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Cox Automotive Insight Report respondents predict car dealership consolidation

Philip Nothard, Cox Automotive’s customer insight and strategy director

The majority of car retailers expect at least 10% of dealerships in the UK to close within the next five years, according to the findings of the latest Cox Automotive Insight Report.

Compiled by Cox’s customer insight and strategy director, Philip Nothard, and Grant Thornton’s associate director of business consulting, Owen Edwards, the report found that 90% of those surveyed expected a reduction in the number of car retail sites.

The report indicated that many were ready to embrace a shift towards online retail in a bid to mitigate the effects of a declining physical presence, meanwhile, with 60% stating they will have online transaction capability within two years.

Nothard (pictured) said: “The role of the dealer is still crucial, but we know that consumers want to interact with the automotive retailer in a variety of ways – notably via a range of digital platforms.

“Our analysis clearly shows it’s not just a case of replicating the retail experience via the internet.

“Those dealers that are leading the retail evolution are embracing technology to improve the customer experience and bring more flexibility into the car buying process.”

Cox’s report found that the increased in the automotive retail market since the global recession, had resulted from franchised dealers’ drive to increase profitability through efficiency improvements, cost savings and economies of scale.

Nothard indicated that the trend would only continue, adding: “None of the respondents anticipated a rise in the number of UK dealer locations, and the vast majority (94%) expected some contraction, with 43% predicting a reduction of 10- 15%, far more conservative than some of the recent headlines on shifting industry trends.”

“What’s clear is that consolidation is a method of improving efficiency, the number of dealerships may reduce, but what will emerge are stronger businesses that are better suited to the market.”

Cox claims to have achieved “considerable accuracy” with its used car transaction forecasts to date.

Its first forecast in August 2018 proved to be within 1% of the final figure reported by the Society of Motor Manufacturers and Traders (SMMT) and was followed by a prediction of used car transactions for Q1 2019, correct to within 1,000 cars.

For 2019, Cox Automotive predicts a 2% decline in used car transactions – down 7.795m on 2018.

Reduced supply and a drop-off in new diesel sales were cited as causes of the predicted decline.

Nothard concluded: “As retailers shift their attention to used vehicles, stock is key, and an appreciation of supply and demand in the wholesale market is vital to help maintain strong margins.”

“This is particularly true as we enter a period of fuel transition. Low-age diesel stock is still in demand however data from Manheim shows that petrol vehicles are beginning to make up a larger share of wholesale volumes.

“As fewer new diesel vehicles enter the market we may see a short-term increase in used values, although interest in these vehicles will wane in the longer term.”

The Insight Report’s analysis of growth in Mobility as a Service (MaaS) in the UK suggested that there had been a change in attitudes towards vehicle ownership.

While 35% of respondents back in 2015 agreed with the statement “Having transportation is necessary, but owning a vehicle is not” this figure rose to 39% by 2018.

Edwards said: “For the foreseeable future, the focus for the UK automotive sector is likely to be on more immediate concerns such as online retailing and the impact of alternative fuels. However, MaaS and CaaS are two topics that the industry will need to embrace.”

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