terminations, profit margins and just about everything else over the past 40 years. VW, Toyota, Nissan and others have taken over the reins from pioneering distributors. Even Porsche, in charge since the 1960s, needed AFN to kickstart its own sales in Britain.
But there is still scope for entrepreneurs. New automotive manufacturing countries keep emerging, and China is likely to be a potent force looking for overseas sales by around 2010. It will doubtless need an experienced British distributor to get sales started.
For now, Hyundai Cars is the biggest independent, taking 1.41% of the UK market year-to-date.
The importer is part of the RAC (originally Lex Service). Bob Edmiston’s IM Group has the most marques, importing and distributing Subaru, Daihatsu and Isuzu, though its total sales do not match Hyundai’s. IM blazed a British trail for Hyundai from 1982 to 1993 before selling the concession to Lex. It took over Daihatsu from Inchcape in March 2000 and once distributed cars for SsangYong. IM Group’s spokesman, says: “IM has specialised in looking after niche brands, and we feel we can do it better than the manufacturer.”
Independents are no more uniform than manufacturers when it comes to distribution. Lex Service invested heavily in building the Hyundai brand and, with an improving model range, has increased sales – they broke through 1% of the market in 1997 (to 1.18%), reached 1.25% in 2003 and 1.41% for the first half of this year.
Hyundai Cars spokesman Rodney Kumar says: “Hyundai Motor Corporation has no plans to take over here. It directly distributes in the US and Australia, but relies on independents in its other 191 export markets. An independent can be an advantage to dealers – Hyundai drives us, rather than the network directly.”
The Colt Car Company brought Mitsubishi to the UK 30 years ago and made good money for itself and its dealers when Shoguns were in strong demand. Registrations have fluctuated but a slump to 10,344 in 1994 was followed by a recovery to 32,282 last year (includes LCVs).
Mitsubishi Corporation has a 49% share in Colt and direct input into policy changes. Control, though, is complicated by Mitsubishi’s alliance with DaimlerChrysler, which has a 37% stake. DC no longer has veto authority, however, following its decision not to pump further funds into the ailing Mitsubishi Motors.
There are cases to be made for direct and indirect distribution. Direct: manufacturers have total control over everything – building cars, shipping, branding, pricing, cost control, parts distribution and management of the retail network. Indirect: independents claim greater knowledge of local trends, react quickly to economic and other changes and are better placed to improve brand perception.
Nowadays, the success of either approach is dependent on the steady arrival of new product and consistent supply. It was not always like that, because back in the 1960s Japanese cars sold on reliability and cheapness.
Octav Botnar, an East European with vision and ruthless sales techniques, first brought Datsuns to Britain in 1969. Sales were pinned by import quotas, which led to Nissan, Toyota and Honda opening ‘transplant’ facilities. The next logical step was to take control of distribution and Nissan Motor GB replaced Botnar’s company in 1992. Initially sales dropped, but have since risen close to pre-’92 levels.
Mazda’s fortunes have improved significantly since distribution moved from MCL in August 2001 to Mazda Motors UK. Four years ago, Mazda was taking a 0.6% share of the UK market: this had risen to 1.87% year-to-July. “Retailers prefer contact with the factory through us and I do not believe there will be a swing back to independents – there is better control of the brand this way,” says Philip Waring, Mazda Motors UK managing director.
MCL also used to distribute for Kia, whose sales have risen substantially since the factory took control. Last year, they rose 71% to 21,177 units; this year they are up another 44%. Not all manufacturers prosper when they take over, however. Proton came to UK showrooms through entrepreneur David Brown who sold out to the manufacturer in 1994, when registrations totalled 12,452. Last year, the total was down to 2,201.
Brian Collier, Proton Cars UK managing director, says: “Proton has supported us through a difficult time with massive investment in the network and our dealers have been extremely loyal. Now we have the new GEN-2 model to launch our recovery – I doubt whether an independent distributor would have taken the long-term view.”
Why the middleman has a place
Automotive retailers can win good profits by being among the first to represent a new manufacturer selling in the UK, says Alan Pulham, RMI franchised dealers director.
“A manufacturer tends to appoint an entrepreneur as distributor when entering a new market and will pay a premium for a middleman with the right knowledge,” says Pulham. “Daewoo was the exception and got into trouble when used cars became an issue because it didn’t know what to do with them.
“Reaching 1% of market share is usually the point when a manufacturer takes over. Leaving the entrepreneur in position too long makes it difficult and costly to take control – Proton has not exactly flourished after eventually taking over.
”For dealers, there is good money to made early on before a manufacturer starts to insist on expensive tiles and other costly fittings in the showroom. Clever dealers know when to leave and move on to the next newcomer.”
Pulham believes the vehicle manufacturing sector can expect further radical changes over the next decade. “I expect the Chinese to be here in about five years and its carmakers will be able to meet the British demand for more and more smaller, inexpensive cars. That’s where the sales growth lies, not in cars like the BMW 7-series,” he says.