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Dealers face profit crisis, claims report

Pressure from shrinking profit margins has forced many dealers into receivership, despite retailing more cars, according to a new industry report.

The UK car market, published by consultants Mintel, claims that the average net profit from car retailing as a percentage of sales has fallen from 1.5% to 1% since the mid-Nineties.

“The majority of profits are generated through non-retailing activities such as servicing and parts supply,” says the report. It blames manufacturers for cutting margins.

Between 1995 and 2000, the number of dealerships fell by around 15% to 6,300, attributed to “growing pressure” from carmakers to offer more aftersales services from larger premises. Sales per outlet, though, rose by 40% to around 367 units.

“This is a result of the trend towards multi-franchised outlets and consolidation within the sector,” says the report. It predicts further consolidation, particularly affecting independent carmakers, as economies of scale become critical.

Carmakers' production volume, previously “adequate” at around 2m units a year, “is expected to double” over the next 10 years “due to globalisation and rising costs”. The report says the future of “BMW, Honda and even PSA Peugeot-Citroen” was in some doubt.

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