After-sales service prioritized

The JD Power 2013 study found customer satisfaction with after-sales experience has a direct impact on dealer service volume.

Service volume among dealers with high customer satisfaction - 831 points or more - averages 14,692 service visits per year per dealership, compared with 11,224 visits among those with low satisfaction - 773 points and fewer.

"And we found that the dealers with higher customer satisfaction earned 14 percent more profit than those with low customer satisfaction," Mei said.

The importance of service is clear, said Charles Mills, vice-president for global retail experiences with JD Power China, Shanghai.

He told China Daily that 40 percent of vehicle dealers in China suffered a significant deficit last year.

Some 20 percent broke even, and another 40 percent profited.

This is a major change from three years earlier, when only 6 percent of dealers reported losses, he said.

He attributed the sudden turnaround to the rapid market cool-down in the past three years.

"When the demand surged in 2009 and 2010, dealers could gain huge profits from new vehicle sales, which made them ignore the after-sales service," said Mills.

"The high expectations for the market made them lose sight of preparation for other value-added services.

"It's too late for some dealers to start building a profit engine in services now that new vehicle sales have suddenly slowed."

In the US, dealers' profits mainly derive from after-sales service, trade-in vehicles and insurance rather than new vehicle sales, Mills said.

"On average, US dealers made 30 percent more profit than Chinese dealers," he said.

Li Guiping, president of Changjiu Group, a Chinese vehicle trader with more than 80 authorized dealers, said that car care business has been the biggest contributor to profit in its dealerships.

"China is going to introduce a car warranty policy in October, supporting customers' rights to return defective vehicles and seek a refund or replacement," said Mei.

"Dealers are at the frontline of ensuring a positive customer experience.

"Meeting or surpassing customer needs is critical to mitigating the potential adverse effect of this new policy on customer loyalty and profitability for brands and dealers alike."