8:11 am, September 27, 2024
Directors at Eastern Western Motor Group say that Mercedes’ decision to implement agency sales cost them £50m in revenue last year as the group announced reduced profits.
The firm is the latest in a long line of automotive retailers to see its profits slashed in its latest accounts, following on from the likes of Listers, Vindis and Vospers.
Car Dealer has today published a special feature on just why it is that dealers are not making as much money as they once were and while not the biggest drop, Eastern Western has not been able to buck that trend.
Documents published via Companies House this week show that the Eastern Holdings Ltd made a profit before tax of £18.92m in the 12 months to December 31, 2023.
That figure represents a slide of more than 31% when compared to the £24.94m the outfit made in 2022.
Despite this, the firm managed to raise an improved turnover of £857.83m, compared to 2022’s £810.94m.
In response to falling profits, directors pointed the finger of blame at ‘general inflationary increases’ and the costs of opening new Toyota and Lexus sites.
They highlighted Mercedes’ implementation of agency sales, which they say cost Eastern Western more £50m in income.
A recent report by Cox Automotive described agency sales as a ‘false dawn’ and encouraged the automotive industry to ‘move on’.
In a statement included in the accounts, company director and secretary Nasser Mohammed said: ‘In 2023, the motor group’s turnover increased from £181m in 2022 to £858m.
‘This increase is after the move by Mercedes Benz in January 2023 to an agency model where we now receive a handling fee instead of invoicing the new vehicle.
‘This change to the agency model has reduced our turnover by more than £50m in the Mercedes Benz Passenger Car franchise.
‘The group made a profit before tax of £18.9m for the year ending 2023 (2022: £24.9m).
‘The reduction in profit between 2023 and 2022 can be attributed to numerous general inflationary increases, namely, interest payments, energy costs, salaries and substantial costs associated with the development and opening of three new Toyota dealerships and one Lexus dealership.’
Results season so far…
- Eastern Western sees profits slide as Mercedes’ agency sales model sucks £50m from revenue
- Listers becomes latest car dealer to see profits tumble as shrinking margins hit
- Family-run Vindis Group sees profits wiped out but bosses ‘satisfied’ with performance
- Bosses at family-run Vospers warn of automotive ‘trade war’ as profits slump in latest accounts
- John Clark Motor Group breaks £1bn turnover barrier but pre-tax profit sinks by almost 10%
- Hartwell bosses happy with ‘strong financial performance’ despite 70% slump in profits
- Holdcroft directors award themselves 345% pay rise as profit takes a tumble
- Vines Motor Group sees profits slump as bosses blame wider economic factors
- Car dealer group Parkway is the latest retailer to see profits wiped out as firm takes 75% hit
- Lloyd Motor Group’s annual pre-tax profit falls despite upturn in revenue
Directors ‘pleased’ with performance
In the period covered by the accounts, Eastern Western Motor Group increased new car sales by 21% but used car sales fell by 3.8%.
At the end of the year the group had franchises representing Mercedes, BMW, Mini, Lexus, Toyota, Volkswagen, Nissan, Honda, Mazda, Smart and Maxus.
It also has agreements with bike brands Kawasaki and Harley-Davidson.
When it came to staff, the firm employed 1,561 people, compared to 1,528 in 2022, with wages and salaries totalling £60.5m.
Meanwhile, directors remuneration dropped to £608,000 from £787,000.
Reflecting on the results, Mohammed added: ‘Overall, the directors are pleased with the motor group’s performance in 2023.
‘The motor group performed particularly well in new vehicle sales which increased by 21% mainly through corporate, fleet and Motability.
‘The excellent new car performance adversely affected our nearly new vehicle sales which contributed to our total used volume reducing by 3.8%.’
