September new car sales fall will have a “brutal” impact on some dealers’ profitability

08 October 2018

September new car sales fall will have a “brutal” impact on some dealers’ profitability

September new car sales fall will have a “brutal” impact on some dealers’ profitability

The 20.5% fall in September’s new car registrations, reported by the Society of Motor Manufacturers and Traders, will have a brutal impact on some dealers’ Q3 and full year profitability, according to Coachworks Consulting.

The independent consultancy said the decline was against a backdrop of dealers reporting high levels of customer enquiries for the month. However, many were unable to register sufficient numbers of new cars because of stock shortages caused by the introduction of the new WLTP (Worldwide Light Vehicle Harmonised Test Procedure) regulations on 1 September.

“The introduction of WLTP at the beginning of the 68 plate-change always had the potential to have a disruptive impact on registrations in the second biggest sales period of the year but the ability of manufacturers to manage the impact has been mixed,” said Coachworks Consulting’s managing director Karl Davis.

“The impact on retailer profitability in September will be brutal as each delayed delivery will be compounded by the loss of revenue from finance, GAP and aftersales; it’s not just about chassis profit.

“The seriousness of the situation is shown by one brand cutting its dealer sales targets for September and Q4 by around 50% because it knows it will not have sufficient stock for its network and that will also have a major impact on dealer profitability. Manufacturer sales targets go up, they rarely go down.”
However, according to Davis some retailers had mitigated the situation by self-registering units.

“Some dealers anticipated shortages and got their arms around as many desirable new cars as possible ahead of September and traded more successfully as a result.
“However, I’ve spoken to one retailer boss who was given an incentive by their brand partner to self-register 100 cars and has ended up with models he described as ‘all rubbish’ which he will struggle to trade out of profitably in Q4 because customers will not want them.

 “The supply of new cars will improve over the coming months but the pressure is now on all dealers to close Q4 as strongly as possible, otherwise it’s not only the share price of the plcs that could be negatively affected by less than forecasted full year results, but even the very survival of the highly geared smaller players, where lender confidence plays a crucial role in maintaining cash-flow.”

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