Day: July 27, 2023

Many 5-year-old boys want to be firefighters or astronauts when they grow up. But Eric Frehsee was not like other 5-year-olds.

“Since five, my answer to ‘What do you want to be when you grow up?’ has always been the same: a car dealer,” Frehsee told Automotive News.

That single-minded determination was sparked by Frehsee’s grandfather Marvin Tamaroff, who opened a Buick dealership in 1969 on farmland at 12 Mile and Telegraph roads in Southfield, Mich.

Frehsee recalls visits to the dealership from as early as age 3. Through high school and college, Frehsee worked summers at the family business.

“I love seeing the evolution of cars and technology,” said the car collector and Formula One racing aficionado. “I like shaking someone’s hand, looking them in the eye, and making them happy.”

Today, Frehsee oversees Tamaroff Group’s six stores in suburban Detroit that represent Honda, Acura, Nissan and Kia. As president, he also manages the company’s commercial rental business and a boutique vehicle leasing unit.

“I like knowing that I’m continuing my grandfather’s legacy,” said the father of two.

Since taking over the top job in 2019, Frehsee said Tamaroff Group’s profitability has quadrupled, while revenues are up about 20 percent.

“Kia is the rising star,” he said. “It was the manufacturer we put the most money behind.”

An early adopter of digital retail, Frehsee credits technology with helping the dealership group navigate the pandemic-era turbulence.

“When COVID hit, I had digital retailing in all my stores,” he said. “It was absolutely a differentiator because, for the first couple of months coming back to sales, everything had to be done remotely.”

Frehsee has also relied on technology to enable his employees to work shorter days and weeks without losing productivity.

“We’re selling more cars in fewer hours by working smarter,” he said. “That has helped with employee turnover and morale.”

With the pandemic in the rearview mirror, Frehsee is watching another industry-disrupting challenge — the transition from fossil fuel to battery-powered vehicles. He said he believes manufacturers are pushing EVs on the consumer, mainly due to government mandates.

“Consumers aren’t quite ready for full electrification,” Frehsee said. “But we look forward to helping them get there.”

Sales of the Nissan Rogue compact crossover surged 69% in the first half of the year.

Nissan Motor Co. has turned on the incentive spigot to strengthen its position in the compact crossover segment.

In January, the Japanese automaker began offering three-year, 0 percent financing on its bestselling Rogue.

It’s an attempt to pick up market share in a key segment, dealers and analysts said. And through the first half of the year, Rogue sales surged 69 percent to 147,745 vehicles.

Nissan dealer Eric Frehsee said the lucrative financing offer is “definitely not a sign that there are any issues with the Rogue.”

The crossover is “consistently our No. 1 seller,” said Frehsee, president of Tamaroff Group, which operates two Nissan stores in suburban Detroit. “Rogue represents over 50 percent of our sales.”

Frehsee described the financing offer as an “advertising play” to attract consumers.

“Interest rates are so high on the leases right now that you can’t really advertise the lease price and be super competitive,” he said. “They’re putting all their horsepower behind [the Rogue] to try to move as many as possible.”

Former Nissan National Dealer Advisory Board Chairman Scott Smith said 0 percent financing is attractive for payment buyers in a high-interest environment.

“It drives a lower payment,” said Smith, president of Smith Automotive Group, which operates four Nissan dealerships in suburban Atlanta. “It appeals to the consumer seeing 5 percent to 6 percent interest rates. So it appeals to a broader spectrum.”

Smith said Nissan’s focus on the Rogue makes sense.

“This is a core model and an area we need to focus customer retention on,” he said. “[The segment] is where we do best and is the place to compete.”

Nissan North America sales and marketing boss Michael Colleran said the financing offer on the Rogue is a win for customers.

“Consumer affordability is definitely getting stretched right now,” Colleran said. “People are just trying to figure out how to buy eggs and milk these days.”

Automakers prefer lowering interest payments over cutting sticker prices, which can ding residual values.

“It keeps the transaction price higher, and [dealers] get a retention tool,” Smith said.

Interest rate offers are an effective incentive, especially for Nissan’s price-sensitive customer base.

Ivan Drury, director of insights at Edmunds, said that 1 in 4 Rogue buyers in July “aren’t paying a dime in finance charges.”

Drury said that the Ford Escape and Hyundai Tucson, Rogue competitors, also have 0 percent offers, but with just an 18 percent take rate on the Escape and 6 percent on the Tucson.

A 36-month loan is a financing sweet spot because it matches the buying cycle with the vehicle warranty and drives customer loyalty.

“If a consumer comes out at 36 months, we know that they tend to be much more loyal” than at 72 months and 84 months, Colleran said. “Loyalty is very low when it comes to those longer terms, even if those terms are at lower rates.”

Shorter loan terms also create an earlier opportunity for repeat business.

“Oftentimes, you’ll see a consumer come into equity well before that 36 months,” Colleran said, allowing them to purchase again.

Sales sizzler

The compact crossover segment leads the industry in volume and is hypercompetitive, with 18 nameplates in the U.S.

Compact crossovers represent 1 in 5 vehicles sold, according to Edmunds.

Drury said inventory turnover time is at two weeks or less for some of the most desirable vehicles in the segment, showing tremendous demand despite ever-increasing new-car financing costs.

“There is not a single mainstream automaker that doesn’t aspire to do well in the segment where many new shoppers will land,” he said.

The Rogue, redesigned in 2020, is the third-fastest-growing nameplate in the segment behind the Mazda CX-50 and Buick Envision, according to the Automotive News Research & Data Center. It ranks third in volume behind the Toyota RAV4 and Honda CR-V.

The Rogue is “essential to Nissan’s survival,” Drury said, noting the nameplate represents 1 in every 3 Nissans sold.

Supply stabilizes 

The financing offer arrives as Nissan dials up Rogue manufacturing after supply chain issues kneecapped output last year.

AutoForecast Solutions estimated that Rogue production rose 59 percent in the first six months compared with a year earlier. But compared with the first half of 2021, Rogue output is “basically flat,” said Sam Fiorani, AutoForecast Solutions vice president.

“In this competitive segment, maintaining volume is a good sign for the model and brand,” he said.

Frehsee said his Rogue allocations are 20 to 25 percent higher than a year earlier, adding the factory is doing better with the model mix. Nissan is “shifting production to the more affordable S and SV trims, which is great for dealers and customers,” he said.

But the improving supply, rising interest rates and stiffening competition are manifesting on Nissan dealership lots.

Drury said the time it takes to move Rogue inventory has nearly doubled since the beginning of the year, to 62 days in June.

“Nissan is producing more Rogues than it can sell,” he said.

 

SOURCE: Automotive News