But for Peter Vosper, it has created an environment for him to make bolt-on acquisitions which will consolidate the position of 46th-placed AM100 group Vospers Motor House as one of the strongest motor retailers in the south-west of England.
“Three years ago we had to make up our minds whether to go for further expansion or get out of motor retail,” says Vosper.
He and his team decided on the former – the group has since gone from 11 franchised outlets turning over £111m to 31 outlets and £188m.
“Standing still wasn’t an option because of the rate at which this industry is progressing,” Vosper says.
“To my mind, there is no question that, looking into the future, big is beautiful. We need the economies of scale and strength in the business’s finances to be able to handle the volumes that the manufacturers now want us to handle.”
In 2005, after decades dedicated to Ford and Mazda, Vospers took advantage of the new entitlement under Block Exemption to operate multiple franchises from the same showroom.
Fiat was slotted in alongside its Ford operations in Redruth and St Austell.
“Ford is still market leader and has great product and a very strong brand, so our future is confident with it. But at its peak it had 30% of the market.
Naturally, as more brands have come into the marketplace, Ford’s share has dropped to almost half that,” Vosper says. #AM_ART_SPLIT# Providing more choice
“We have to consider our customer base – people want more choice and that’s something we’d like to provide.
We’ve chosen brands that complement our operation.
We’ve worked hard to get our customers and want to be best positioned to attract customers and keep them for life.”
A steady stream of acquisitions started in 2005.
First came the take-over of EMG’s four Ford, MG Rover and Subaru sites and a further acquisition of Exeter Ford and Torbay Ford from Pendragon.
The following year, Vospers bought Carrs of Exeter Mazda, opened Plymouth Fiat, Tiverton Ford and Treliske Subaru.
In 2007 it gained its fourth Fiat outlet with its acquisition of Sidwell Motor Company in Exeter.
Already this year, Vospers has added an Alfa Romeo sales franchise to the Exeter Fiat site.
It had operated an authorised aftersales franchise for the Italian marque since 2007, but Vosper was keen to get a slice of the brand’s stylish new car range.
Vosper says he is not finished yet, although no deals are on the table at present.
He would like to expand further with Ford and his other manufacturer partners, and the Alfa Romeo business has given him a taste for premium brands.
This year, turnover is expected to breach the £200 million mark for the first time.
Ford will account for around three-quarters of that, but the recent acquisitions have given Vospers an entry into new market segments.
Vosper predicts a fifth of group sales will come from his Fiat and Mazda businesses, which have been strengthened by the launch of the Fiat 500, Mazda2 and Mazda6.
Subaru is the poorest performing brand in the group’s portfolio at the moment.
Vosper admits the operation hasn’t made a profit in the last 12 months, but he nevertheless remains upbeat.
“We’ve been desperate for the diesel.
By the end of this year we will have that in the volumes and models we want, so this will change.
Customers have been waiting for it.
It’s been a very difficult franchise with only petrols in the current market.
“For us it’s a niche marque but I can see us doing business once the diesel is here with the farming community.
I think because of fuel and tax costs they will want to downsize but remain in 4x4s, which is an opportunity for us with Subaru.”
#AM_ART_SPLIT# Commercial vehicles
The group also has a strong commercial vehicles operation, selling around 2,500 units a year, delivering to customers nationwide.
Parts distribution is another large revenue stream, with 30 delivery vans supplying aftermarket parts to independent repairers in Devon and Cornwall.
The big issue that Vosper would like addressed is new car profitability.
“We need more sustainable margins.
You shouldn’t end up with the bonus as the profit.
The goal of the quarterly objective means that people discount the product from day one, and you can only do that short-term.
“I don’t believe that we make enough profit to invest for the future.
It’s important that we improve our profit. We need to make more money on new cars,” he says.
He has already tackled overheads.
Vospers owns many of its properties, and the business is a member of Retail Automotive Alliance, which was founded in 2005 by 22 regional dealer groups to give them a greater scale of buying power.
This has saved Vospers “hundreds of thousands of pounds” through supplier contracts for oil, paint, insurance and large volume consumables.
The next big development Vosper would like to see is RAA members sharing best practice.
Company name: Vospers Motor House
Locations: Exeter, Falmouth, Liskeard, Plymouth, Redruth, St Austell, Tiverton, Truro, Torbay
2008 projected turnover: £200m
Outlets: Ford (10), Ford LCV (4), Mazda (3), Fiat (4), Fiat LCV (4), Subaru (2), Iveco (3), Alfa Romeo (1)
Key executives: Peter Vosper, managing director; Eric Goss, finance director; Nick Vosper, general manager