Motor Dealer Report 2016

Moore and Smalley are really pleased to present the results of the 2016  Motor Dealer Survey.

 

We are delighted by the volume and quality of the responses we have had to our survey. It has proven to be growing more and more each year.  A good proportion of dealer groups are continuing to invest in the sector through developing existing sites and/or the acquisition of more franchises, sites or other dealers. Confidence levels have certainly remained strong throughout the first half of the year and the results of the survey demonstrate this.

 

The report also provides excellent commentary which has been provided on the survey and the sector as a whole by Sue Robinson from the National Franchised Dealers Association (NFDA).

 

The underlying UK car market is clearly strong, but the Brexit uncertainty is very likely to have an adverse impact on the level of buyers changing their cars, as well as other operational uncertainties such as the stability of a dealer’s workforce, funding costs and the resultant level of profitability in the short to medium term. The sector is, however, extremely resilient and so it will be interesting to see how this pans out in the coming months and through the remainder of 2016 and into 2017.

 

Profitability – Dealers are positive

Over half of motor dealers (53%) believe that new car sales targets are achievable, however it should be noted that only 16% of dealers state that they do not rely on pre-resignation to meet those targets.

 

Sue Robinson, NFDA Comments:

“It is encouraging to see that the majority of franchised dealers are positive about the outlook for the retail motor sector for the remainder of the year.”

 

PCP continues to represent a significant element of new purchases, with 52% reporting that PCP contributes to over 70% of new car purchases.

 

Used Car Margins and Marketing Service Plans

All respondents noted that reliance on used car results for site profitability, it is concerning that 46% of dealers have noticed a decline in margins. Of those, 74% are expecting their current position to continue.

 

80% of respondents place service plans as medium/high importance to grow aftersales performance. This proves the sale of service plans appear to be an important focus for dealers as it also helps them to develop further relationships with their customers.

 

Operations

The cost impact of staff retention and bringing high quality individuals into the industry can be seen as staff recruitment and pay rises are the top two areas cited as having significant cost increases.

 

87% of respondents have noted their intention to recruit. The main areas of recruitment were expected to be in operational areas of business, with 72% of dealers looking for trained technicians, 57% looking for apprenticeship technicians and 57% looking for vehicle sales staff.

 

Social Media

It is encouraging to see 75% of respondents believe that they are actively managing their information and cyber security risks.

 

It is widely accepted that building customers’ trust is fundamental in sales conversions, and more and more of that trust is sought via digital sources, so it is surprising that social media isn’t used to its full potential with dealerships relying on websites (57%), other advertising (28%) and marketing materials (21%) to promote customer feedback.

 

The Future – Business Growth and Franchised Dealer Model

64% of respondents were looking to grow their business within the next 12 months, with 44% of those aiming to achieve this by organic growth/redevelopment, 40% looking to grow via acquisition, and 16% looking to increase sites.

 

Our respondents were divided when it came to whether they saw mainstream outlets such as Rockstar/Tesla transitioning into and becoming an integral part of the franchised dealer model. 46% of respondents could see this happening, of which 53% thought it would be within 5 years and 42% thought it would be within 5 to 10 years.  If this was the case, this will be a significant shift in the current business/infrastructure model we have today.

 

Alternative Fuel Vehicles

With demand for alternative fuel vehicles (AFVs) outpacing the market with double digit growth (up 21.3% compared with the first six months of 2015) and AFVs now accounting for 3.2% of the overall new car market (June 2016), we asked motor dealers if they think it’s likely that AFVs will gain significant market share. 73% thought that it will happen and 66% thought that it would happen within the next 10 years.

 

This shift to a new product type could have a significant impact on the business model due to the associated potential long-term reduction in aftersales revenue.

 

If you would like to find out more you can download the full 2016 MHA Motor Dealer Report here. Alternatively if you would like more information or advice on the possible changes in the Motor sector, please contact Ginni Cooper on 01772 821021 or email her on ginni.cooper@mooreandsmalley.co.uk