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Car dealer profits will not ‘catch-up’ until March 2019, warns ASE

Mike Jones, ASE chairman

Buoyant car registrations resulting from the September switch-over to WLTP and RDE fuel economy and emissions tests saw car dealers defy the usual August slump with a £200 average profit, ASE has reported.

But ASE director Mike Jones warned that a September slump might consign retailers to a battle to meet profitability targets that might not be won until March next year.

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Jones attributed August's positive shift to the “significant incentives being provided to move cars prior to the start of September” as he revealed in his monthly update on the profitability of the sector that the relatively small profit came in contrast to a £17,000 loss during the same period in 2017.

Jones echoed the sentiments of other industry commentators, who expressed concerns that a dearth of supply as manufacturers battle to meet their WLTP re-testing obligations, in voicing his opinion that retailers’ performance could have faltered in September, however.

He said that he was expecting “a significant profitability fall in the months”, adding: “With September registrations looking like being over 20% down on 2017 hitting annual profitability targets is clearly going to be a challenge for retailers and brands.

“We need a supply of desirable vehicles to enable us to undertake a December sales push and we also need the demand to still be there.”

He added: “My prediction is that, despite the forecasts of some brands, we will not fully catch up in 2018 and retailers will see overall annual profitability fall, to be followed by a catch-up in March 2019.”

ASE’s monthly profitability updates showed the growing reliance of retailers on their used operations.

During the 12 month period to August 2018 the average used to new car sales ratio has shifted to 1.42:1, compared to 1.27:1 a year earlier.

The return on used car investment has fallen to 85% from 89.8% a year earlier, however.

During the rolling 12 months to August 2018 retailers made an average 0.98% net profit as return on sales – up 0.01% on the same period a year earlier.

The average sales per sales executive also rose year-on-year in the 12 months to August 2018, to 161 (2017: 155).

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