10:57 am, December 22, 2022
Franchised dealers are well set up to deal with a downturn in the economy as recession bites in 2023.
Car Dealer Top 100 compiler and automotive industry analyst Mike Jones believes next year is ‘going to be tough’ for the motor trade.
In a video chat about the Car Dealer Top 100 list of most profitable dealers, Jones said he thinks franchised dealers will be more ‘cushioned’ from the downturn due to their multitude of revenue streams.
He said: ‘The franchised business model is set up quite well to cope with a recession by having multiple different income streams, from used cars to after sales. Plus, for the majority of people outside of London, a car is a necessity.’
Eddie Hawthorne, Arnold Clark CEO, the Top 100’s most profitable dealer group, said the motor trade needs to ‘keep the faith’ in 2023.
‘I think we’re all struggling a little bit just now as there’s a shortage of nearly new used cars,’ Hawthorne told Car Dealer during a video interview you can watch at the bottom of this story.
‘That’s just a function of supply over the last couple of years. I think there’s a customer base out there that are looking for those types of cars.
‘So that is my wish going forward, that we can get back to some nearly new, younger used cars. That’s what we want to get to next year.
‘But there’s still a large number of customers out there with zero to three year old cars that can easily come into the marketplace.’
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Jones said that historically after a bumper year, the following years see a downturn – and after the record profits dealers enjoyed in 2021, he is expecting a fall.
The Car Dealer Top 100 revealed the most profitable dealers in the UK made a combined profit of £2.6bn in 2021 – up £950m on the year before.
‘These drops happen when you get a new balance of targets and remuneration,’ he told Car Dealer. ‘I expect a swing in 2022 and into 2023.
‘Clearly some of the brands are moving towards agency sales and some are starting in January so that will present a big change from an operations point of view.
‘The franchised retailers that see their way through that and work out how they’re best to set their business up, and the ones who do a brilliant job for their customers, are still going to prosper.’
Tim Smith, CEO of Automotive Transformation Group, the headline sponsors of our Car Dealer Top 100, said there were certainly ‘uncertainties’ ahead.
‘Moving into 2023, there’s a lot of uncertainty there and I think it’s going to be a really challenging year,’ he said.
‘We’ve faced a lot of increases in costs and demand has really softened. We’ve just got to batten down the hatches and keep ploughing on in terms of being efficient as organisations.’
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