GoAutoNews Premium has been told that Toyota has written to dealers broadly outlining its intentions.

A recent meeting of Toyota dealership accountants was also told that their management accounting for their Toyota dealerships would have to swing over to the newly acquired DMS.

GoAutoNews Premium has been told that Toyota Australia has for some time favoured the Tune DMS for its dealers but has always allowed their dealers to use other DMS software providers.

A DMS is the most vital management tool in any dealership as it controls, integrates and reports on all the thousands of transactions flowing through dealerships on any day.

Dealers pay significant fees for these systems because they are so fundamental to monitoring the pulse of the individual dealerships and the tracking of the consolidated results of all roof-tops within a total group.

Moving from one DMS provider to another is very disruptive to a dealership business because the systems and terminals are so deeply embedded throughout the dealership. The cost of retraining staff is high and often custom software already in place has to be rewritten on the new platform at extra cost.

For these reasons, it is often said of the DMS industry that the ‘barrier to exit’ for a dealer is very high.

The Tune DMS is the brand of Revolution Software which Toyota Australia recently purchased. While it is not known what Toyota paid for the business, it was valued at not less than $5.4 million in 2017 in the course of a court dispute between its three founding owners.

Revolution Software traces its roots back to 1993 when the founders created software for running car, motorcycle and marine dealerships. Court documents from 2017 suggest that Revolution had by then sold 100 systems and 2200 individual licences.

The 2017 court documents said that “the most significant of these was to Toyota Australia, which led to that company recommending the system to its dealers, about 90 of whom have purchased it in Australia; others have also acquired it in New Zealand”.

Dealers tell GoAutoNews Premium that at this point there is limited information about the plan.

But it has been made clear that the ultimate goal is that every Toyota franchisee will run their franchise on a single Tune DMS so that the information flowing to Toyota is for the Toyota business only and for no other brand operated within the group.

The alternative would mean dealers would have to pay for two DMS providers and have duplicate systems and terminals running in their dealer group businesses.

The dealers have been saying to Toyota that they want a single DMS for their operations and Toyota is reportedly saying “they can support that” and that dealers will be able to run the businesses for all their other brands on the Tune system.

Just how keen the other franchises will be on having the complete details of their dealers’ operations available to a company owned by Toyota is anyone’s guess.

There is also the issue of a brand confidentiality. The DMS providers meet regularly with the 50-plus brands in Australia to keep abreast of their plans and requirements so these features are reflected in the DMSs in the dealerships.

How will that work, dealers are asking, when one of those in the room getting secure information about a brand’s plans is Toyota?

For example, the setting up of a new marketing initiative that must be embedded in the DMS involves giving the details ahead of time to a DMS company. Dealers ask: How will that work when those details are going to a company owned by Toyota?

The move will particularly affect the country dealerships which all need many franchises in order to spread their investments across multiple brands and the cost of duplicate DMSs and training would be formidable.

There are many other practical issues to address. One large Toyota dealer told GoAutoNews Premium that he has a very large parts business on the Pentana platform that is integrated across all his brands and that he believed that moving to Tune would “cost me millions in revenue”.

Another dealer said he had told Toyota he would not move until they showed the Tune system was superior “in every way” to his current systems, that the annual cost was less than he pays now and that Toyota would compensate him for the move, downtime and training involved.

Some dealers have said that Toyota has indicated it would be prepared to buy them out of their existing contracts with their present DMS providers.

Many dealers have raised the question of whether Toyota is sailing close to the wind in forcing dealers onto Tune now that Toyota owns Revolution Software.

The Australian Competition and Consumer Commission (ACCC) has this to say on the subject: “Broadly, exclusive dealing occurs when one person trading with another restricts the other’s freedom to choose with whom, in what or where it deals.

“Exclusive dealing is common in many business arrangements. Importantly, changes to the Act on 6 November 2017 mean that exclusive dealing is only a breach of the Act if the restriction is likely to have the purpose, effect or likely effect of substantially lessening competition.”

As one dealer said: “Toyota has always applied strong levels of encouragement to move over to Tune. But this is more than encouragement. This is a mandate.”

Toyota Australia told GoAutoNews Premium: “We can confirm Toyota Australia’s ‘One Dealer Management System’ strategy was announced to our dealer network in September. Having all dealers operating under one DMS will deliver many benefits and efficiencies to our customers and dealers. This strategy will be implemented in close consultation with our dealer network over the coming months.”

By John Mellor