The Courier & Advertiser (Angus and Dundee)
Pessimistic motor dealer sector outlook driven by Brexit and profit fears
Online sales and alternative fuel vehicles key to long term growth
The second annual Henderson Loggie and MHA Motor Dealer report reveals a significant drop in optimism among UK motor dealers around the prospects for profitability this year. Key stats included: Only 24% of UK dealers expect an increase in profits in 2017 – a drop of 20% from 2016.
80% of dealers say Brexit uncertainty will have adverse impact on the sector.
Used car performance is expected to have most positive impact on profitability.
Pre-registration levels, consumer confidence and costs have most adverse impact on profit.
Online retail is set to become an integral part in the future new car purchasing model.
59% are happy with franchise partners’ future proofing strategy for AFV and autonomous vehicles.
The pessimistic outlook for 2017 was driven largely by the uncertainty around Brexit, with 76% of dealers believing it will have an adverse impact on the sector over the next 12 months.
The profitability landscape is also under pressure from issues of consumer confidence, potential changes in purchasing habits resulting from concerns around possible diesel scrappage, the recent media and Financial Conduct Authority attention on potential Personal Contract Purchase (PCP) mis-selling and the likelihood of continued reductions in retail registration numbers.
The impact of increasing costs on profitability in areas such as staff recruitment and retention, compliance and regulation, charges, rates and utilities also continue to cause concerns.
Pre-registration levels were cited as having the main adverse pressure on dealer performance.
Despite this reduced optimism, dealers are expecting to drive their performance mainly through used car sales this year.
Growth plans remained relatively steady with 60% of dealers saying they planned to grow over the next 12 months compared to 64% in 2016.
However, there was a significant shift in how that was going to be achieved, with just 13% expecting acquisition-led growth compared to 40% in 2016.
Organic growth and redevelopment is now the main focus with 62% of dealers compared to 44% in 2016. One quarter expect growth to come from expanding the number of locations, an increase of 9% from last year.
Ian Cameron, head of Henderson Loggie’s motor retail team added: “The motor industry is going through significant change, but it’s a resilient sector and the future will very much be dependent on manufacturers and their franchise partners working together for the best of the industry.”
Future trends in new vehicle purchasing were dominated by the growth potential from online retailing.
Alternative Fuel Vehicles (AFVs) are also set to gain a significant market share within the next five to 10 years.