Car Retailing – is it time to dust down ‘volume is vanity profit is sanity’?
In 2019 UK vehicle sales volumes remain strong at around 10 million units. New car registrations will be around 2.3 million and used sales will pitch in at approximately 7.9 million.
Yet, the UK retail sector, based upon both dealer feedback and more significantly published financials is, on the whole, not in rude health. The position is not UK specific, Grant Thornton recently noted; “sales were also continuing to decline significantly across Europe, the US and China.”
The reasons for the challenges facing motor retailing and other parts of the broader automotive value-chain are many. In short, they include: overproduction globally, the shift from fossil-fuel to electric cars, which is creating market and buyer uncertainty and which will mean less aftersales/servicing activity in the future, increasing competition including online marketplace providers, rising costs, notably in people and marketing and a well-informed and protected consumer.
This unhealthy focus on lower prices is not unique to the automotive market; ‘Sales discounts on clothing and products in the lead up to Christmas could be the biggest in almost ten years,’ according to Deloitte noted the BBC online (16/12/19). The greater challenge facing car retailers is that in used car stock, they have to manage a depreciating asset. Surely something has to change to provide greater sustainability? A war on costs seems likely and then there is the question about product pricing. Sanity dictates that price rises need to happen, or will the sector see a wholesale consolidation?