11:38 am, August 30, 2020
While car dealers are having a buoyant summer of sales as the 70-plate approaches and used car supply remains constricted, there are concerns trouble is looming on the horizon.
Battered by coronavirus lockdown losses, dealers have been steadily recovering since showrooms started welcoming back socially-distanced customers.
But the end of the furlough scheme and the inevitable increase in unemployment that will go with it, coupled with what looks likely to be a no-deal Brexit are weighing heavily on the minds of car industry bosses.
Stuart Foulds, chairman and chief executive of TrustFord – the world’s largest dedicated Ford dealer group with 65 locations across the UK – thinks some dealers will be on the cusp of running out of money.
He told Car Dealer: ‘Redundancies will undoubtedly have an impact on retail sales and that, coupled with the recession, and then Brexit, makes the foreseeable future difficult.
‘A worry for our industry is [first half of the year] losses through Covid 19 and pressure from manufacturer stocks going fully paid due to ageing could mean some dealers will run out of money.
‘The impact of that will hit in October, post the plate change month when debits hit.’
October has long been forecast as the pinch point for the industry.
With a large cash drain from the 70-plate change next month – which looks set to be a bumper sales month – car dealers who are already strapped for cash could be pushed to the wall.
‘Given the continued curtailment in the hospitality sector, the conclusion of furlough and the expected impact on GDP the economic reality will have to bite at some point,’ warned Vines BMW boss Sean Kelly.
‘I would expect us to see this before the end of 2020.’
Kelly reported sales at his dealerships are currently up 40 per cent on the same period last year, but said he thinks pent-up demand had now been satisfied.
The trader can take some solace in the fact that used car sales are booming at present – and experts from Auto Trader don’t think that will change any time soon.
In an exclusive video interview with Car Dealer, commercial director Ian Plummer said he believes current customer demand was sustainable and won’t let up any time soon.
‘A lot of people are asking will the demand tail off or fall over after September,’ he said. ‘Given that it’s sustaining itself at the moment, there is no reason to second guess that it’s going to fall away.’
Dealers need to be careful not to ‘feast, then famine’, though, warns Batchelors Motor Group boss Tony Denton.
‘My biggest fear is health and the wellbeing of my family, staff and customers,’ he said.
‘And we need to make sure business is steady – not feast and famine.’
Denton – who sells Mitsubishi and Suzuki models – is predicting demand for the rest of the year will remain as it is, ‘to a degree’.
Waylands Automotive boss John O’Hanlon is frustrated with just how difficult it is to predict what will happen next in the car market.
The Volvo dealership boss said: ‘It is simply the unknown of the end of this year and the start of the next year.
‘With Brexit, increasing unemployment and a potential “Covid 2” we have a number of risks that are incredibly hard to quantify their impact on the business.
‘That is why it is so key to take advantage of the wave of the business we are enjoying today and into September and October.’
Other car dealers are worried the trade is steadily talking itself into a downturn.
Cazam founders Peter Waddell and business partner John Bailey
Big Motoring World boss Peter Waddell will soon-to-be launching his online used car sales arm Carzam and told Car Dealer he was fed up hearing the doom and gloom.
‘Business is what you make it – we need to stop talking this great industry down,’ he said.
Hendy Group boss Paul Hendy said his biggest fear was the industry ‘talking the economy down’ which he says is just as dangerous as the potential for local lockdowns.
He told us the end of the furlough scheme was ‘clearly a pinch point’ but added: ‘The attitude and energy of our team will be focussed on maximising every opportunity.
‘There will still be plenty of business out there and we have to go and grab it.’
SW Car Supermarkets operations director John Marshall has similar concerns.
‘My biggest fear is that we let ourselves be talked into a dip, and lose the positivity that most of the industry currently has,’ he told Car Dealer.
Other independents feel there could be opportunities in the event of a downturn if it comes – and remain positive.
Jim Reid, of Jim Reid Vehicle Sales, thinks sales and enquiries will flatten, but even with skinny margins he says being ‘creative’ will keep his business bouncing along.
And Andrew North, of luxury used car dealer Alexanders Prestige, says even in a dip there will be positives to be had.
‘A prestige independent like us will be fine,’ he told Car Dealer.
‘There will be some wanting to sell their third car while others may want to replace a new daily driver, so there’s always opportunities no matter what happens.
‘If the economy gets worse that will simply allow us more buying opportunities.’
Positivity, it seems, may well need to be the name of the game.
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