Article:

Industry Issues

19 April 2013

The industry is again accelerating at full throttle. Turnover and profits are up for the majority of motor dealerships and the sector continues to motor ahead of the general economy with the significant increase in turnover being underpinned by the continued growth in new vehicle registrations which is at a 10 year high. M&A activity is also on the rise as the acquisitions last year of Benfield Motor Group and Spire Automotive by Lookers and Group 1 Automotive respectively clearly show.

There is no doubt that the UK motor retail sector is and continues to be flavour of the month. It remains the best performing market in Europe, as demonstrated by a flurry of overseas entrants in the sector over the past two years with a number of South African, US and European groups actively looking for opportunities to expand in the UK. Funders’ appetite for the sector continues to grow and all the main UK banks continue to “like” the sector and look for opportunities to lend. The rates may be increasing slightly however, compared to historical averages, the cost of debt remains low. The manufacturers own financing arms continue to provide competitive levels of finance and debt facilities and to provide healthy competition to the existing high street banks and other financiers.

However this continued resurgence in the sector has not escaped the notice of the manufacturers who, having invested significant sums in the development of new product, are now looking for dealers to contribute through increased dealer standards, investment in new showrooms and realignment of bonus schemes. There are many other challenges that still exist within the industry and amongst these are:

  • Increasingly unsustainable levels of pre-registrations.
  • A squeeze on margins from all sides: manufacturers are re-aligning bonus schemes are setting ever-increasing targets, and customers arrive in showrooms with more knowledge than ever and are better equipped to negotiate on price.
  • Additional regulation, with the advent of the FCA and further consumer credit rules.
  • Potential future interest rate rises might make the cost of finance deals less attractive to consumers.
  • Used vehicle prices have remained steady over the past few years but these could deteriorate significantly with the return of the vehicles sold at the start of the PCP boom due to an oversupply.

 

How we help

BDO understands the complex mechanics of automotive retailing. Our clients include franchised dealerships and used car operations and range from single to multi franchised groups. This means we can pinpoint where you can enhance efficiency and protect profit. As sector specialists and with our broader role in the industry we have run seminars and workshops with the Retail Motor Industry Federation and The Institute of Motor Industry, we attend motor conferences in the UK and the NADA conference in the USA and from this we can keep you informed of changes, challenges and opportunities as they arise through having a close working relationship with you. We are also working with AM magazine as part of the judging process for their annual AM Awards. This combination of breadth and depth and commitment to exceptional client service has made us one of the top advisors to motor dealerships in the UK.

We recognise that clients want initiative not arrogance and believe the key to good client relationships is a straight talking, human approach. We have a practical understanding of the issues you face so our advice is realistic and pragmatic and our partner-led approach which means that clients can expect high quality and quick, robust decision making. We don’t believe that one size fits all and offer tailored solutions for your business needs.