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Leasing firms to ditch franchised dealers?

Major leasing firms could drop franchised dealer networks in favour of independent outlets for servicing and repair. According to Michael Woodward of IBM automotive business, franchised networks' service departments will be left with only half the fleet servicing market, instead of the 75 per cent share they have now. IBM research shows 45 per cent of fleet funding companies will 'consider' changing from franchised outlets to reduce service costs.

“Just a 20 per cent reduction in service prices by independents would be sufficient to get consumers to switch,” says Woodward. “Manufacturers would have to cut parts prices to stem this flow of work to independents and lower cost authorised repairers, since franchised dealers couldn't reduce their labour rates.”

However, several analysts have countered these claims, indicating that dealers could match independent labour rates through new efficiencies made possible by block exemption revisions.

“Where dealer workshops are currently occupying expensive space and where some are achieving below-optimum capacity utilisation with a solus aftersales franchise, savings can be made by moving to less expensive premises, and by combining more franchises and employing more productives with, in proportion, lower management costs,” says Toby Procter, director of MTS Knowledge.

“These new multi-franchised aftersales outlets may be host to adjacent parts operations, which again, by combining stock from different franchises, will be more efficient in achieving profitable trade sales. This is a survival strategy that can help both franchised and independent service operations.”

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