Christian Chia is a man of the world.
Born in Holland, raised in Jakarta and educated in Vancouver, the head of OpenRoad Auto Group also lived in Tokyo and was one of the first entrepreneurs to run dealerships in China.
In 1998, Chia and his two brothers bought a group of four dealerships – two Toyota points, a Honda store and a Lexus dealership – in the Vancouver area. He launched the OpenRoad brand in 2000 and hasn’t looked back.
With a portfolio of 16 stores representing 15 brands, the group’s growth has been a steady incline for more than a decade. After closing a deal for three major dealerships in downtown Vancouver this fall, Chia spoke with Canadian AutoWorld about dealership consolidation, training and the importance of economies of scale.
Canadian AutoWorld: Talk about your motive behind the latest three acquisitions – The BMW Store, MINI Yaletown and Rolls-Royce Vancouver.
Christian Chia: That was an opportunity that was probably 10 years in the making. I’ve always felt very close to the BMW Group Canada brand and always wanted to expand that relationship.
We were very motivated to pursue this opportunity further and the timing was right both for the vendor and us.
Who was the vendor? We heard it was U.S. based
It was one dealer group, the Chicago-based Fields Automotive Group. They bought these stores around 2005. They also had a presence in Victoria, B.C.
About three years ago, they divested the Victoria dealership. When we saw that, we knew it was just a matter of time before they would divest in Vancouver as well. Their approach was to grow big or go home. I don’t think they ever got the cadence of growth they were hoping to get in Vancouver. After leaving Victoria, it didn’t make sense to keep these operations in Vancouver.
And all three of those brands are on the rise?
They are all in a position where they are looking for growth. The Rolls Royce numbers are relatively small, but this will be a record year for Rolls Royce Vancouver. We’re on track to deliver 25 new Rolls Royce vehicles this year. That places Vancouver just outside of the top 10 markets in North America.
What was the price tag for the deal?
I don’t want to get into specifics but it was north of $40 million.
What happens after OpenRoad buys a store? Is the staff retrained? Walk me through the process.
This case was relatively easy because what we saw in these three stores was a high-performance culture and high-performance team. One of our objectives when we started talking to the Fields Group was that we wanted to retain this team.
Our strategy in this acquisition was how to retain the team and avoid any defection. That has paid off as most if not all of the team has elected to stay.
My personal philosophy is that we want to be the leading automotive retailer in Canada. The way we do it is by having the best automotive professionals in the business. That’s not just talking about skills but about attitude as well. We want to attract and identify people that really love our industry and see a long-term, bright and successful career in automotive retail.
Does OpenRoad do any in-house training?
We have many training programs but the one I am most proud of is called LDP, which stands for leadership development program. We built it in-house to act essentially as our own MBA.
It is a two-year program where we take in between six and 10 new candidates who are put through a program that includes classroom, on the job, project and job rotation experience. We even have a graduation celebration at the end.
The typical profile is candidates who are reaching the point where they would be considered for management positions.
We started this about six years ago and our third class is close to graduating now.
Describe your management scheme.
We believe in the general manager structure and have one in every store. They’re focused on providing exceptional guest experience and team leadership.
They are supported by a suite of shared services.
Do the general mangers have equity stakes in the stores?
You have a number of projects on the go now. Are you satisfied with the pace of growth?
We have new Audi and Volkswagen dealerships being built now and we are opening a new Porsche store in the first week of November.
To be honest, I think we haven’t grown fast enough. We could have grown faster but we are very strategic about our growth and it has to be the right fit.
Ideally, I would like to expand with our existing manufacturer partners. We are optimistic about prospects in B.C., but we have looked out side British Columbia.
How far outside of B.C. have you looked?
We’ve looked at Ontario, Alberta and other parts of the prairies and the U.S. as well. Our criteria became more disciplined the further we move away from our home base.
What are your growth aspirations?
I don’t have a specific number or size in mind, but speaking for our own group, we are starting to see those synergies materialize. We are finding ways to improve our business, reduce cost and become more efficient with a greater scale.
That quest for size and scale is starting to pay off now and we are starting to realize that in significant ways; whether it’s through centralized services like accounting, marketing, HR and IT but also in supplier relationships like banking and audits. We’re starting to see tremendous savings.
Do you have the same DMS in all your stores?
Your brands are all imports and, with the exception of Porsche, BMW, Jaguar and Land Rover and MINI, are all Asian manufacturers. Do you have any desire to move to the domestic market?
We are open to the idea. I was born in Holland and grew up in Jakarta, Indonesia. My father was an entrepreneur and his very first business transaction was the importation of Chevrolet trucks into Indonesia in the ’50s. So, there is a long history there so maybe one day one of the Detroit 3 could have a future with us.
What do you most want to improve on for 2015 in terms of operations?
There’s many (laughs). Where we’re really focused on is growing out pre-owned business. I think that’s a place we can make a lot of improvements.
Another area that keeps me thinking is whether the metrics we are looking at are the correct metrics. Obviously the financial metrics are very important, but the non-financial metrics – are there another 10 or 20 key metrics that we are not focusing on – and those could be metrics around social media, client engagement, loyalty. Are we looking at the right dashboard in terms of measuring our success going into the future?
I would say the most critical piece is the staff component. Are we developing enough? Are we investing enough? Are we able to attract and retain the best people? That’s what I spend my time thinking about.
What about in terms of operations?
One very car specific number that keeps me awake is service retention. We are starting to see decline across the board but a lot of dealers are not seeing it because service business continues to grow. That’s because the industry has experienced growth and at least one record year. The number of cars in the community is growing and dealers say service is growing, but actual retention and our share of that business is declining.
I understand that trend is prevalent in the industry.
Where do you see the pace of ownership consolidation going in the coming years?
I think the pace will accelerate rather than slow. I think it’s a natural process in any given industry that is as fragmented as ours.
Roughly 1,800 parties in Canada own 3,000 dealerships. That is a very fragmented industry.
Just the prospect of acquiring one dealership with an investment of $10 to $15 million is not something people are looking to do right now. The barrier to entry, the complexity of the business and scale of investment means it is no longer something single individuals would want to contemplate right now.
There are also non-financial barriers. I think our industry is still quite selective on who they let into the fold, so to speak. Every open point and purchase and sale has to go through a rigorous approval process by manufacturers and they are looking for a specific profile.
I would say the pace will continue. Certainly with what Buffet and Berkshire Hathaway did in the U.S., I think it’s a sign of things to come there, in Canada and around the world.
Do you think a U.S. megadealer group will cross the border any time soon?
I don’t expect to see them that soon. I think they’ve all sniffed at Canada, but I don’t think they see the environment as attractive as that in the United States.
There are two factors that drive that. One is scale. The average throughput in dealerships in the U.S. is much higher and the average size of dealerships there is much bigger. That makes them seem more attractive with bigger captive market areas. Second is the legislation. The regulatory environment is much more attractive in the U.S. for dealers with its strong franchise legislation than it is in Canada.
Do you see Honda, Toyota and other OEMs resistant to public ownership in Canada changing policies?
I think that stance will change over time. At the end of the day, manufacturers are looking for performance, customer satisfaction and market share. If the public groups can prove they can deliver that, then the resistance will slowly fade.