Download a PDF version of our results summary (PDF - 3.12mb)
The franchised dealer sector might be battered and bruised but it’s also in a resilient mood and getting on with business, according to the inaugural Baker Tilly/Motor Trader Retailing in the Recession Survey.
Franchised dealers have taken off their gloves. They are not prepared to give in without a fight and, encouragingly, can see light at the end of this particularly dark economic tunnel.
These are among the key findings of our survey. The research was conducted during the all-important March plate-change month with franchised dealers across the UK representing a cross section of manufacturers from niche franchises to the country’s biggest selling volume brands.
We will follow up this survey later in the year to track how the sector is coping with the recession and pinpoint the key retailing issues impacting dealers.
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What was particularly surprising about this survey is just how confident dealers are despite tumbling Q1 new car sales.
50% of respondents were confident in the viability of their businesses in the current market conditions, while less than a third (29%) had little confidence. The remaining 21% chose to sit on the fence, at least for the time being. There’s plenty of anecdotal evidence on the most common cause of lost car sales so we asked the question and have a definitive answer. Over three-quarters of recipients (76%) cited a lack of buyer demand, with just 24% saying a lack of finance was the main hurdle.
The downturn in new car sales is benefiting other dealership departments which will hopefully see the growth of alternative revenue streams. 67% of dealers said the drop in new sales had boosted used demand and 59% had seen aftersales grow. While the growth in consumer demand for used cars over recent months is well documented, the boost to servicing departments is welcome news and is likely to be on the back of cars being run for longer.
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The current malaise could make or break some dealer-manufacturer relationships so we asked how these partnerships, which, let us not forget can be challenging during the good times, are faring. When it comes to how flexible and supportive dealers’ primary brands are the split is fairly even. 38% said their partners are not supportive, 31% said they were and the remaining 31% were in the middle.
Despite this most dealers (59%) think manufacturers have got it just about right when it comes to enforcing showroom and workshop facility requirements. 37% thought they were over facilitated while 4% thought they were under facilitated.
The general popularity ratings of banks are not currently at an all time high. Our survey results revealed mixed views among the dealers. 40% of the dealers surveyed gave banks a low rating when asked how flexible and supportive they are, while just over a quarter (27%) rated them highly. The remaining 33% were in the middle.
The retail climate might be grim but dealers are tending to look out for future business opportunities with 46% saying they would consider making a business acquisition if the opportunity presented itself. 36% would not entertain the thought while the remaining 18% do not know. Furthermore the overwhelming majority of dealers (92%) have no intention of exiting car retailing this year, with just 8% saying they would.
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The unanswerable question on most lips is exactly how long the downturn will continue. Many car retailers (25%) are optimistically predicting the sector will start to pull out of recession from Q1 2010. A further 21% have their eyes fixed on Q2 2010, although 19% are taking a more long term view and see 2011 as the earliest possible date.
With no shortage of headlines about the plight of the Detroit based carmakers and substantial production cuts in Europe, it’s unsurprising that most dealers (88%) expect to see the collapse of a car brand over the course of the next 12 months.
The results of our survey show a franchised dealer sector which has taken a beating since last summer but is clearly not defeated and in fighting mode as it adjusts to a tough car retailing climate, which would have been unimaginable 12 months ago.
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"Perseverance and determination are two defining qualities of the UK retail motor sector. This survey confirms that the spirit of Churchill lives on. In the war against recession, good housekeeping and doing things right only gets you so far. For sustained survival and success you must do the right thing however unthinkable it may seem. Plans that we’ve helped dealers shape which do the right thing need both manufacturer and funder support; it can be done.
"There will be sector casualties, but combining perseverance and determination with a plan that stands up to scrutiny of both the facts of your situation and market opportunities, will shorten the odds on success considerably."
Bruce Mackay, National Lead Partner, Restructuring and Recovery Motor Group, Baker Tilly
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A selection of responses from Motor Trader readers to our Retailing in the Recession Survey:
- Customer retention actions, cost cutting, ignoring certain franchise requirements, placing cashflow as the dominant driver in the business
- Increase PCP and Motability sales
- Looking after customers, past and present has proven key to a successful Q1
- Reducing staff headcount
- Controlling costs, looking at aftersales opportunities, robust deferred work programme
- There has never been a better time to buy a new or used car.
Download a PDF version of our results summary (PDF - 3.12mb)