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AM100 autumn update: new car sales take a back seat

Authors: Daniel Taylor, from Grant Thornton, and consultant Piers Trenear-Thomas

The industry has been seeking to reduce the dependence on new cars Pendragon have been concentrating on lower priced used cars and service customers, and have made much recently of their investment in the old Quicks brand for its used car supermarket initiative.

Lookers has continued to expand its parts business by growth and by acquisition and profits from car retailing have been significantly bolstered as a result.

Most of the larger groups have at least some sort of used car specialism – for example Arnold Clark with Arnolds Motorstores; Lookers with Lookers Trade Centres; Vertu with Motor Nation.

Their experience has been mixed. While specialists can get it very right, - making double the return on sales of most franchised dealers - the franchised sector seems to find it hard work.

Nevertheless since the challenge is to retain, or access, more customers, relying on new car sales to do that must be a limiting strategy in challenging times.

It seems logical to think that there should be synergies. After all, it is the existence of a highly
developed change mechanism that bolsters the new car market.

Countries where the used car market is less well developed, see proportionately fewer new cars sold.

Again however, franchised dealers seem to find these synergies elusive.

Camden Ventures do not even appear to look for them. Its investment in the used car sector – Car Shops – appears to be successful almost because it is a stand-alone investment, rather than gaining from being one investment amongst a collection of franchised businesses.

It will be interesting to see whether a winning formula emerges.

The statistics in use on these pages indicate some directions for some strong recommendations, but are at present merely scratching the surface.

We look forward to more detailed and penetrating analysis, covering a greater proportion of groups in the automotive sector, both in scale (including groups outside the AM100) and operation (commenting on the businesses of those less reliant on the franchise model).

 

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