In recent weeks there has been a real stir regarding the outlook for automotive retailing and the future of dealer networks. This on the back of regular press headlines regarding diesel vehicles, electric vehicles and autonomous vehicles has certainly created some significant uncertainty for those outside the industry looking in and is far from helpful.
To put it into perspective the UK automotive market has been one of the most successful sectors for years and regardless of economic climates has been an extremely resilient sector. Whilst there has been the obvious developments and changes in the market such as the internet, monthly payment programmes, service plans etc, the industry is still a relatively straight forward and traditional retail model. The manufacturers need a dealer network to supply their vehicles, the consumers want a dealer to enjoy their buying experience, the consumer needs a dealership to service their vehicle and the dealership needs to exist to deal with any trade in/used car disposal when the consumer wants to change.
David Kendrick, Automotive Partner at UHY Hacker Young said “Whilst the shape of the networks may change over the coming years with smaller dealerships in non-core locations perhaps falling away, the need for quality dealership operations is here to stay for the medium term. The banks and financial institutions are still willing to fund the significant build costs as dealers continue to develop and expand their facilities which certainly doesn’t match the press suggesting dealership operations are a thing of the past.”
Paul Daly, also an Automotive Partner at UHY Hacker Young added “There appears to be a real disconnect between the hysteria of media headlines and the reality of where the sector is at. Investment levels in dealerships have never been higher and whilst the network size and structure will always be in a state of flux with winners and losers across the brands represented we have not seen any concrete signs of a step change in how the manufacturers work with their networks. The one constant factor is that the manufacturers have significant surplus manufacturing capacity and hence must deploy a scaled and efficient distribution system to ensure volumes are maximised.”
We continue to see buoyant transaction values and numerous new entrants looking at acquiring UK dealership groups, therefore I believe the outlook is positive and whilst dealers will need to adapt the fundamental elements of the business are unlikely to change in the short term.