We all know the motor sector has been particularly hard hit by the recession. Total new registrations fell by over 20% in 2008 and early industry analysis indicates that new registrations are expected to fall by over 20% in 2009 down to circa 1.7m units. Commercial vehicles are currently falling at an even higher rate. To make things worse, in 2008 the value of used cars also fell, although these would appear to be recovering this year.
However, despite this doom and gloom, many of BDO’s clients have had a good first 6 months of 2009, buoyed by the car scrappage scheme, the turnaround in used car prices and additional support from manufacturers.
Whilst initial reactions to the scrappage scheme were muted as the government contribution was lower than some of our European counterparts and manufacturers demonstrated varying degrees of enthusiasm, it is now clear that for most franchised dealers it is adding real incremental new car sales to their results.
BDO clients are generally pleased with the scheme, in particular anything that can restore some confidence to the market and bring people into showrooms has to be good news. Even if bottom line contribution is not significant, dealers are taking the opportunity to build local vehicle parks that should generate greater service department opportunities in the future.
Our concern is that it is distorting the market by bringing deals forward from later this year and early next. Couple this with a likely increase in VAT and new car supply getting tighter and tough times for dealers are likely to follow in late 2009 and early 2010. Dealers need to continue to control their costs and conserve cash-flow for what might be a bumpy road ahead.
Our motor retail team is led from Southampton and supports a network of around 50 senior professionals representing years of experience in car and commercial vehicle retailing and after-sales. We can advise on all aspects of running a dealership and deliver solutions that work in the real world.