Franchised dealers expect 2015 to be a more challenging trading period than 2014, when the new car market continued to grow strongly and used car values remained robust, leading to strong dealer profitability.<\/p>\n
Delegates at a recent AM<\/em> Round Table, held in conjunction with Total Lubricants, reported that consumer demand for new cars had been strong in the first three quarters of 2014, but has tailed off since, leading to considerable dealer pre-registration activity in order to achieve volume-related bonuses. Registrations to private buyers since the start of 2015 are down year-on-year.<\/p>\n Manufacturers have also ramped up the volume of rental and demonstrator registrations to maintain market share and to absorb excess production, while the sterling exchange rate remains strong, and dealers fear their own businesses will suffer from the depreciating impact this has on their nearly new cars, demonstrators and used car stock.<\/p>\n \u201cAs soon as the retail market is seen for what it really is, their targeting is going to be unsustainable,\u201d one dealer said. Others said there are already brands planning to revise dealer targets upwards, and some carmakers had asked dealers to pull their orders forward. \u201cEvery single month is being mortgaged,\u201d one added.<\/p>\n Another dealer boss said: \u201cManufacturers are playing on a different wavelength to the real market, and they won\u2019t listen and they will not reduce targets, they have their volumes to push into the UK, end of story, and there\u2019ll be no sympathy from the manufacturers.\u201d<\/p>\n Delegates said manufacturers\u2019 constant obsession with growing market share cannot continue. Craig Fraser, operations director at Harratts Group, said: \u201cThis continual growth aspiration is artificial and if that continues there will be a big fallout.<\/p>\n \u201cNow there is a lot of uncertainty in the world and the UK is a safe haven, so all the manufacturers are using the UK to take extra production and we\u2019re at the end of that. I think we need to be strong and say it can\u2019t continue. It can\u2019t go on forever.\u201d<\/p>\n However, delegates felt the franchised networks lacked the ability to challenge effectively. The National Franchised Dealers Association (NFDA)\u00a0 publicly supports the monthly SMMT registrations statements rather than signalling the underlying dealer sentiment, and manufacturers have greater control than ever.<\/p>\n \u201cIn the past we had dealer councils that could have a strong discussion with the manufacturer, but we don\u2019t have that anymore, and there have been the changes to Block Exemption as well,\u201d said John Clark, chairman of John Clark Motor Group.<\/p>\n \u201cAnother issue the manufacturers are missing is a reduction in the dealers\u2019 return on investment due to the development, redevelopment and remedial works we\u2019re all engaged in to make premises bigger and bigger in order to cope with the volumes they perceive as being part of their future. It doesn\u2019t work, it can\u2019t work in the long term, unless the market is sustained. The problem is that for the manufacturer to reduce targets is seen as a sign of weakness.\u201d<\/p>\n Dealers accept they are in the hands of their franchisor. \u201cAs a franchised dealer we\u2019re controlled by the manufacturer. If we\u2019re making too much they squeeze us a bit harder, if not making enough they relax it. Just at the moment they\u2019re forcing what they want and they know everybody has made money so they can stand it,\u201d said Luscombe Group managing directorRobin Luscombe.<\/a><\/p>\n He said an upside is that the incentives for the consumer to buy a new car have never been better, because the strength of the exchange rate allows manufacturers to make significant contributions to the deal.<\/p>\n Ray Sommerville, chief executive of Perrys, said volume targets are driving down the margin, and it is vital to set out the stall in the first month of the quarter and dealers have to do the \u201cskinny deals\u201d early on to get on top of their targets.<\/p>\n Swansway director Peter Smyth said it is difficult for dealers to know if they\u2019re making money until the end-of-quarter bonus.<\/p>\n Delegates discussed whether an increasing car parc was benefiting their aftersales profits. Some, like Luscombe, said they are seeing growth in aftersales, but others questioned the impact on their workshops\u2019 recovery rate of being pushed by manufacturers to offer cheaper service deals.<\/p>\n Fraser said manufacturers\u2019 involvement in service plans is diluting the dealers\u2019 margins, yet helps them sell their OE parts, and now finance volume bonuses have changed.<\/p>\n \u201cGradually, with what\u2019s happening to a lot of these ways of making money, we need to reinvent ourselves,\u201d he said. Much of the success is dependent on which brands dealers have, he said. Luscombe agreed, adding that there is a lot of new product coming to look forward to.<\/p>\n Clark said the market conditions are not doom and gloom, but they are challenging.<\/p>\n It was a view echoed by Daksh Gupta, chief executive of Marshall Motor Group. \u201cIf you\u2019re a privately owned group, are you going to risk what you\u2019ve invested? You can\u2019t. But most of us are entrepreneurial people, so we adapt.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"