a difference and usually that's what get's us in trouble. We have to promote our stores and scooters as an alternative to the SUV mentality. Detroit only has one solution to the problem and thats to sell more cars that use a little bit less gas.

On average prices were are up 45 cents compared with 2009 to reach $3.05--the first time the cost of gas has climbed over the $3.00 mark since September 2008. In 2008 we were all caught with our pants down especially motorcycle dealers across the USA.

We all remember the summer of 2008 when gas prices hovered above $4.00 and there was a surge on fuel-efficient vehicles, motorcycles and scooters, and public transportation usage. Everyone was talking about electrics and scooters then suddenly the investors and buyers disappeared as the economy went south. Dealers were out of stock for months and when the shipment finally arrived many of them went out of business because the economy crashed. The glut of units from 2008 continues at NPA auction, dealer auctions, and GE warehouses across America. All I have to do is pick up the phone and find out how many units GE is picking up this week. In the end a handful of dealerships made millions buying back units from Piaggio Group at a third of the cost and selling them at their dealers. One dealer closes another one benefits, but now we're in 2011 and demand is creeping back up.


This time however dealers are unprepared for the rise in service and parts demands. The number one call we've had is from new shops who have mechanics that don't know how to look for a PDF file or use a factory number. They call asking for a throttle cable. We have over 85 cables in stock. This is likely to get worse as gas prices rise and dealers realize the profit is in selling used bikes and repairing older bikes. Our solution was to put online over 150 repair manuals for scooters any dealer can click on the link and get the correct factory part.


I think many people get into the business without a manual. There is no one way to make this work. A college town is different from NYC or San Francisco. What I have learned in ten years of business is that new doesn't always equal profits. The dealer is told to stock more and more on inventory and pay more money to General Electric ( nicknamed Get's Everything because they will screw you royally when its the right time ) and you end up making money for everyone else except yourself.

The trick here is to think outside the box.

The first lesson new shops have to learn is you can make more money on trade ins and used units. Honda and Yamaha dealers make less than 7% on a scooter. Some new Taiwanese 125cc bikes cost dealers $2159 plus shipping you add that in they make less than $400 when retailing it for $2699. To be competitive some have absorbed dealer prep PDI and other costs making them less than $300. However taking that same 125cc and getting a used bike and $2,200 they can fix up the used unit, invest a few bucks and hours in it and later on sell it for $1500. They can make more on the used unit that a new 125cc. Even better some dealers have agreements with tow truck companies, auction houses, and car lots to buy units that have been abandoned. My biggest client in Central Florida buys every single unit from the tow truck company at the local University that has been abandoned for $150 cash. He invests between $200 and $300 in time and parts and sells them all for $999. Some of these are good units the same 125cc Buddy/Bubu PGO - Genuine scooter that he sells for $2700 retail he's sold a 2007 model twice after buying it at the tow truck house. These stories to me tell me that there are "Alternative" ways of being profitable in the scooter business. Not everything has to be about selling new units.

Trade ins as we approach 2011 is a fast money maker for college based stores like Gainesville, Florida or Austin, Texas. In other markets like Miami Beach transient people who live on South Beach or Key West for a few months tend to buy a scooter and quickly sell it on Craigs List or back to the dealer. These bikes often just need a piston change or a new belt so they are quick money makers. So my advice for 2011. GET AGGRESSIVE WITH USED SCOOTERS!

Part of being a good dealer is knowing where the market is headed and those bikes selling at the tow truck auction for $100 today will be going for $899 come April when gas hits $3.90 a few hours of work, maybe $150 in parts and you just doubled your money. Where do you get the parts for these unknown brands? MRP - The one stop shop for scooter parts! We have it all for scooters from Aprilia to Zongshen we have the largest collection of parts in North America. Remember many of these students on a budget or the retired guys from the RV park are trying to save money so they will want a used unit before looking at the new Chinese bike. Twenty five percent of all used buyers are new to the market, they have never owned a scooter before according to Dealer News so take advantage of this. Every year three used scooters sell for every single new scooter so that equals over 200,000 units being repaired and put back into the marketplace. Having so many opportunities out there its no wonder Honda dealers are focusing on a used unit where they can make 40% instead of the new scooters where they only make 7%. The numbers don't lie. So if you're a smart dealership make 2011 the year of the used scooter before gas hits $4.

To find out more about used bikes or how to make money contact us about helping your dealership make some money in the new 2011 economy.

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