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Dealers lose average £9,500 in May

The average motor retailer made a loss of £9,500 during May as the impact of the scrappage scheme began to wane.

Whilst new vehicle registrations remained strong, overall profitability fell as the motor dealer sector began to prepare for a more difficult remainder of 2010

Overall profitability took a step backwards during May with the average retailer showing a year-to-date profit of £61,000, according to ASE.

Whilst this is still 50% greater than for the same period in 2009, for the first time dealers failed to beat the monthly result reported in the prior year.

This is not surprising given that the scrappage scheme was just starting to take off in May 2009 and this trend is forecast to continue for the remainder of the year, with the majority of dealers battling hard to retain the profit earned during the first quarter.

 

This will require a change in focus for the majority, as the profitability in the first five months has largely been built on a creditable new car sales performance.

The SMMT is forecasting significantly lower sales volumes in the second half of the year compared to both the first six months and 2009. Dealers will therefore need to improve focus on both used cars and aftersales.

At 61 days, used vehicle stockturn remains a concern, particularly given the recent seasonal drops in the pricing guides.

On current stock levels the July book movement produced a £10,000 stock adjustment for average dealer. As ever this overall view masks a variety of pictures with quality stock still very difficult to acquire. For the first time in over 12 months we have seen the emergence of a significant volume of late-plate vehicles.

Service profitability remains disappointing, with the average dealer £18,000 down on 2009’s result. This can be seen in the drop in both efficiency and gross profit. Service sales processes need to be reviewed and optimised to drive after sales profits during times where the customers are watching every penny.
 

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