9:37 am, September 23, 2023
There was an embarrassment of riches for our latest Car Dealer Podcast in a week that saw – among many major news stories – the 2030 ban on sales of new petrol and diesel cars being pushed back by five years.
The U-turn happened out of the blue a day after transport secretary Mark Harper had said the government was standing firm on the 2030 deadline.
There were also ructions involving the Pendragon buy-out, not to mention Cazoo arranging a debt-for-equity swap deal with its bondholders as it looks to sort out its financial mess.
In fact, it was such a news-packed seven days that it became a case of what to leave out, otherwise the podcast – sponsored by JATO – would have been in danger of lasting many, many hours.
Phill Jones, chief operating officer of eBay Motors Group, was our guest this week to discuss the stories chosen by Car Dealer founder James Baggott and multimedia manager Jon Reay.
Jones commented: ‘The summer wasn’t quieter and then it’s cranked up a notch. It’s like inflation, where nothing seems to come down in price, it just seems to get busier and busier.’
He said that at the time of the 2008/09 credit crunch, there were fears that Pendragon might ‘fall over’ as it was highly leveraged.
The dealership chain, which owns the Evans Halshaw and Stratstone brands, is currently the subject of a buyout offer by American outfit Lithia Motors, with Hedin and Penske launching a combined bid for it as well.
Jones said: ‘I’ve a lot of affection for Pendragon. They’ve been customers of ours for years. They’ve played a huge role in the UK automotive sector, but I think it’s always been undervalued.
‘Car dealerships are quite hard to value anyway because you’ve got these relatively short-term franchise agreements, which is why they often end up being valued on the value of the land and very little goodwill for the actual business itself.
‘But that said, time and time again, these businesses do deliver and do deliver a good job.’
He added: ‘When I first came into motors around the time of the credit crunch in 2008/09, we were literally worried that Pendragon would fall over because it was highly leveraged and the market turned.
‘So it has been through those, and my observation is that sometimes these automotive groups sort of get too big.
‘Normally bigger is better in business, but the really successful, profitable, cutting-edge automotive retailers are often quite family-led or with a very strong leader, where they’ve got an element of control, because it is always about day-to-day profit and trading and they need that sort of psychopathic focus on the business, and that’s why you get these big personalities in the industry.
‘The dealer group that I think is run most effectively at scale is Arnold Clark.
‘I think the Americans will back themselves to go “Actually, we can shake this up.”
‘My personal observation? Americans think they know how the UK car market works but [they] don’t.
‘We used to have visitors over from the US when we were owned by Cox and it seemingly looks exactly the same and they’d walk into a car dealership and say “Where are all the new cars?” and there’s one or whatever and they’re like “Why aren’t they all lined up? If I want to buy that Golf, can I buy that Golf?” and we’d say “No. We can put it on order and you can get it in about three to six months” and they don’t understand it.
‘So there will be an element of “We think we can do this better” and sometimes that helps, but they’re big, complex companies but I do observe that the noise and kind of constant speculation has been affecting these businesses and it’s really hard.’
What Pendragon really needed right now was stability, he said.
‘There are some really good people in Pendragon, some amazing locations, some really smart stuff, but I haven’t really heard anything particularly multi-year from them in the last couple of years – and I say that with sympathy because I’ve been in a similar situation – and the team there deserve that certainty,’ said Jones.
The topics discussed were:
- Lithia makes second bid for listed car dealer Pendragon with £280m offer
- Shock rival bid to buy Pendragon from Hedin and Sytner-owner Penske rejected
- Car dealers have their say on 2035 ban as some predict ‘it’ll never happen’
- Manufacturers ‘will not change’ plans despite petrol and diesel car ban being pushed back
- Car makers’ target to sell 22% EVs in 2024 will remain in place despite 2030 ban shifting
- Car dealer warning as FCA targets GAP insurance that doesn’t ‘provide fair value’
- Tributes pour in after used car dealer Dan Kirby tragically dies at 37
- Cazoo officially confirms ‘restructuring’ agreement which will ‘materially reduce debt’ of used car dealer
You can listen to this week’s podcast below:
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