THE car dealership industry is set for one of its worst periods in many years as a result of economic uncertainty, waning consumer confidence and ever decreasing disposable income – that’s according to Ernst & Young’s 2008 Car Dealership Report.
The report goes on to say that the dealerships most at risk are the small to medium sized operations – those with sales less than £100m– as their reliance on used car sales will be impacted by a consumer slow down and by manufacturers putting incentives behind new cars.
David Duggins, Ernst & Young partner and co-author of the report, says that against a back drop of increasing sales during 2007, 49 per cent of small to medium dealerships have reported annual losses and with a challenging climate for car sales predicted, he feels there maybe many casualties at the smaller end of the sector in 2008.
‘The overall increase in new car sales in 2007 gives rise to the impression that the industry overall had a good year,’ he says. ‘But if you consider that the small to medium dealers had a tough time breaking even in 2007, it would suggest that many small to medium sized dealers could be heading into financial distress.’
Examining the latest results publicly available for UK dealers reveals that the majority reported an increase in sales last year, but large and mega dealerships (revenue above £100m) fared best, with 75 per cent showing growth.
Commenting on the significance of these sales figures, Eric Wallbank (pictured above right) director of Ernst & Young’s automotive team and co-author of the report, says: ‘The figures demonstrate that there are clear benefits of scale in the drive to increase sales.’