1:05 pm, January 25, 2021
I have never been a man for New Year resolutions. Why should one date in time herald a change in your life that perhaps should have been made some time before?
However, I can see why people will have used the festive break as a period of reflection, and I should imagine that 2020 will have given everyone a lot to think about.
I think most dealers and manufacturers will have looked back on 2020 and say we’ve dodged a bullet.
There is no way that anyone could have foreseen the strength in the car market – used cars particularly – in March.
Boardrooms were gloomy places then, awash with doomsday projections that would have made stakeholders in even the most securely funded businesses nervous.
Such was the bounce, however, that many operators have experienced year-on-year growth in volume, turnover or profit.
The other inadvertent impact of Covid on the industry is the potential shift to ride-sharing that has been forecast.
It might take a while for consumers to be happy about sharing enclosed spaces for a while, though, even with a vaccine.
But before we start slapping each other on the back for being so awesome, the motor trade has ridden the wave more by luck than judgement.
It is true that some dealers will have been more successful than others, but there are still some fissures in the motor retail model that need repairing.
I have read many articles recently that speculate on the inevitable move to agency-model new car motor retail.
This has long been a need, and as new car stock starts to reduce thanks to limited battery supply for a wider range of hybrid or electric cars, Brexit, reduced factory capacity and changing consumer demand, it looks more realistically achievable in 2021 and beyond.
The majority of dealers have complained about new car margins for decades and agency-model supply gives guaranteed handling fees – but be careful what you wish for.
There will be less new car stock on the ground, meaning customers will have to wait longer and therefore have more opportunity to cancel.
Entrepreneurial dealer groups with slick used or corporate departments have feasted on new car over-supply and those opportunities will dry up.
Agency selling also makes dealers more vulnerable to closure – if you’re unable to deliver a service or volume that supports a new car franchise, you’ll be converted to authorised repairer status before you know it.
If new car revenue becomes more challenging, the only salvation is used cars.
Many franchised networks aren’t structurally ready to increase used car volumes.
It isn’t just a case of trying to fund more stock, there is simply not enough used cars to go round – especially at commercially attractive prices.
It means dealers will need to engage in selling older cars and budgeting for preparation in a different way.
Manufacturers also need to play their part. Expecting retailers to pay premium prices for OEM parts when dealers compete with supermarkets using factor equivalents is not competitive.
Neither is having onerous approved used car programmes that result in expensive warranties.
Online disruptor companies such as Cazoo are having an easyJet-like effect on the industry, meaning shoppers are searching on price as much as added value.
Whatever happens in 2021 I don’t think it is going to be easy, and while I take no pleasure in being a prophet of doom, we seem set fair for another year of seismic changes that will have an impact on many people.
James Litton is an automotive retail consultant who always has something to say about the industry he loves.
This column first appeared in Car Dealer issue 154. For more like it, view the latest edition by clicking below.
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