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AM Roundtable: Earthquake aftermath is adding to dealers' woes

Franchised and independent businesses met in Coventry this month for the AM Roundtable, sponsored by Close Motor Finance.

Key topics discussed included the effect of the Japanese earthquake on dealers, a lack of competition in the finance sector, apathy towards electric vehicle sales and the importance of keeping on top of online activity.

Earthquake affects supply

Jon Mathers, Cross Roads Subaru managing director, said: “We’ve lost all production for a year due to a micro electrics factory that’s been affected by the Japanese earthquake. The Subaru plant has been closed until November and we’re not expecting fresh stock until 2012.

“As a result we’ve been set no targets for this year and we’re working with the stock that’s left in the UK and our used car sales.”

Colin Knowlson MBE, chairman at Slaters of Abergele, said the group’s Nissan franchise hadn’t seen much disruption as a result of the disaster.

It’s not just Japanese manufacturers that have been affected, however.

John Miskin, Sportif Citroën managing director, said: “A lot of components are built in Japan. It hasn’t hit Citroën too badly, but there are some diesel engines that have been affected.

Mathers said: “There’s certainly been a change in our market since the recession set in. Supply is a lot more brittle across the board.

“The yen exchange rate is also a problem for us, but it’s secondary to the supply issue.”

Robin Luscombe, ex-Colin Appleyard director and now boss of Luscombe Suzuki Leeds, said Suzuki was balancing its stocks well, which had allowed the business to compete against competitors.

He said: “If a customer is in a situation where he’s visited other dealerships and he can’t get a Nissan Juke we’ll win that sale because we can give them the car straight away.”

Used car prices

Delegates agreed that used car prices still had some room to drop.

Miskin said: “Used car prices have still got a lot further to drop. There was a 5% drop in CAP value last month and I think we’ll see a similar drop again.”

At Luscombe Suzuki staff check Auto Trader and the internet to determine the price the market will pay.

Mathers said: “Customers can compare prices online and they come to the showroom equipped with the same knowledge as us.”

However, Mathers questioned the effectiveness of the price guides.

He said: “Five to six years ago we used to fill out all sorts of forms for the price guides, but we don’t see that anymore.

"The guides just aren’t in touch with the actual market. They don’t adjust quickly enough and I’d say they’re usually six to seven weeks behind where the market is.”

Online strategy

The consensus in the meeting was that a full-time employee is now needed to tackle digital marketing and optimisation.

Mathers, who handles all the search engine optimisation (SEO) for his business, said: “We use SEO to make sure we’re on the top page of the Google rankings.

"The most successful strategy for us has been buying up search specific domain names and developing our own Google strategy.”

Mathers added that it was looking likely that Google will move to a system for page rankings by allowing customers to “like” relevant pages and rank them for their usefulness.

The more likes, the higher up the ranking a website will go. The “likes” have to come from separate IP addresses.

Cross Roads Subaru will ask its customers to give the website a “thumbs up” to help improve its Google ranking.

Mathers said: “We also look for customer groups on Facebook and Twitter that match the target customer for our products, like vets.”

Cross Roads Subaru is based in rural Warwickshire, but as a result of Mathers’ efforts with SEO the dealership is number one for sales with Subaru this year and “it’s all because of the internet”.

Luscombe said: “Dealers need to have a full-time web manager, but they need to have car selling experience too.

"It’s more important for them to have some car selling knowledge, rather than being more web savvy. It’s quite a specialised skill-set for that position.”

Miskin said: “As the whole motoring industry changes with the digital age, is it really necessary to have 35,000 square foot multi-million pound pal-aces anymore? Things are changing.”

Neil Crossley, Nidd Vale Group managing director, said: “The days are gone that a customer comes in to ask for advice on what car to buy.

“Distance selling accounts for 14% of our used car sales. People know what they want. The only reason for larger facilities is the credibility it gives your business.”

Mathers warned: “There will come a time where dealers will be a used car site with servicing and new car demonstrators. The new car stock will then be taken from a centralised pool.”

More finance competition

Dealers want to see more finance providers enter the automotive market in order to create better competition.

Mathers said: “There are just not enough of them out there. We’re getting beaten with a funding stick and if customers aren’t coming in with large deposits you can’t get the funding.”

Chris Reid, Close Motor Finance key accounts director, said: “Dealers don’t want to be tied down with one lender.

"They tend to go for three or four.”

Miskin said that manufacturers’ own finance houses were squeezing very hard and it was still the most competitive in the market.

Richard Atterbury, key accounts sales director at Close Motor Finance, warned that the lack of competition meant finance providers could afford to be selective and bullish.

“There will be more entrants into the market when returns are made to shareholders and dealers alike. At the moment some providers are making returns by squeezing dealers rather than helping them,” he said.

Relationship banking

Everyone at the roundtable had experienced problems with their banks, with long-term relationships strained during the recession.

Jonathan Gravell, Gravells managing director, said: “Not all banks have a good view of the motor trade, it’s seen as high risk.”

Kel Prince, chairman of The Prince Group, had been with a particular big name bank for decades, but decided to change after receiving poor service. It took five months to change.

Mathers has also left the same bank recently. He was surprised by how slow it was to react.

He said: “I’d been a good boy, our business makes good profits, but they were just very slow to react. It shocked me.”

Crossley said: “Five years ago the market was awash with cash. Now it’s a brick wall. Nothing can get past these guys sitting in the bank, everything is under the microscope.”

Miskin said: “There’s been quite a churn in banks over the last three years with a lot of dealers changing what had been very long-standing relationships.”

Chinese manufacturers

A major concern for the future was the speed at which Chinese manufacturers are catching up with European product ready to launch into the UK.

Mathers, who has already driven product from Chinese manufacturer Great Wall, said: “The speed at which they develop and refine product and process is like a steam roller.

“I’ve driven the product and it’s already squeak and vibration free.

“The interior still isn’t quite up to standard yet, but it will be within three years.”

Miskin said: “There will be a lot of owner drivers that take on a Chinese franchise and then it won’t be long before they look to regional groups to expand further.”

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