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Dealer profitability remains top priority for Mitsubishi

Mitsubishi has told its 120 dealers that their profitability remains its number one priority and it will not pull the financial support it has been pumping into the network until it is happy with profit levels.

In 2009, the manufacturer began covering dealer costs such as staff training and point-of-sale material.

“We took away franchise costs, we also reduced stocking costs and demonstration requirements,” explained Mitsubishi Motors UK managing director Lance Bradley.

“This will continue through 2010 but there are no promises that this will continue after that, it depends on dealer profitability. However, we will not cut off support until our dealers are selling enough – there will be no cold turkey.”

Mitsubishi dealers’ profitability has been improving: in 208 it was 0.92%, in 2009 it was 1.2% and “we want it to be 2% return on sales, if we succeed in that by the end of this year, I will be very pleased”, said Bradley.

The manufacturer is also demanding that its dealers produce a budget – something it has insisted on in 10 years. “We need to focus on numbers not feelings,” said Bradley.

But with costs stripped out, dealers must sell more vehicles.

Registrations fell to 16,000 last year from a peak of 38,000 four years ago.

But sales this year have been healthy and are almost double that of the same period last year thanks mainly to the appointment of dealers in Birmingham, Manchester, Edinburgh and Sheffield last year.

With the new L200 and the compact crossover ASX arriving in July, which opens up a new sector for Mitsubishi, as well as existing models getting a facelift, there is every chance Bradley’s aim of selling between 18 and 20,000 vehicles this year could be a reality.

Although he also needs to appoint dealers for the five open points in Kent and Yorkshire.

“The plan is for annual volume to reach 30,000 units over the next three years,” said Bradley.

But a lot depends on the pick-up market, where Mitsubishi enjoys some 40% of the retail market with its L200.

With 1,000 units – mostly Colts - being sold under the scrappage scheme, Mitsubishi is not expecting to suffer from the post-scrappage hangover that some of its counterparts will be hit with.

“We could see that it would be easy to become addicted to scrappage,” said Bradley.

”So we set targets and most of our models were unaffected by the scheme, so its impact has not been as great as other manufacturers.”

However, dealers should still expect a Colt incentive programme to be announced.

Mitsubishi is also carving a name for itself as a leader in zero-emissions cars with its i-Miev, the first mainstream electric car to go on sale in the UK.

But for a small four-seat city car, its hefty at £38,699 price tag is going to make it a challenge for dealers to shift, at least until 2011 when the £5,000 Government subsidy kicks in.

“I aim to use our electric car to change the public perception of the brand by the end of next year. I’m convinced many people will regard Mitsubishi as an environmentally-friendly manufacturer when they realise that the £115 cost of travelling 12,000 miles in an i-MiEV compares with around £1,200 in a petrol car – and they no longer have to pay road tax, or congestion and parking charges,” said Bradley.

“But the price currently is relatively high and our dealers are not ready yet. This is a completely new market so we are using the car more for PR than sales this year.”

Dealer group Inchcape is putting its support behind i-Miev and has just established a dedicated showroom in central London where the majority of the electric cars are expected to be sold.

The group’s move is great for Mitsubishi, which did not have representation in central London and has strengthened the relationship between the manufacturer and the dealer group, following Inchcape’s acquisition of the Mitsubishi outlet in Colchester last year.

“Our experience of Plcs has been poor, we tend to get ignored,” said Bradley of the company’s previous run-ins with large dealer groups.

“However we are very impressed with Inchcape – we have an excellent relationship.”





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