AM Online

Karma Cars to scale down

A troubleshooter has been called in to Karma Cars less than six months after the Watford used car supermarket was launched by Private and Commercial Finance Group.

AIM-listed PCFG had originally charged Karma only with breaking even, its focus being to showcase the finance house’s products rather than sell cars in volume.

Mounting losses, however, have led the board to call in former Perrys Motor Group managing director Graham Dry to review the business and improve sales and profit margins.

Operations director Shane Robinson has quit and the outlet’s general manager has also been replaced.

PCFG says that with hindsight the launch last autumn was “not the ideal time” as it is traditionally the lowest quarter for car sales. The original proposed opening date was delayed by wrangles with local planners.

“The fall in consumer spending, which began in October, was an additional drag on sales and exacerbated the teething problems associated with opening a new venture,” says chairman Michael Cumming.

“This resulted in a significant loss in its first three months in addition to the significant setting-up costs expenses over the year.”

PCFG is understood to have invested at least £500,000 in the operation and Cumming claims each successive month since opening has seen increasing numbers of cars sold.

“We remain confident in the original business model behind the venture; that of creating a vertically integrated car retail and finance operation,” he says.

“However, its success obviously depends on sufficient volumes of car sales, and we are monitoring the situation closely.”

The losses are likely to halt PCFG’s ambitious plan for a network of up to six Karma Cars supermarkets around the M25.

At the launch of the Watford site, chief executive Tony Nelson claimed two more would follow in early 2005. However AM has learned that PCFG has a one year get-out clause in its Watford lease, so could abandon the project entirely.

Sources tell AM it is already scaling down its stock levels.

Nelson hadn’t returned our calls as AM went to press.

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