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The big picture: Dealers set for stormy times

At one point midway through September, retailers were talking about new car registrations down on September 2007 by 20, 25, even 35% in a couple of instances. 

The figures, due out next week, will no doubt show a far smaller drop – though don’t be surprised if it is close to 20% – after the usual flurry of late-month registrations fuelled by pack deals. 

However, the volume of ‘sales’ going through the book in the final two to three days of trading could be quite a bit smaller than usual.

Why? Because some carmakers have adjusted their sales targets to take into account the growing economic worries. It has eased ever so slightly the pressure on dealers to hit numbers in order to secure bonuses.

Honda has already cut its targets for the first half of the year by 10%, and it isn’t the only one; others are looking at third-quarter targets.

But with many marques likely to show red figures of -20% and more in September, even that action could be in vain for many dealers.

With 17 of 22 trading days completed, the figures stood at a little over 250,000, some way off the SMMT’s full-month forecast of 390,000 and not even in the same ball-park of September 2007’s 419,290. 

End of year slowdown

On the back of an awful third quarter comes the traditional end-of-year slowdown. It’s a time when many dealers are reliant on friendly bank managers to help tide them over to the New Year.
Consider the fact that average return on sales was just 0.6% for the first seven months of the year, down from 0.9% over the same period last year.

But the traditional slowdown pulled last year’s returns down to 0.7% for the full 12 months, so expect the 0.6% to be similarly whittled down. How many dealers will be trading in the red come December? 

With the ongoing banking crisis, credit lines are going to shorten, if not disappear, and any company that has not been able to make sufficient provisions will face a difficult time. 

It’s a cheerless prediction, but I fear that we are going to see a lot of dealer failures. By January we could see far fewer dealerships than the 5,500-odd we started 2008 with.

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