DEALER optimism about prospects for profitability has dropped significantly, according to a new report.
In the second annual MHA Motor Dealer report, 76 per cent of dealers surveyed said they expected profits to drop or remain static for the year – an increase of 20 percentage points on 2016’s 56 per cent.
The report – compiled by the UK-wide group of accountancy and business advisory firms and based on data from 88 senior management from dealerships in England, Wales and Scotland – looks at the current outlook of the sector as well as future trends, including online retail, alternative fuel and autonomous vehicles.
Profits were also under pressure from issues of consumer confidence, potential changes in buying habits as a result of concerns about possible diesel scrappage, media and FCA attention on potential PCP misselling 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 continued to be of concern as well.
Pre-registration levels were cited as having the main adverse pressure on dealer performance. Despite this reduced optimism, though, dealers were expecting to drive their performance predominantly through used car sales this year.
Sixty per cent of dealers said they planned to expand over the next 12 months compared with 64 per cent in 2016. However, there was a significant shift in how that growth was going to be achieved. Only 13 per cent of those surveyed said growth would come from acquisition, compared with 40 per cent in 2016. Organic growth and redevelopment is now the main focus for 62 per cent of dealers compared with 44 per cent in 2016. A quarter of dealers said they expected growth to come from expanding the number of locations: an increase of nine per cent from last year.
Future trends in new vehicle purchasing were dominated by the growth potential from online retailing. A total of 94 per cent of dealers cited online as becoming an integral part of the new car purchasing model in the future. Sixty-three per cent of those dealers believe it will happen within the next five years. However, the report said there were still key areas to address, including clarity about where responsibility for selling vehicles will lie and the infrastructures needed to hand them over.
Steve Freeman, pictured, head of the MHA Motor sector, said: ‘I am not surprised to see the survey results confirming the marked change in dealer confidence levels we have heard from our clients recently.
‘The industry is really going through a period of change and I do think that online developments may start moving at a pace now. The continued strength and resilience of the sector is certainly dependent on all parties, including manufacturers and their franchise partners, working together to ensure a sustainable business model for the future.’
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