BREXIT AND PROFITABILITY CONCERNS DRIVING PESSIMISTIC MOTOR DEALER SECTOR OUTLOOK FOR 2017

Published 19/06/2017 00:00:00 in Press Releases

  • Only 24% of UK dealers expect an increase in profits in 2017; a drop of 20% from 2016.
  • 8 out of 10 dealers say Brexit uncertainty will have adverse impact on the sector.
  • Used car performance expected to have most positive impact on profitability.
  • Pre-registration levels, consumer confidence and costs have most adverse impact on profitability.
  • Online retail set to become integral part in the future new car purchasing model.
  • 59% happy with franchise partners’ future proofing strategy for AFV and autonomous vehicles.

The second annual MHA Motor Dealer report reveals a significant drop in optimism amongst UK motor dealers around the prospects for profitability in the sector this year. 76% of dealers surveyed said they expected profits to drop or remain static for the year, that’s an increase of 20% from 2016.

The MHA Motor Dealer report, compiled by the UK-wide group of accountancy and business advisory firms, looks at the current outlook of the sector as well as future trends including online retail, alternative fuel and autonomous vehicles and the outlook for M&A across the UK.

The pessimistic outlook for 2017 was driven, in no small part, by the ongoing uncertainty around Brexit with 76% of dealers believing it will have an adverse impact on the sector over the next 12 months.

The profitability landscape is also under pressure from issues of consumer confidence, potential changes in purchasing habits resulting from concerns around possible diesel scrappage, the recent media and FCA attention on potential Personal Contract Purchase (PCP) mis-selling and the likelihood of continued reductions in retail registration numbers.

The impact of increasing costs on profitability in areas such as staff recruitment and retention, compliance and regulation, charges, rates and utilities continue to cause concerns.

Pre-registration levels were cited as having the main adverse pressure on dealer performance. Despite this reduced optimism, dealers are expecting to drive their performance predominantly through used car sales this year.

Growth plans in the businesses themselves remained relatively steady with 60% of dealers saying they planned to grow over the next 12 months compared to 64% in 2016. However, there was a significant shift in how that growth was going to be achieved. Only 13% of those surveyed said growth would come from acquisition compared to 40% in 2016. Organic growth and redevelopment is now the main focus with 62% of dealers compared to 44% in 2016. A quarter of dealers said their growth is expected to come from expanding the number of locations, an increase of 9% from last year.

The survey results also reflect the fact that M&A activity slowed during the back end of 2016 and beginning of 2017, with only 7% of dealers looking to exit their business and only 8% looking to acquire.

Future trends in new vehicle purchasing were dominated by the growth potential from online retailing. 94% of dealers cited online as becoming an integral part of the new car purchasing model in the future. 63% of those dealers believe it will happen within the next five years. However, there remain key areas to address including clarity around where responsibility for selling vehicles will lie and the infrastructures required to hand them over.

Alternative Fuel Vehicles (AFVs) are set to gain a significant market share within the next five to ten years. 59% of all respondents said they were either very happy or happy with their franchise partners’ strategy for future proofing AFVs and autonomous vehicles. For premium brands the level of confidence was much higher than volume brands (74% and 54% respectively)

Head of The MHA Motor sector, Steve Freeman added: “I am not surprised to see the survey results confirming the marked change in dealer confidence levels we have heard from our clients recently.  The industry is really going through a period of change and ‎I do think that online developments may start moving at a pace now. The continued strength and resilience of the sector is certainly dependent on all parties (including manufacturers and their franchise partners) working together to ensure a sustainable business model for the future.‎”

Sue Robinson Director at the National Franchised Dealers Association added: “We have entered challenging times, but our sector is resilient and used to coping with difficult and unexpected situations. Going forward, it is encouraging to see that the majority of dealers feel positive about their partners’ strategy for AFVs. We are also pleased to see that there is a very high level of awareness of the importance of online retailing. These two elements are likely to become two predominant aspects of car retailing in the near future and franchised dealers’ flexibility and ability to adapt will help them continue to operate confidently and successfully.”

 

ENDS

NOTES TO EDITORS: A copy of the full report is available from the press office. This report is based on data from 88 senior management from dealerships across the UK in England, Wales and Scotland.

About MHA

MHA is a fast growing UK wide association of respected and progressive independent accountants and business advisers, all sharing common values and goals.

Each firm is characterised by its strong reputation in its local area for providing accountancy and business advice to entrepreneurial businesses.

By joining together as part of MHA, member firms can offer clients an increased number of specialist accountancy services and expert business advice. As well as benefiting from the in-depth sector knowledge available across the association.

MHA is an independent member of Baker Tilly International.

Baker Tilly International is the world’s 9th largest accountancy and business advisory network by combined fee income of its independent members. Baker Tilly International member firms specialise in providing accountancy and business advisory services to entrepreneurial, growing businesses and mid-market listed corporates worldwide.

Gabriele Severini, NFDA Communications Officer
Tel: 020 7307 3423
Mob: 07880 039897
Press Office direct line: 020 7307 3422
Press Office fax: 020 7307 3406

Web: www.rmif.co.uk  Email: gabriele.severini@rmif.co.uk

The Retail Motor Industry represents the interests of operators in England, Wales, Northern Ireland and the Isle of Man providing sales and services to motorists and businesses. The RMI has a formal association with the independent Scottish Motor Trade Association which represents the retail motor industry in Scotland.

Back to Articles
Back to Articles

Cookies

This site uses cookies. Some cookies are essential to ensure our website works for you in the best possible way. You may delete and block all cookies from this site, but parts of the site may not work. To find out more about cookies on this website and how to delete cookies, click here to see our cookie statement.

Close