Under or over-supply an issue for retailers

  24 June 2018

One way or another the issue of supply has been very much at the forefront of the trade in this past couple of weeks and will only grow throughout the summer.

On one hand a set of financial reports filed by one retailer this week made an oblique reference to the effect the force-feeding of stock by manufacturers into retailers had on profit margin and one was reminded of that old business saying, turnover is vanity, profit is sanity.

On the other the gathering storm that is WLTP gained momentum with manufacturers saying there will be gaps in production as factories struggle to respond to the new standards they claim have been late in being set and having to manage the transition from NEDC emissions to the new ones. VW is one such manufacturer, saying it expects to lose up to 250,000 vehicles in the second half across Europe.

Looking to this autumn and beyond when one imagines the tax profile of the majority of cars measured under WLTP will be a lot less attractive than now as mpg figures go down and emissions go up, what is going to happen to the corporate market? Quite how the business customers will respond to this remains to be seen but it doesn’t bode well, does it.

There was something else buried away in those end of year financials; one line which said that the company fears for 2018 even after that rather artificial bounce this spring compared to April 2017 and that despite putting on a brave face in public, many others do as well.

With WLTP hanging over their heads, an uncertain economy as we get nearer to March 29, 2019 Brexit cut off with no clear industrial strategy and the possibility of Donald Trump slapping a 20% tariff on European cars pushing manufacturers to pump more into markets this side of the Atlantic, you can see why.

Hold on tight, we are in for a very bumpy ride.

 

John Swift
Editor
Auto Retail Agenda

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