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'Ticking time bomb' a threat to dealers

Dealer services absorption rates on average will be between 40 and 45% by 2020 if they stay on their current path, making the franchise dealer model an “untenable ticking time bomb”, according to research company ICDP.

Director Dr Andrew Tongue told delegates at AM’s Used Car Market conference at the National Motorcycle Museum at Solihull: “Volatility is now the new normality for the new car market and the used car market needs to react.

“If your strategy is based on waiting for the market to return to normal, we don’t see that happening.”

Tongue said dealers have been adept at staying on their toes in comparison to their European counterparts. He said: “Used car profits have helped to sustain UK dealers throughout the recession.

“Dealers have the skills to cope with the challenges, but they are now being faced with a double whammy of a lack of new car sale profits and falling service demand.

“Service demand levels will only get worse and dealers will need to get a lot better at getting those older used cars into the network.”

Tongue also said manufacturers would be looking to increase their involvement in used cars in the dealer business.

He said: “How much help do dealers actually need from manufacturers in the used car sector?

“Manufacturers will be looking to strictly control the lifecycle of used cars through the first, second and third owners. Used car programmes will become more flexible incorporating mobility schemes, warranty and insurance into one package.

“The more this happens, the closer used cars become aligned to the new car process. There’s actually very little difference between a new and used
car anymore.”

Tongue said direct and closer data integration would be vital and dealers would have to retain and enhance their skills regardless of manufacturer controlled used car schemes.

He said: “Dealers still need that magic in their fingertips, but it needs to be combined with process thinking.

“Every car purchase in the future will be influenced by digital process.

“Increasing volumes of data are being collected as a result of this increased activity.”



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