Auto Retail Agenda: 5 November 2018

  04 November 2018

 

Retailer hits out at BMW

BMW and MINI retailer William Morgan has warned that profits should not be sacrificed for sales volume and that some in the network might struggle to make money from the business.

Unveiling a loss for 2017 of £486,000 from a profit of £1.6 million the year before and a 10% drop in turnover from £193.5m to £173.6m, the directors blamed both the sales drop and discounting to hit the manufacturers’ sales targets for the reversal.

Filing its 2017 accounts, the Northampton car and motorbike retailer said: `volume targets exceeded natural customer demand (and) put considerable pressure on retained gross margin and weakened our overall profitability.’ It also noted `Future growth in volumes driven by BMW Group has the potential to continue to dilute margins in pursuit of volume targets…the pressure on retained margin will continue until supply equals demand.’

 

Volvo reveals online sales plan for 2019

Volvo will launch a full online sales capability at the start of next year.  Speaking exclusively to Auto Retail Agenda, Jon Wakefield, Volvo UK managing director, said: “We’re launching our online sales system in the first quarter of 2019.  It will offer an end-to-end system including finance.”

Volvo has been one of the more experimental brands in blended retailing arena with experiments selling new models online and working with Amazon to deliver test drives.  According to Mr Wakefield the new system will include a finance capability from Volvo’s finance partner Santander with retailers being able “to set out their stall” on this and trade-ins.

However, Mr Wakefield remained tight-lipped about who had developed the online system but said it had not been done in-house.  Volvo’s online offer is being a test ahead of sister brand Polestar’s launch next year which “will be a digitally driven distribution model”, said Mr Wakefield.  “There will be brand centres in a few key retail areas.  It will be purely customer device driven with the aftersales done completely within the Volvo network.”

* Read the full interview with Volvo’s Jon Wakefield in Auto Retail Bulletin.

 

 

Pre-reg cars give boost to October sales

New car registrations for October will be down around 3% on the same month last year, according to figures seen by Auto Retail Agenda. The outcome signals a slight recovery in the annual trend with year-to-date until now down 7.5% and September registrations https://bit.ly/2zAWVOX  (affected by WLTP) down by 20.5%.

However, insiders say pre-registrations have played a significant part in hitting targets despite a lack of WLTP-approved models for some major brands. These pre-registered cars are likely to be older NEDC models that can be sold for another year under derogation https://bit.ly/2AKW140 rules.

One expert commented: “These cars are likely to be models or specifications that no one wants. Retailers will have to be very careful that they don’t get stuck with these (nearly-new) cars and then have to take a hit in year-end figures to get rid of them.”

Official SMMT registration data for the month is released at 9am today (Monday).

 

MSXI buys Impetus Automotive

Retail support specialist MSX International has increased its UK presence after buying outright Warwick-based consultancy Impetus Automotive for an undisclosed sum.

The move more than doubles the size of MSXI’s footprint here and the company says it adds complementary skills in the key areas of retail sales, aftersales and learning services.

Patrick Katenkamp, CEO of Retail Network Solutions at MSXI, said: “The acquisition of Impetus Automotive combines best-in-class experience from two market leaders in the U.K., while providing a pathway for clients to extend services across MSXI’s global presence. This acquisition strongly supports our strategy to gain scale in core training, sales, and service offerings as well as strengthen client relationships with major automotive manufacturers.”

 

Tom Madden – obituary

It is with great sadness that BCA announces the passing of Tom Madden, former Director, Customer Affairs.

Tom passed away peacefully on Monday, October 29th 2018, following a lengthy illness, leaving his wife Christine, children Katherine and John and four grandchildren.

Tom held a number of sales and customer facing roles over 30 years with BCA, retiring in July 2006.  As a member of BCA’s senior management team, Tom was a well-known and much respected motor industry figure and regularly addressed audiences representing fleet managers, manufacturers, motor dealers, finance and leasing experts and the press, both in the UK and Europe.

He was a passionate supporter of charitable causes and was a founding Director of the Wooden Spoon Society.  He was also a founder and Chairman of the Institute of Car Fleet Management (ICFM) and a Fellow of the Institute of the Motor Industry.

Everyone at BCA sends their sincere condolences to Tom’s wife Christine and his immediate family at this difficult time.

 

 

WORLD NEWS

VW shares revenue in new retail model

VW retailers will earn from software upgrades even if customers bought the car direct from the manufacturer to compensate for reduced aftersales revenue as EVs arrive with their lower servicing needs.

From April 2020 a new franchise model means the car maker can build more direct links with consumers but retailers chosen as a vehicle owner’s `preferred service partner’ in that customer’s cloud-based digital profile will share revenue for performance or spec upgrades.

Jürgen Stackmann, VW head of sales, added: “It may sound unusual since this is entirely unlike the business model of the past 60 years, which centered on rewards in exchange for achievements. Our dealers are valuable to us as system partners, and we want to strengthen them. So we will provide compensation even when there is only an indirect accomplishment; that you’re there and that you’re available for the customer.”

https://bit.ly/2AI8rcY

 

Car makers look to share costs of EV/autonomous vehicles

Daimler was reported this week as not ruling out a link with Tesla, even after selling its shares in the American company, and VW and Ford are said to be looking at jointly developing self-driving and electric vehicles to cut costs.

Ford said `Our memorandum of understanding with VW covers conversations about potential collaborations across a number of areas’. VW Chief Financial Officer, Frank Witter, went further and said it is open to deeper alliances, particularly around autonomous driving.

https://reut.rs/2CQ3WhO

https://reut.rs/2EZ1QyP

 

STOCKWATCH

Closing prices at November 2 and weekly movement

BCA 214.0p (+20.4p)

Cambria 51.5p (+1.0p)

Caffyns 415.0p (+13.0p)

Inchcape 583.5p (+84.5p)

Lookers 100.8p (+5.8p)

Marshall Motor Holdings 126.0p (+3.5p)

Motorpoint 218.0p (+8.0p)

Pendragon 27.3p (+1.0p)

Vertu 36.0p (-0.1p)

 

COMING UP

November 6: Auto Retail Live Q4 Briefing, 9 am.  Guest speakers include Alison Jones, managing director of Volkswagen UK, Bill Dobie owner of Dobies Cumbria and Rebecca Clark, manufacturer & agency director, Auto Trader.

https://bit.ly/2Qj8zVJ

 

 

LAUNCH DIARY

Mercedes-Benz GLE. SUV now with seven seat option. Deliveries spring 2019. From £55,685.

BMW 8 Series Convertible. On sale April 2019 from £83,270.

 

MONEY MATTERS

Free D&I report launched

Retailers looking for best practice advice on diversity and inclusion within auto retail can now download a free report from Auto Trader and executive search experts Ennis &Co.

http://bit.ly/2AHUb3O

 

House prices will rise faster outside London rebalancing the historic north/south divide in property values over the next five years.

Estate agency, Savills, predicts an average 15% rise nationally by 2023 but by 22% in the North West compared to just 5% in London and 10 in the South West.

https://bit.ly/2zig9s8

 

 

OUR BLOG

Turnover is vanity, profit is sanity

On Page 1 of the `How to run a successful business’ handbook should be the phrase `turnover is vanity, profit is sanity’.

How many times have I written and you read over the past several months of retailers complaining about the erosion on profit caused through volume being force fed by manufacturers desperate to keep factories running at a level where economies of scale can kick in and generate the profits expected by shareholders?

This time it’s the turn of BMW/MINI retailer, William Morgan, to warn in surprisingly stark terms that this is unsustainable and the sentence in its annual reports – `the pressure on retained margin will continue until supply equals demand’ – is about a clear a message as it can give. Ouch!

That was written by the company in relation to its 2017 financial year so god only knows what it’s going to be like the next time around when the full impact of WLTP and shifting all those derogated models will have kicked in. We’re seeing colossal discounting in the showrooms, be that through pre-regs or simple cash off the front end of the deal. Either way it doesn’t seem to make a lot of economic sense and depending on the brand, it’s going to take until next spring at least for this mess to work its way through the system.

Let me acknowledge that the picture is far from universally bleak and plenty of individual retailers and groups are still making money.  Not a lot relative to the turnover maybe, but it’s better than the alternative as they say.

But aren’t we seeing some retailers falling victim to the vicious circle syndrome? If you make less money per unit sold the only way forward is to sell more of them…or to sell smarter and do something different, to find new ways of generating profitable revenue.

Answers on a postcard please.

 

John Swift
Editor

Auto Retail Agenda

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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