Preface

The Tug-of-war？

“The Aftermarket in the Automotive Industry”a new subj ect，or since the sales soared and with that the entire industry，is it not more a topic which has not seen enough focus in the past？-Yes，we all know aftermarket and in particular the parts business is small in revenue contribution，but large in the profit contribution to the car manufactur-ers.Service as a Strategy，as suggested by several analysts and key spokesperson in the industry.The believe is that a strong service strategy can have a positive impact on finan-cial performance.Competition，cost pressures and empowered customers are forcing car manufacturers to look beyond their products to drive profitable business growth.While some manufacturers still view service as a cost element，an increasing number have suc-cessfully grown their service business while transforming it to a core profit centre，and an important part of their strategy.

In addition，this book“Automotive Dealer Business Management System——Build Dealer's Own Information Technology Platform”takes a closer look at how to optimize af-termarket and automotive retail performance in established and emerging markets，through adoption of information technology.And some chapter of the book focuses on how to bring a culture of service into an inherently product-focused company.

But I have to slow down myself for a moment and let me start from the beginning.As the beginning is still in several cases the actual situation in a lot of countries：as known as dealer communication systems.Dealer Communication System，a communication system deployed by car manufacturers to extend their main line applications out to dealers for ve-hicle distribution，finance，warranty，services and parts management systems，and at the same time try to keep the control in their own hands，the hand of the car manufacturer.A model with future？-Not sure.I doubt，as the customer empowerment will force to new business models，also the product evolvements“electro vehicle”-change in mind set-from car as a status symbol toward buying and using mobility.The Dealer Management System followed in a lot of regions the dealer communications system.

A traditional Dealership Management System（DMS）is a bundled management infor-mation system created specifically for automotive industry car dealerships or large equip-ment manufacturers，such as construction equipment or heavy duty trucks，and also adap-ted for boat，RV，and power sports dealers.These systems often contain software that ca-ter to the needs of the finance，sales，parts，inventory and administration components of running the dealership.A dealership an independent legal entity in an multi or single fran-chise model with one or more roof-tops（branches or dealer sites）.DMS software typi-cally includes support for all aspects of running a dealership such as tracking vehicle inven-tory，tracking sales and service performance，finance and insurance calculations，tracking customers（and customer follow up），accounting，but also managing dealer websites，cal-culating employee commissions，support purchase order tracking，the parts inventory，and last but not least the work order management and appointment scheduling for test drives or service.A DMS usually offers many interfaces with other systems，particularly with systems of the manufacturer，in order to enable automatic processing of purchases，war-ranty claims，price lists and many other data.In many countries of the world the automo-tive manufacturers used to prescribe a certain specific DMS to their dealers.This is how-ever no longer officially allowed，as in Europe the so called Block Exemption Regulation got introduced.

However，we all know the shift from a dealer communication system to dealer man-agement system does not automatically“change the game”？-The tug-of-war as I sometimes call it，the pulling between car manufacturer and dealer and dealer group，cer-tainly both in the“interest of the customer”is still on.For those of you not familiar with my expression，a short ex-course …… Tug of war，also known as tug o'war，tug war，rope war or rope pulling，is a sport that directly pits two teams against each other in a test of strength.The term may also be used as a metaphor to describe a demonstration of brute strength by two opposing groups，such as a rivalry between two departments of a compa-ny.I think that metaphor brings the car manufacturer v dealer situation to the point.

Who owns the data？Who has the right to control the DMS？-Concerns are being stated by OEMs and at the same time by the dealer associations about who really owns the data in the DMS and has the“absolute right”to control access to both the data and the DMS.The arguments which are being presented are that the Dealers own their data and pay for the DMS，so therefore they have the right to control access.But you can imagine that the manufacturers are seeing it slightly different.OEMs have good reason，from their viewpoint，for trying to reduce the number of DMS types used by their Dealers interna-tionally.

OEM impact on open competition continues.In all regions of the world，but mainly in America，Europe and in parts of Asia the OEMs have a significant impact on the freedom of Dealers to choose their systems from a wide array of dealer system providers（DSPs），particularly their DMS.In example the USA and Canada，the influence comes mainly via the OEMs'freedom to supply interface specifications and certification processes only to the DSPs they choose.Throughout the 1990s and up to 2008，several OEMs which together account for about 30% of the cars sold in the USA have，with one small exception，been“open”only to ADP and R&R（including UCS）.This blocked the progress of smaller DSPs with any Dealer or Group which sold those brands of vehicles.After a lot of Dealer pressure，there are signs that this situation is changing，although not quickly.In Europe，the influence comes from strong recommendations by OEMs of specific DSPs and the in-creasing number of complex integrations which are required，which add to the cost of de-velopment for DSPs.

Today the OEMs are under pressure financially and they want to control their Dealer Networks，particularly to have a consistently high quality of customer handling internationally.Systems are one of the mechanisms for doing this.Some OEMs would undoubt-edly like to reduce the number of DSPs which they certify to a very small number，which Dealers see as a restraint on competition when they are buying systems.At the same time the trend of larger sized dealers with multi-brand offering is growing steadily.You see-rope is moved from left to right and back again.

It will be interesting to see what really will be THE solution in the future.Bottom-line to me is，what we be accepted by you and me，meaning us the customer？！？！-May-be in some regions we will see a trend toward stronger OEM influence，maybe in other re-gions the dealer has a stronger vote.But that are battles who will be won，but not the war！

Prediction where it will go…… Very tough to make the call.I believe it will be a tied game（tug-of-war）and as dealer are becoming stronger and even spreading on a global scale around the globe，j ust look at Inchcape or Sime-Darby or Pandragon or others ……Both，the car manufacturer and the dealer，need to find a joint way-a route to success. Maybe this way will be derived by premium or luxury market versus volume market，as-suming customers are accepting a different service level and treatment？-Because at the end that is the bottom-line，the customer acceptance.

With that let me stop as I do not like to take away the entire story.I j ust like to en-courage you for taking the time to really read the book from the beginning toward the end. Dr.Junsong Peng's book will hopefully help you to define your own service and automo-tive retail strategy-certainly a successful one！

Guenter Lasser

Vice President

Industry Business Unit Automotive

Industry Solutions

SAP AG

24-May-2010