‘Survival of the fittest’ – the future facing Citroen’s UK dealer network

Time 8:55 am, October 15, 2019

CITROEN’S UK network is undoubtedly going to suffer over the next 12 months with some dealerships likely to close.

That’s the outlook from boss Karl Howkins, pictured, who said casualties were likely but the manufacturer was doing all it could to help dealers weather the inevitable storm.

In an interview with Car Dealer Magazine, the managing director of the UK division said: ‘We’ve probably got three things affecting us. We’ve got Brexit around the corner, which is presenting a bit of uncertainty for us in terms of the market and obviously what it’s going to look like next year. The second thing we’ve got is the market not moving towards electrification as quickly as we’d like, because people are still weighing up “Do I need a hybrid or do I need a full electric car?”, and then kind of around that is the third issue – this new legislation change called Cafe [Clean Air For Europe] 2020, which goes live on January 1 next year. We’re hell-bent that we need to get our emissions in line with the objective of 95g and below – we don’t want to pay any fines.’

With the UK poised to leave the European Union at the end of this month, he warned: ‘Import tariffs are going to come into play in terms of some manufacturers are going to be affected more than others – unfortunately, we’re going to be one of those because we’re a European/EU manufacturer.

‘Clearly, we need to take that into account if there is a hard Brexit at the end of October, so we’re geared up for that. We’re definitely in a position where we’re planning for the worst and hoping for the best, but planning for the worst without being too downbeat. We need to be in a position where we make sure that we protect the business and obviously try to protect our network as much as possible but still sell cars and vans.

The Citroen C3

‘We’re not downbeat; we’re pretty optimistic. We’re going to keep going even if the market is down 20 per cent – the other 80 per cent is going to be active, so that’s kind of our mantra really.’

Is it something dealers need to worry about? ‘Not be worried but they should be concerned. We’re working with the network in terms of resizing their businesses. If the market is going to be down, clearly they need to address their structural costs.

‘We’ve had some pressure points – the early ’90s was pretty tough; 2008/2009 was pretty tough; we’re probably due another tough market. As I mentioned before, we’ve got Cafe and Brexit around the corner. So it’s challenging but it’s unfortunate. I say this to my guys: “It’s going to be a little bit of survival of the fittest.”‘

Nor did Howkins mince his words when asked what he’d say to Boris Johnson if he were talking directly to the prime minister. ‘I tell you what I’d say: “Stop the uncertainty, get a deal done, or get an extension. Because more than anything else it’s the uncertainty that’s causing more problems. And equally, keep in mind that there’s 65 million people in the UK, so we all should stick together and not be in a position where we’re all trying to divide and conquer.”

‘Personally, I don’t think another referendum solves it – the country’s made a decision, you’ve got to move on whether we like it or not. But the longer it goes on, the more uncertainty and nervousness it puts in the market.’

But he was certainly pleased about the manufacturer’s current performance. ‘We’ve been bucking the trend somewhat. The industry is down – not massively, it’s down just over two per cent – but we’re just over 4.5 per cent up year on year. We’re up on car, we’re up on van, and we’re up on every channel, which is good, so we’re not picking and choosing certain sectors and leaving the other ones out.

‘Commercial vehicles we’re having a really good year – we’re up 9.5 per cent in a market that’s just over four and a bit per cent up. Cars we’re up three per cent in a market that’s down 2.5, so we’re doing pretty well. In terms of car line-up it’s strong for us – the C3 continues to do really well, we’ve had a good year. C5 Aircross has been good for us as well, we’ve had a strong start with it and we need to continue. And then like for like in terms of vans we’ve basically been strong across the whole range.’

The Citroen A5 Aircross

He refuses to be complacent, though. ‘We’re not comfortable because we know we’re three-quarters through the season and we’ve got another quarter to finish off. I think we’re in a reasonable place but obviously we need to keep pushing as hard as we can.’

Talking of comfort, that’s something Citroen is renowned for, and Howkins told how the fact was being reinforced. ‘Every manufacturer needs to have a USP – ours has always been comfort. I don’t think there’s as many people who know about it in the UK as there should be, so we’ve been doing a number of things around marketing and events and campaigns, etc, this year to promote comfort and what that is with the Citroen range. So yes, it’s definitely still an important USP for us.’

Giving his predictions for how the new car market will perform in the next 12 months, Howkins said: ‘Best case the market will be down 10 per cent next year, worst case it’ll be 20 to 25 per cent down. Ten per cent is natural market conditions. If you look at GDP as a benchmark – not just in the UK but say Germany, France, Italy – there’s probably “a little recession” on the way. And if it’s a hard Brexit, for us probably the market is going to be down 20 per cent.

‘It could be 25 per cent as I said, but putting it into context what will that look like? The car/van market’s going to end up at about 2.1 million or just above two million.’

Does that mean the network will shrink? ‘We’ve got a 145-strong network. Will there be some casualties? There probably will be, unfortunately. In a market that potentially could drop by 500,000, a lot of these dealers have got their business staked on a market of 2.5/2.6 million – if it drops 500k then clearly their revenue stream is going to go down if you act in the same way.

‘That’s why I’m trying to say to the dealers: “Get your business model right, get your structural costs right and look at the positives – that the other 80 per cent of the market will still be going – and don’t get too downbeat. Get tough, be competitive, but realise that you’ve got to do what you’ve got to do to survive.’

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