The 32 consecutive months of new car registration growth have been driven by Manufacturers’ incentives. Missing a payment threshold has disastrous consequences for dealers, and so many have self-registered cars to hit them.
A strong Quarter One led to confidence in the industry being very high. New car profits were strong, used car volumes were on the rise and the signs were good. The April MHA Confidence survey revealed that over 74% of those surveyed believed profits would be higher this year than in 2013.
Yet amongst all of this, aftersales KPIs have continued to stagnate, and the efforts that have gone into improving sales in this area have, according to the September KPIs published by ASE, merely resulted in a marginal (0.01 hrs.) increase in Hours per Job and a decrease in Gross Margins. There is so much opportunity for increased profitability in Service if a Sales Culture can be created.
The new FCA regulations came into force in April and a 6 month transition period ended in October. Whilst these regulations should build trust between customers and dealers, many have felt the pain of implementing what have been seen as onerous and time consuming changes.
After a record breaking September, dealers have started to see their confidence weaken. Only 48% felt that profits would be higher when the MHA survey was carried out again at the end of Q3, and much of this was down to increased targets and slimmer margins. In fact 73.3% of dealers felt that Manufacturers’ targets were unrealistic compared to 56.3% in April.
The concerns over the fragility of the final quarter of the year started to crystallise in November when used car values suffered their biggest fall since mid-2011. Black Book Live, put the fall down to increased supplies, falling retail demand, full forecourts and high used car prices.
The new car bubble doesn’t look like bursting in the next few months as a weak Europe ensures that the focus on new car sales will remain in the UK; but it is clear, as we head into 2015, that we as an industry are over reliant upon this wave of new car volume.
To ensure that we can cope with any downturn in the new car market, whenever it comes, we as an industry need to make our own waves and maximise every opportunity to create more throughput and generate more profit in used cars and aftersales.
If you want to turn on the wave machine at the start of next year, give Karl a call on 01335 324 325. A one day Growth Appraisal will identify the areas of opportunity in your business to make EVERY department fly in 2015.