7:00 am, August 27, 2022
Rising energy bills could force car dealers out of business unless additional support is provided by the government, industry insiders have told Car Dealer.
Automotive firms are facing up to utilities bills that have risen by upwards of 250 per cent in the past year, leaving many with major headaches.
While some larger outfits say they will be able to absorb the additional costs, others have been left fearing for their futures.
It’s a grim situation for dealers to be facing, with supply chain issues already having a major effect on both new and used car supply.
Among those to express concern about the situation is Nathan Tomlinson, dealer principal at Devonshire Motors.
The franchise dealership in Barnstaple has seen its gas bills rise by around 265 per cent, forcing bosses to scratch around for alternative energy-saving solutions.
Tomlinson told Car Dealer: ‘We are coming off a fixed contract this autumn and even using outsourced procurement we’re looking at an increase on gas of circa 265 per cent – which puts our annual cost into six figures!
‘As such, we’re currently undertaking a very aggressive review of how we use energy across the dealership and our two bodyshop sites. We’re also looking at a number of alternative solutions to replace traditional energy sources.
‘Fortunately, we’ve always punched well above our size in terms of profitability so we can take the pain. Fundamentally though, increases like these could finish many businesses.
‘Those that can absorb the increases have no way to pass costs on, and why would you want to anyway? That will only worsen an already delicate retail situation.
‘The other obvious “quick fix” is to make cost savings elsewhere in the business.
‘But for a sensibly run business with ambition, there aren’t many savings to be made that don’t impact on the goal you’re trying to achieve.’
He added: ‘I know it can be a reckless attitude to simply push problems on to the government.
‘But without a significant amount of support, I don’t see anything other than a very difficult winter for many – and that unfortunately coincides with the time of year when people struggle the most.’
Nathan Tomlinson foresees a very difficult winter for many
Another business that is facing rising energy bills is Car Quay in Derby.
Boss Jamie Caple says that although the company’s bills are yet to rise, its landlord is now considering installing a meter because of the rising cost of electricity.
He also called for additional support from the government in the form of reduced corporation tax.
Speaking to Car Dealer, Caple said: ‘Our overall monthly charge for our site includes all rates and utilities so hasn’t gone up a penny yet.
‘However, I keep stalling a meeting our landlord wants to have about the cost of our electricity and looking at putting a separate meter in.
‘I think the measures in place to protect normal people in homes, such as price caps, should perhaps also extend to companies, too.
‘Support for businesses where needed is great as we generate huge tax revenues and also employ lots of people.
‘We shouldn’t be propped up, as I feel it isn’t healthy for an economy to allow businesses that don’t work to survive financially, but perhaps reducing our corporation tax burden would be a nice gesture to help soften the blow of rapidly increasing costs.’
‘Consumers will suffer’
Despite the mounting crisis of rising bills, Umesh Samani, chairman of the Independent Motor Dealers Association (IMDA), doesn’t believe that the majority of retailers have changed their day-to-day habits.
He says that for many, the ballooning utilities bills are ‘just another cost’, but he warned that the rises cannot continue without having a knock-on effect on customers.
‘From what I have heard, dealers are not drastically changing their daily habits,’ he told Car Dealer.
‘I think quite a lot view it as just another cost that needs to be paid.
‘What I would say is that companies can’t just keep increasing bills and everything carry on as it is.
‘Costs will have to be passed on somewhere, so dealers will either have to cut their margins or pass on that cost to consumers who will suffer as a result.’
When asked what steps dealers could take to reduce their bills, Samani added: ‘Even before the electric problems began, I had started reducing the lights I use.
‘I’ve got lots of glass at my showroom and have four banks of lights. I’ll usually now just have one bank of lights at the back switched on because the rest you don’t need on a bright day.
‘It’s just about generally making sure you’re not wasting electric for the sake of it.
‘It might be nice to have LED lights shining all day but sometimes, particularly in car showrooms, you don’t need to have them glaring away all the time. It’s just a waste of money.’
‘Remember your staff as well’
Despite snowballing costs, dealer have still expressed a desire to look after their staff during difficult economic times.
Earlier in the year, Car Dealer reported that Caple had given his Car Quay staff a pay rise to help with the cost-of-living crisis.
Tomlinson also urged dealership bosses to remember that staff too are facing rising bills at home.
He said: ‘There is an additional scenario playing out too – one that needs as much if not more attention.
‘Businesses are taking a strain on energy for sure, but within every business is a team of individuals who all face the same strain on their personal circumstances.
‘As an employer, we have a responsibility to look after our people just as much as our business, and that too carries a cost burden.’
