The industry had seen a poor start to the year with the number of business failures in the automotive industry increasing by 67.9%, according to Experian, the global information solutions company. This was the second largest increase in insolvencies experienced across the 34 industries reviewed by Experian.
However, a fall in the number of business failures during the rest of the year indicated that motor traders have been taking appropriate steps to deal with the threats they have been facing.
Fewer automotive businesses became insolvent in the second quarter of 2006 (down 2.9%) and a big drop in business failures during quarter three (down 18.8%) was followed by a further decrease in quarter four (down 1.4%). But, the sharp rise in corporate failure during the first three months of the year has ensured that the automotive industry has still increased its overall rate of insolvency by 7.1%.
Rob Whalley, managing director of Experian’s Automotive division, said: “2006 kicked off with a dramatic increase in the number of automotive businesses going bust and that had a huge effect on the year as a whole.
“The situation is not surprising given the challenges confronting motor traders. While consumers have faced various demands on their personal incomes this year, such as energy and fuel costs reaching an all time high, the internet is making the environment more competitive and other demands such as pressures on prices are affecting profits.
“With, 2006 showing the highest number of automotive business failures recorded (since Experian began collecting the data in 1997), dealers must continue to look for more effective ways of marketing and selling their products and services to remain profitable and to remain in business in 2007.”