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Virgin Cars throws in the towel

The Virgin Group has given up trying to turn Virgin Cars into a money-making division, and pulled out of motor retailing. It could make a comeback, but not for at least five years.

Virgin announced the closure with a notice on its website just before Christmas and ceased taking new orders on December 22.

In 2000, Sir Richard Branson attended a high-profile launch of Virgin Cars, which he forecast would become the UK’s biggest car retailer. The enterprise struggled from the start, and Sir Richard turned to experienced car dealer Derek Cook in early 2004 to rescue it by running Virgin Cars alongside Cook’s Motor Solutions business.

Since Derek Cook’s death last May, Virgin Group has kept a low profile on its car enterprise and last year declined to answer questions about future strategy.

John Jackson, head of Virgin Retail, says: “We have about 700 orders for vehicles, and these will be fulfilled, which should take about another two months. We have lost money on Virgin Cars but not a substantial amount.

“We decided to close it because it is not a priority for us – we have a lot of businesses, and this one was not adding value to our brand. Derek Cook’s demise was also a factor.

“We had hoped to build a big online business selling cars and vans, but the amount of return was not worth the effort.”

Jackson says Virgin Group’s stake in Motor Solutions will transfer to managing director Paula Cook and other members of the family in an “earn-out”, but details are confidential.

After his tie-up with Virgin Group was announced, Derek Cook told AM that Sir Richard Branson approached him. Up to that point, Virgin Cars lacked motor retailing experience.

In November 2004, Cook claimed Motor Solutions would sell 24,000 units that year, including 80% to 90% under the Virgin brand. He had hoped to develop a nationwide network of Virgin Cars based on the initial outlet in Manchester. This remains open to clear stock but will close during the first half of the year.

Other similar online new car dealers will close in the coming months, predicts Professor Garel Rhys, head of Automotive Industry Research at Cardiff University.

He says web-based retailers cannot compete with the customer service delivered by franchised networks. Many have attracted criticism for delivery delays and providing cars that are not as specified by buyer.

“Price difference was the only reason for Virgin Cars’ existence – to undercut the mainstream network of dealers. But when the price difference disappears, that reason disappears too,” he adds.

“And when 90% of consumers are either very satisfied or satisfied with dealers, there isn’t a huge number of people who want to buy by other routes.”

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