Manufacturers are ‘unfairly’ pushing car dealers into ramping up their businesses too quickly as the desperation in the industry puts partners at loggerheads.
Car Dealer Magazine has been contacted by a large number of anonymous dealers who are fearful for their businesses as they delicately look to restart.
Dealers – none of whom wanted to go on the record for fear of reprisals – have warned car manufacturers are:
- Introducing unattainable targets for June – despite car dealers only just reopening
- Pushing car dealers to take back all their staff from furlough before they’re ready
- Forcing stock into dealers in pre-reg deals that will put businesses at risk
We have received three anonymous emails, two text messages and numerous phone calls in the past week from car dealers fearful heavy-handed tactics by manufacturers were close to pushing them over the edge.
The biggest issue appears to be car manufacturers insisting dealers bring back staff from furlough before they are ready.
One dealer told us: ‘Manufacturers are putting pressure on dealers to bring ALL staff back and get the job going asap.
‘It has been a positive start for certain but what is not being taken into consideration by senior management at head office is our duty to maintain safe working distances within the workplace between staff.’
Many car dealerships are simply too small to bring all staff back and maintain social distancing measures imposed by the government – especially in workshops and the back office.
One dealer said this simply couldn’t be done at his site as technicians would be working side-by-side and in too close proximity to each other.
Car dealers are also carefully managing current demand with the government support for jobs. They are cautiously bringing staff back from furlough but don’t want to move too fast in case demand dries up and they’re left unable to cover the costs of the staff.
‘You have to measure the needs of the business against furlough support,’ said a dealer, in an anonymous text message.
‘Yes it’s busy now, but of course it will be after two months of closure. All dealers will want to tread carefully as they go making sure that those staff that return are busy, but we do not have too many people around.’
The dealer said car manufacturers are sending strongly worded communications to its dealers ‘which do not sit well’ with franchise partners.
Car manufacturers are in equally difficult positions as they look to start the cash flowing back into their businesses. They need dealers to take stock off their hands to free up cash and also have many staff on furlough themselves.
This is already leading to difficult conversations over targets.
‘It is utter madness for manufacturers to put in place ridiculous targets for June with our much-needed bonuses at risk if we don’t hit them,’ said one angry dealer group boss in a phone call last week.
‘Manufacturers were, in the main, very good with their support for dealers when this all kicked off, but now they are back to their pushy ways. We’re under enough pressure as it is.’
Other dealers are worried that car manufacturers will pull support for dealers if there is a second lockdown.
Regional lockdowns have been suggested by the government if coronavirus flares up in certain areas of the country, and dealers want to know they’ll continue to get support if that happens.
‘Do manufacturers plan to help support dealers if another lockdown occurs, either nationally or on a regional basis?’ asked one dealer. ‘It’s a major concern, especially as some countries have had to reimpose certain restrictions.’
He added that car manufacturers are asking him to wholesale stock and pre-pandemic levels which he labels as ‘crazy’.
He aded: ‘There is a strong argument to say some manufacturers who are continuing to off load stock into smaller businesses are knowingly causing long-term problems and potentially killing the network.
‘In normal years this could be dealt with, now who knows?’
Paul Daly, partner at accountants UHY Hacker Young, said he had been made aware of problems too.
He said: ‘This is certainly an issue we have seen within our own client base. Manufacturers are understandably keen to make the most of any consumer demand and clear some of their unsold and ageing units.
‘Car retailers’ expertise revolves around their ability to sell volume at wafer thin margins. I think manufacturer partners must recognise and trust this expertise but equally dealers need to respect the enormous pressure the supply chain is under and do their utmost to maximise the volume opportunity.
‘The results for the first week of showroom opening were nothing short of phenomenal with one group recording vehicle sales in excess of double the equivalent week in 2019, with a strong weighting towards used cars.
‘This has prompted discussion around how to make the most of this demand, with a number of innovative ideas being experimented with, especially around how best to staff a dealership in the current environment.
‘However, the phrase “one swallow does not a Summer make” seems particularly relevant and everybody is understandably concerned about the ongoing level of demand, particularly for new cars. Against that backdrop, some of the target expectations appear challenging to say the least and pre-registrations must surely only make sense for those groups with sufficient funds in reserve.’
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