Fixed Operations
Giving Away Free Oil-You Better Think Twice
By Ed Kovalchick
In 1998, a new standard for automotive engine oil capability was introduced by the International Lubricant Standardization and Approval Committee (ILSAC), which is a committee formed by major Japanese and American auto manufacturers. The new standard is GF-3, a major upgrade from the current GF-2 specification. The goals for the new specifications were to further increase fuel economy, improve operating in high temperatures (minimize deposits) and decrease oil consumption.
While it was first thought that this new standard would be introduced this year, it now appears that 2001 is the new target date. Most automotive service professionals are familiar with the API (American Petroleum Institute) symbol printed on cans of oil, and their certification letters such as SH and SJ. When the new rating finally arrives (after final approval by API), it is expected be titled "SL." Note: API grants a license to oil companies to use their copyrighted circular symbol, to demonstrate that the contents meet the API's specifications for a particular designation such as SL.
Here's the rub, which is both good and bad news. The GF-3 standard is expected to extend oil change intervals, with the 7,500-mile interval being the minimum duty cycle. That thought strikes fear in the hearts of the quick-change industry and possibly dealers who have invested heavily on quick-change service stalls.
Currently, consumers are waiting about 4,500 miles to change oil, and the younger generation leads the way to greater distances between oil changes. Of course, changing oil at lengthy intervals is better for the service and parts departments' bottom lines, since most service visits would include other maintenance activities such as brake inspections and tire rotations. An oil change service alone provides little if any profit to dealerships, service writers or technicians.
Numerous dealers/service managers have installed programs that include free oil. Some provide a free oil change every fourth oil change, some when you buy a specified service, some every other time a service is completed, some for as long as the original owner keeps the vehicle and some for no particular reason at all that I can determine.
These managers will want to rethink this policy when the GF-3 is introduced because it is expected to be significantly more expensive than current GF-2 oils. A representative of one of the large oil companies recently stated that the oil companies and chemical companies are spending "a couple hundred million dollars" for this upgrade, and he went on to indicate this will result in higher end-product pricing. Both the base stock volatility and the additive package are improved to meet this standard, he said.
Managers who have budgeted free oil when it was 80 cents a quart will be in for a jolt when this increase occurs, if no planning was performed far in advance. Since this change will most likely occur early next year, now is the time to plan some method for paying for this probable increase, or to change the policy and use another marketing tactic.
Another issue to deal with when GF-3 is introduced will be the use of additives. Currently, no manufacturer recommends additives be added at oil changes, and while most accomplish no benefits, some can eve be harmful according to honest-to-goodness scientific evidence. This information is available on the Internet Web site www.vtr.org/maintain/oiladditives.
html, which reviews the results of actual scientific studies, rather than the typical anecdotal stories generally permeating additives conversations.
Some of the dealerships that now provide free oil changes partially depend on selling additives to help make up for the loss created by the free oil. The pressure will be on to sell more items once the price of oil increases and the use of additives disappears. All of this is food for thought on developing your next merchandising plan and how oil changes will fit into that plan.
Ed J. Kovalchick is CEO of Net Profit Inc., an international automotive manufacturer and dealer training and management-consulting firm. ekovalchick@dealeronline.com
