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Dealer views on the health of the market

Each quarter AM surveys dealers in its High Performance Indicators survey on the state of the market and their confidence in areas such as sales, profitability, manufacturer relations and consumer demand. The survey includes telephone interviews with a number of dealers.

Their views are expressed here on the end of 2011 and the outlook for 2012.

Jonas Zambakides, managing director of JZM Porsche Sales

“We have three elements to our business – used Porsches, Porsche maintenance, repairs and tuning, and the online Porsche accessories shop. We got into e-commerce because we recognised that we needed to be more diverse.

“Month for month, last year was a mirror image of the year before. People have settled into the recession and every time there was a glimmer of hope something happened in the global markets or the EU to set us back again. For Q4 there was no real bang or zip, it just carried on.

“However, I think there will be an improvement for all car businesses in 2012. As long as dealers came out of 2011 unscathed the rewards will start to come. Both used and new car sales will be buoyant because there will be a lot of discounting from manufacturers to get the market moving.

“There may not be huge amounts of profit made, but at least there will be an increase in turnover. That will bring some energy into the market and momentum should pick up.

“The bottom line is that used cars are good value across the board, whether it is a Porsche, a VW or a Ford, the price has been driven down. There are people out there who do budget, who do plan for their next car purchase or getting one for their son, daughter or grandkid. These people will buy because it is a good time and they might even trade up to something more exotic.”

Richard Sanders, managing director of Richard Sanders Ltd

“We are a family-run regional group and recently acquired our fifth site – a Citroen dealership in Northampton. We are very retail focused, not into short-term rental or big fleet volume, so that makes us a good barometer for what is really going on.

“Over the last month sales activity for new and used cars is up by five percent on the same period last year. Our aftersales activity has declined a bit, but we enjoy a good reputation and a high level of customer loyalty.

“Profitability in this industry is far too low. You should be making two percent on volume and three on premium, but the plcs are achieving nowhere near this.

“Over the last two years we have restructured to meet demand rather than trying to force the market. None of the manufacturers have more than three core models so you don’t need vast showrooms or 10-ramp workshops.

“I see the industry continuing to change at a rapid rate of knots, but I do not see the market growing. This is not due to the economy but because manufacturers are producing exemplary products. Someone with a three year-old Qashqai with 40,000 miles on the clock will say ‘You have just serviced it and nothing is wrong so why should I change it’.

“The announcement by Renault to reduce the network is a very brave and solid decision – it probably needs to be mirrored by a few other manufacturers.

“There has been a massive amount of mergers and acquisitions recently and if there is a good business opportunity then we are interested. There is always a future for well-run businesses.”

Mark Lavery, chief executive at Cambria Automobiles

“From April last year the market toughened and we expect it to remain tough for the whole of 2012. Used sales are flat year-on-year but they came back a bit in Q4 and January, which is encouraging. Aftersales margins are in line with last year. New car sales are strong but the margin is dreadful.

“Our financial year finished on 31 August and we pumped in a record year, but we will not be providing anything like that this year. There are inflation, unemployment and exchange rate issues, although currency is beginning to move in our favour with Sterling getting stronger. We have had to rationalise the business and the cost savings from that will kick-in from January.

“On the digital side we are getting into social media, grabbing hold of each lead and not letting go. There is a market there but you have to go and get it.

“January saw a significant increase in new vehicle volumes but at massively reduced margins, which is a dangerous step. The manufacturers are all powerful once more and they have global targets to make. Italy and Spain are particularly under pressure and the Greek market has stalled, so they are increasing our targets.

“If your new car department is operating at a loss it can pull the rest of the business down, so there is an interesting set of market dynamics. The flipside is that this will afford opportunities to grow the group. A number of operators who are not as robust as us will find these market conditions untenable. We will look to take advantage.”

Derek Gentles, operations director, John Martin Group, Scotland

“We are generally more optimistic about the next three months. Any issues we had relating to stock in 2011 have been resolved and we are far better prepared for 2012. Key to this is that our expectation levels are far more realistic for this year and the budget is set in line with these expectations.

“In Quarter 1 we anticipate an improvement in used car sales and a small improvement on new car sales, albeit this is largely because we’ve added some more franchises to our businesses. But the bottom line is profitability is set to increase.

“In the main, manufacturer relationships are improving which is good when you consider we have 11 franchises. Manufacturers are being more realistic. Production and distribution is lean; there are no signs of overproducing like we have seen previously. Manufacturers, like us, are basing 2012 on realistic goals rather than a wish list. Whilst targets are ‘must do’ they are much more doable.”

Martin Shaw, managing director, John Clark Motor Group

“Car sales in Aberdeen have stayed buoyant, but the central belt of Scotland has struggled in the past three months across both new and used sales. However, prices have stayed reasonably buoyant, particularly in the used car arena.

“I am more optimistic now than compared to this time last year. Increases aren’t being looked for in the same way, even though we did actually achieve our targets in 2011. When we set budgets back in October last year we weren’t as confident as we are now. Indeed, we expect to see a small growth in profitability in the next 3 months.

“In particular, we are looking forward to getting new stock this year. Getting our hands on the new cars we wanted to sell prevented us doing better in 2011. Indeed, stock availability was a concern last year.

“Over the last year we have invested in improving customer care, both in terms of training our staff and recruiting people with more appropriate skill sets. Customers have higher standards and as such we are seeing the pay off of investing in the tools to meet customer service expectations.”

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