Broker Zeus Capital is forecasting \u201cmodest levels\u201d of organic growth for dealers in 2016.<\/p>\n
It said increased new car sales and stronger margins in aftersales would be offset by rising labour and property costs and pricing pressures on used cars.<\/p>\n
Analyst Mike Allen said he expects \u201cfurther consolidation\u201d amongst the dealers as the operating environment continues to favour larger groups.<\/p>\n
\u201cWe believe that the market is in a stable mid cycle phase, and expect the new car market to continue to grow through 2016.<\/p>\n
\u201cThe primary driver behind this remains the volume push from manufacturers aided by a robust UK consumer,\u201d he said.<\/p>\n
Allen warned that the used car market will come under pressure as the supply of vehicles up to three years old increases but said a bigger used car parc will be a boost for aftersales.<\/p>\n
\u201cWe see opportunity for dealers to drive profits through increased volume. The ongoing growth of the UK car parc should continue to support the aftersales market, where we see opportunities to increase group margins,\u201d he said.<\/p>\n
\u201cWe believe that our assumptions applied across the board are conservative as we pencil in modest levels of organic growth through 2016.<\/p>\n
\u201cThis reflects our belief that profit growth is likely to slow during 2016 as we also acknowledge cost pressures like rising labour and property costs.<\/p>\n
\u201cBalance sheets across the sector are strong and the highly fragmented nature of the market is likely to drive further consolidation,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"