The number of car showrooms has fallen year on year, according to the annual survey of suppliers to the UK car market, by the Institute of the Motor Industry.
Compared to last year when dealer numbers increased, the IMI dealer network survey revealed that manufacturers are being forced to explore alternative methods of new vehicle distribution in a bid to increase profitability amid increased costs, competition and over-capacity.
The number of franchised outlets currently totals 6,328 compared with 6,439 at the same time last year. Among those companies taking extreme action, Mercedes-Benz has already announced a radical shake-up of its entire dealer network to gain greater control of the retail function. It is understood that this will include the implementation of high street merchandising outlets and three nation-wide 'experience centres'. Such a concept is also being established by other marques, including Toyota and Honda, says the IMI.
The IMI survey also showed that dealers are having to make significant future investment in their premises and equipment, typically as much as £250,000, in order to fulfil manufacturers' plans. It is anticipated that this could bring about a further decline in dealer numbers, particularly among smaller, independently owned businesses, in view of the wafer-thin margins on new car sales.
Opinion remains divided over whether the sales and servicing functions will become increasingly separated. The survey revealed that specialist manufacturers such as BMW and Porsche consider the two interlinked, whereas volume carmakers see the logic of introducing more service-only outlets, as the number of showrooms is reduced.
According to the institute, this could fuel a demand for more skilled and better-paid technicians, which the industry desperately needs to combat a severe skills shortage.
Similarly, the appointment of 'specialist dealers' to handle selected models, which will involve specially trained personnel, appears to be a growing trend.
Manufacturers such as Vauxhall and Toyota have employed this principle, which demonstrates the increasingly specialised nature of the product and the necessary advanced skills required by dealers.
Commenting on the survey, Peter Creasey, the institute's chief executive, said: “There is no doubt that the retail motor industry will continue its metamorphosis in line with challenging economic conditions and consumer demands.
"One thing remains, however, and that is the need to match the quality of personnel with the quality of the product, to ensure that cars are sold and maintained by qualified, customer-focused people. Achieving this by working closely with the industry remains the focus of the Institute.”
Full details of the IMI dealer network survey are published in the May issue of its magazine Motor Industry Management.
For further information contact Stuart Brooks on 01992 511521.
Full analysis of the IMI survey will also be in the May 25 issue of Automotive Management.