2020 was going to be an uphill climb for Infiniti's 204 dealers, even if a once-in-a-century pandemic hadn't upended the auto industry.
The Nissan luxury brand was contending with one of the oldest product portfolios in the industry while navigating a strategic pivot away from fleet sales and heavy discounting.
"Product is the lifeblood of the brand," Infiniti National Dealer Advisory Board Chairman Ed Lennon Jr., 66, told Automotive News. "When you don't have freshened product, it's very difficult for a dealer to make a reasonable return on sales."
The pandemic made prospects even more challenging.
"Depending on where your dealership was, some areas had a much harder time than others," said Lennon, president of Circle Infiniti in West Long Branch, N.J. "We are in the New York market, which got hit very hard with COVID-19."
The results were not pretty. U.S. sales cratered 32 percent last year — the largest annual percentage slide in Infiniti's history.
There were, however, some silver linings. Infiniti's strategy of focusing on profitability over market share helped improve return on sales. Tight supplies due to production disruption also lifted dealership bottom lines.
The number of money-losing Infiniti dealers in December fell about 10 percentage points from a year earlier, when more than 40 percent of the brand's retailers had been operating in the red.
"We're in a much better place now than we were 12 months ago," Lennon said.
New product expected this year is also brightening the mood of Infiniti dealers. Infiniti will launch the QX55, a new coupe-style compact crossover, and a redesigned QX60 midsize crossover.
"We haven't had two new products come out in the same year in a long time," Lennon said.
Lennon spoke with Staff Reporter Urvaksh Karkaria about the products, challenges and opportunities Infiniti dealers should expect in the year ahead. Here are edited excerpts.
Q: What are a couple of top issues on the dealer board's agenda in 2021?
A: We have been requesting new product for years. Our No. 1 priority is to talk about new product. We need a flawless launch of the QX55 and the QX60 crossovers.
Network return on sales and throughput are also focus areas. Especially over the past year, the amount of new-vehicle sales is going down. When you sell less vehicles, you service less vehicles. So it's always a big concern for us to continue a reasonable amount of new-car sales.
What has you optimistic about this year?
I'm optimistic that we can continue to improve our return on sales in 2021. We're also excited about fresh product and the new management leading the brand. [Infiniti Motor Co. Chairman Peyman Kargar] is our new leader. We've met with him multiple times. We're very comfortable and confident in him helping us with new product. [Infiniti Americas Group Vice President] Jeff Pope has done a good job negotiating through these rough waters.
How has Infiniti helped dealerships navigate the changes brought about by the coronavirus pandemic?
The pandemic caused us to do what we do best — think of our customers' needs. I'm proud that Infiniti was rated No. 1 by consumers for COVID-19 response in the 2020 J.D. Power Sales Satisfaction Index Study.
From 2018, we were very objectives-heavy with everything that we did. And it caused the erosion of profitability. In the second quarter of 2020, Infiniti rolled out a program that removed most sales objectives, and they put into place a new margin that was helpful to the dealer body. From June onward, the return on sales had a nice movement in the right direction. The program focused dealers on the customer and each sale and not necessarily a volume target or objective.
Dealers also benefited from a reduction in inventory due to COVID-related production shutdowns. The reduction of the inventories, with less pressure on each sale, helped with dealer profitability.
During the pandemic, Infiniti put in place initiatives such as delivery and pickup services for new vehicles and aftersales. Dealers need Infiniti to share in some of the additional costs in providing these services to our customers. When service business is off because of the pandemic, we're not looking to acquire additional costs.
What is Infiniti doing to direct dealers on the digital retailing front?
The pandemic accelerated the shift to e-commerce. E-commerce makes transactions more transparent and efficient for customers and retailers.
In May, Infiniti announced a new digital retailing program and offered dealers a choice of vetted vendors to work with. The initiative, subsidized by Infiniti, provides technical components that include integration with the factory's sales and inventory systems and in-store consulting to support a customer-friendly online experience.
Do dealers prefer choosing their own tools from a third party, or is using an automaker's prescribed digital retailing tool helpful?
It's a difficult process for an individual dealer to wrap their head around what to do and who to partner with. Infiniti has done most of the heavy lifting, and we can choose from approved vendors that they have vetted. In many cases, a factory-mandated solution doesn't work for all dealers.
How much emphasis should be placed on eliminating wet-signature requirements in 2021?
We have the ability to sell, contract and deliver vehicles digitally and contactless or do it the old-fashioned way in person. If a dealer doesn't have this capability, he or she will be left behind.
Are Infiniti's production and inventory levels coming back in line with demand?
Inventory levels have tightened due to COVID-19-related production cuts. Supply was a bit lean in late summer and early fall. Inventory is starting to flow back in line with demand. The benefit is we are experiencing a lower cost to carry the inventory, and that's a blessing since it's making it easier to maintain profitability.
Where are the shortages?
Our concern is with the QX60, the bestselling vehicle we've ever had.
Production of the current-generation model ended in December, and the next-gen model won't arrive in stores until late August or early September. The inventory we have right now has to last us for the next three to six months. That's going to be difficult because the QX60 will be in very, very short supply by the end of March. When we get to April, we're going to have to sell more QX50 and more QX80 to make up.
Infiniti understands that and is upping production of the QX50. The transaction price on that model will be very competitive between April and August. But it still is going to be difficult not having the midsize three-row QX60 until later in the year.
Has the pandemic resulted in any change in facility image programs? What do dealers want to see change?
Most dealers have upgraded to the new Infiniti Retail Environment Design Initiative. Our concern is the ongoing facility standards and inspections that occur yearly. Inspections will take into consideration the COVID-19 headwinds that we are experiencing and only focus on customer-facing items. Any non-customer-facing issues, such as minor cracks in the shop floor, will not be considered noncompliant. Dealers need their factory partner to understand and assist us in any way they can to keep our operating costs down.
How have Infiniti dealerships' fixed operations been doing?
Fixed operation revenues have not come back 100 percent. My store is still off about 20 percent, but we see it improving every day and feel confident we can return to normal levels by spring. Starting in November, Infiniti provided for two years of complimentary maintenance with the purchase of any new vehicle to help dealership service departments. They have continued the complimentary maintenance into 2021 with the Infiniti Owner Celebration Event.
Infiniti sales and profitability took a hit in 2020. Has the bottom been reached?
2020 was a challenge for every brand. Our dealer board, in partnership with Infiniti, rolled out a new margin program. Inventory reduction and digital retailing initiatives were also aimed at helping offset declining return on sales.
In 2021, we will see the incremental sales boost of the QX55, which is a new nameplate. Later in the year, we will see QX60. We have high hopes for that crossover — it is a fantastic product.
Are dealers more satisfied with the Infiniti franchise today?
Over the past few years, Infiniti dealers have been very dissatisfied with the brand due to a lack of new products. Infiniti leadership has listened. Starting in mid-2019, the factory began reducing its reliance on sales objective programs, which eroded dealer profitability. We are not objectives-focused. We are now customer-focused and dealer-return-on-sales-focused.
With the QX30 discontinued and the redesigned QX60 not expected until late summer, how important is the QX50 crossover in the lineup?
In 2021, the QX50 has to do a lot of heavy lifting. It has to become our entry-level vehicle; it has to become a volume vehicle.
What products are you looking forward to in 2021?
The [second-generation] QX60 crossover will show what Infiniti is all about — beautiful design, a luxurious and crafted interior, technology that makes driving less stressful. It's about time that we have a vehicle in the third-row segment that's going to be class-leading and competitive with Lexus and Audi.
What's missing from the lineup?
We need an entry-level vehicle to replace the QX30 crossover. We are fighting for a replacement for that QX30.
Infiniti is investigating what platform and powertrain they want this vehicle to take. The dealer body would prefer something that we could get volume out of today, which to me would be a small-utility-type vehicle, all-wheel drive and four-cylinder VC-Turbo engine. [Infiniti hasn't] guaranteed us anything, nor have they presented us with anything, but we all realize that's the next step we need to take.
We also need a halo vehicle that people aspire to own. It could be based on the Nissan GT-R platform, a full-electric model or a high-end hybrid.
Infiniti announced plans to electrify its fleet in the next few years. Is the U.S. ready for electric vehicles, or are automakers pushing these vehicles to meet emissions targets in China and Europe?
There is certainly a market for EVs, but demand won't get completely there overnight.
What manufacturers, other than Tesla, have come out with new EVs that have done very, very well? I don't know of one. That's a category where I don't think Infiniti needs to be a leader. I think we'll adapt; we'll aspire to go toward that segment, but I think there's more questions than answers in that EV market.
Infiniti's strategy of starting with a gas-electric vehicle makes sense — it provides the driving benefits associated with an electric vehicle without the range anxiety. That's where dealers would prefer Infiniti to start, as opposed to a large investment going directly to EVs.