As we have just started the new trading year I thought it worthwhile to reflect on how some of the issues we may have carried over from the previous year can put this year’s used car and new car performance in jeopardy, before the year is even a quarter of the way through.
Firstly, let me say that I appreciate that this article is difficult to write in a generic sense, after all our readership and customer base extends to all manufacturers, from the producers of supercars, through all the prestige manufacturers to the volume suppliers and you all have your individual challenges, that are primarily dictated by the franchise you represent and therefore the sector of the market you are operating in.
On top of this, you will all have widely varying levels of used car professionalism, experience and overall sales performance within your business, but one thing I can assure you all of, (from the analysis of our posts being delivered to dealer networks), is that the one major subject concerning owners and those responsible for running businesses, is the level of “Pre-Registrations” and how this is impacting on financial liquidity and therefore their ability to trade their way out of the levels pre-registered stock being carried over into the New Year.
Many of you have returned to the business and to used car operations that have stock holdings that no longer represent used car demand within the locality, therefore restricting your ability to trade as a used car business, and eventually this will impact on your ability to achieve the new car objectives you require this year. Why? Well in order to achieve the new car registrations targets last year, many of you were forced to “Pre-Register” large volumes of new car stock, which is now heading to the used car operations of the dealers concerned.
Now this is a problem for the dealerships concerned and the ramifications are widespread, everything from;
- Lack of financial liquidity.
- Two internal competing businesses.
- Inability to trade as a used car business.
- No sound foundations for used car and new car success.
It is an inconvenient truth for everyone that sometimes unsold new car stock has to be “Pre-Registered” in order for the new car business objectives to be achieved, but the ability of your business to trade your way out of this stock holding is critical to your on-going new car success, and many of you have no doubt returned to businesses with a used car stock holding that is actually going to be in competition with your new car business during the first quarter.
Both you and the manufacturer you represent want to get off to a great start this year with the new car objectives for the first quarter achieved, unfortunately though there may be a problem because the volume of pre-registered stock could be in danger of compromising your new car objectives either in the 1st quarter of this year, or the 2nd quarter, depending on how both you and your franchise partners are able to trade your way out of this challenging period.
So what in all likelihood will dictate this? Well this will be varied and entirely dependent on the business concerned, but the business determined to return financial liquidity to both their business as a whole and their used car operation, (so they can begin trading as a used car business once again), will have to make the conscious decision to trade out of their “Pre-Registered” stock holding as soon as possible. Why? Well as you all know this is a very expensive stock holding which will be reducing the ability of the used car operation to invest in the more traditional used car stock holding that reflects demand. Therefore it must be sold and the quicker the better, because whilst this stock holding remains in stock, the funds required to acquire traditional and more profitable profiles of used car stock are reduced, thus enabling the independent businesses in your locality to gain access to this stock holding and the customers concerned, which is only going to undermine the stature of your used car operation with local customers.
Unfortunately the “Pre-Registered” stock holding is in effect a new car stock holding that potentially puts your used car operation in direct competition with the new car business and your new car aspirations for the 1st quarter. As I have said before, just because you have double the volume of stock doesn’t mean you will have double the amount of customers, so new car customers could be entering your business and the used car operation will be able to supply them a car cheaper than the new car business can, and this is highly likely to have a direct impact on your ability to achieve the new car objectives required!
The business determined to ensure that the new car objective is achieved in the 1st quarter will, in all likelihood, deal with things differently. They will ignore the problems of the “Pre-Registered” stock holding in their used car operation and direct their focus to the new car objective for the first quarter. Unfortunately as this is happening the problems are only building up in the used car operation; not only will the “Pre-Registered” stock holding, in all likelihood remain unsold, but whilst time is passing its disposable trade value is dropping, it is reducing the financial liquidity of the business as a whole and resulting in a situation where it is no longer trading as a used car business; it can’t, there will be no funds available to acquire traditional profiles of used car stock, resulting in all the problems mentioned previously.
In reality, for this dealer, the problems are only multiplying and in the worst case scenario, the business will be left unable to afford the price of returning financial liquidity to their business, leaving them dealing with the problem of the “Pre-Registered” stock holding during the 2nd quarter, not the 1st quarter. They will have to do this; financial liquidity must be returned to the business, it is vital! Remember that businesses don’t always fail due to a lack of profit, but they will always fail due to a lack of funding!
This is also when either you or your franchise partners are going to be under pressure, that will only compound matters, of taking the short term decision to make both unsold new and “Pre-Registered” stock available to 3rd party independent businesses, those that are becoming very powerful within the sector and who actually threaten your medium to long term new car aspirations. A threat so serious now that some of these 3rd party independent internet based new car supply businesses are actually now embedded in the businesses of some large franchise dealer groups, to the point of conducting sales training on site at dealerships then posting the training days on business social media platforms! But this is another post!
So what’s the answer? Well in reality, unless the connection is made between the importance of used car success, when it comes to continual new car success, both manufacturers and their franchise partners will continue to be threatened by the business threats discussed in greater detail in our last 3 posts and used car success can only be delivered by successful franchised used car networks, containing individually successful used car operations.
And the answers are something that I will be exploring further in my next posts where I will delve into and explore some of the “Thorny” issues that are pivotal to your sales success, subjects and discussions points to include;
- Have you come into 2018 with the right sales team?
- Does your business sell cars or financial models?
- Is your current approach sending out a “Distressed Sale” message and weakening your ability to succeed.
- Are your current sales and marketing initiatives fit for purpose?
- Do you have an independent used car business or are you an ex-demo and part exchange disposal business?
Unfortunately though, the strong and resilient used car operations, (those capable of trading your business, and the manufacturer you represent, out of these perilous trading conditions), do not happen by accident, but luckily help is at hand. If this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car operation on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.
The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com
Alternatively please feel free to call us on 0345 057 3177.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning.
Used Car Business Development Director.
As we have just started the new trading year I thought it worthwhile to reflect on how some of the issues we may have carried over from the previous year can put this year’s used car and new car performance in jeopardy, before the year is even a quarter of the way through.
Firstly, let me say that I appreciate that this article may not be so prevalent to all of you, after all our readership and customer base extends to all manufacturers, from the producers of supercars, through all the prestige manufacturers to the volume suppliers. On top of this, some of you will have widely varying levels of used car professionalism, experience and performance within your franchised dealer networks, but one thing I can assure you all of, (from the analysis of our posts being delivered to dealer networks), is that the one major subject concerning owners and those responsible for running dealerships, is the level of “Pre-Registrations” and how this is impacting on financial liquidity and therefore their ability to trade their way out of the levels pre-registered stock being carried over into the New Year.
So why should you as the manufacturer be concerned about this, after all the new car registrations targets were achieved last year; sure we have some challenges this year, but registrations targets will be achieved, they always are! However for many of you reading this article, this year will be different and to understand why we have to understand what is happening within franchised dealer networks and the financial and business pressures that your franchise partners are under.
Many of your franchise partners have returned to the business and used car operations that have stock holdings that no longer represent used car demand within the locality, therefore stifling their ability to trade as a used car business, and eventually this will impact on their ability to achieve the new car objectives you require this year. Why? Well in order to achieve the new car registrations targets last year, many of them “Pre-Registered” large volumes of new car stock, which is now heading to the used car operations of the dealers concerned.
Now this is a problem for the dealerships concerned and the ramifications are widespread, everything from;
-
Lack of financial liquidity.
- Two internal competing businesses.
- Inability to trade as a used car business.
- No sound foundations for used car and new car success.
It is an inconvenient truth for everyone that sometimes unsold new car stock has to be “Pre-Registered” in order for the new car business objectives to be achieved, but the ability of your franchise partners to trade their way out of this stock holding is critical to your on-going new car success, and many of them have returned to their businesses with a used car stock holding that is actually going to be in competition with their new car business during the first quarter.
You as the manufacturer want to get off to a great start this year with the new car objectives for the first quarter achieved, unfortunately though there is a problem because the volume of pre-registered stock is in danger of compromising your new car objectives either in the 1st quarter of this year, or the 2nd quarter, depending on how your franchise partners are able to trade their way out of this challenging period.
So what in all likelihood will dictate this? Well this will be varied and entirely dependent on the business concerned, but the business determined to return financial liquidity to both their business as a whole and their used car operation, (so they can begin trading as a used car business once again), will have to make the conscious decision to trade out of their “Pre-Registered” stock holding as soon as possible. Why? Well this is a very expensive stock holding which is reducing the ability of the used car operation to invest in the more traditional used car stock holding that reflects demand. Therefore it must be sold and the quicker the better, because whilst this stock holding remains in stock, the funds required to acquire traditional and more profitable profiles of used car stock are reduced, thus enabling the independent businesses in their locality to gain access to this stock holding and the customers concerned, which is only going to undermine the stature of their used car operation with local customers.
Unfortunately the “Pre-Registered” stock holding is in effect a new car stock holding that puts the used car operation in direct competition with the new car business and your new car aspirations for the 1st quarter. As I have said before, just because you have double the volume of stock doesn’t mean you will have double the amount of customers, so new car customers will be entering the businesses of your franchise partners and the used car operation will be able to supply them a car cheaper than the new car business can, and this is highly likely to have a direct impact on your ability to achieve the new car objectives required!
The franchise partner determined to ensure that his new car objective is achieved in the 1st quarter will, in all likelihood, deal with things differently. They will ignore the problems of the “Pre-Registered” stock holding in their used car operation and direct their focus to the new car objective for the first quarter. Unfortunately as this is happening the problems are only building up in the used car operation; not only will the “Pre-Registered” stock holding remain unsold, but whilst time is passing its disposable trade value is dropping, it is reducing the financial liquidity of the business as a whole, resulting in a situation where it is no longer trading as a used car business; it can’t, there will be no funds available to acquire traditional profiles of used car stock, resulting in all the problems mentioned previously.
In reality for this dealer the problems are only multiplying and in the worst case scenario, your franchise partners will be left unable to afford the price of returning financial liquidity to their business, leaving them dealing with the problem of the “Pre-Registered” stock holding during the 2nd quarter, not the 1st quarter. They will have to do this; financial liquidity must be returned to the business, it is vital! Remember that businesses don’t always fail due to a lack of profit, but they will always fail due to a lack of funding!
This is also when your franchise partners are likely to compound matters by taking the short term decision to make stock available to 3rd party independent businesses, those that are becoming very powerful within the sector and who actually threaten your medium to long term new car aspirations. Some of these 3rd party independent internet based new car supply businesses are actually now embedded in the businesses of some large franchise dealer groups, to the point of conducting sales training on site at dealerships then posting the training days on business social media platforms! But this is another post!
So what’s the answer? Well in reality, unless the connection is made between the importance of used car success, when it comes to continual new car success, manufacturers will continue to be threatened by the business threats discussed in greater detail in our last 3 posts and used car success can only be delivered by successful franchised used car networks.
Unfortunately though, the strong and resilient franchised used car dealer networks, (those capable of trading themselves and you, as the manufacturer, out of these perilous trading conditions), do not happen by accident, but luckily help is at hand. If this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car dealer network programme on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.
The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com
Alternatively please feel free to call us on 0345 057 3177.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning.
Used Car Business Development Director.
As we have just started the new trading year I thought it worthwhile to reflect on how some of the issues we may have carried over from the previous year can put this year’s used car and new car performance in jeopardy, before the year is even a quarter of the way through.
Firstly, let me say that I appreciate that this article may not be so prevalent to all of you, after all our readership and customer base extends to all manufacturers, from the producers of supercars, through all the prestige manufacturers to the volume suppliers. On top of this, some of you will have widely varying levels of used car professionalism, experience and performance within your franchised dealer networks, but one thing I can assure you all of, (from the analysis of our posts being delivered to dealer networks), is that the one major subject concerning owners and those responsible for running dealerships, is the level of “Pre-Registrations” and how this is impacting on financial liquidity and therefore their ability to trade their way out of the levels pre-registered stock being carried over into the New Year.
So why should you as the manufacturer be concerned about this, after all the new car registrations targets were achieved last year; sure we have some challenges this year, but registrations targets will be achieved, they always are! However for many of you reading this article, this year will be different and to understand why we have to understand what is happening within franchised dealer networks and the financial and business pressures that your franchise partners are under.
Many of your franchise partners are returning to used car operations that no longer represent used car demand within the locality, therefore stifling their ability to trade as a used car business, and eventually this will impact on their ability to achieve the new car objectives you require this year. Why? Well in order to achieve the new car registrations targets last year, many of them “Pre-Registered” large volumes of new car stock, which is now heading to the used car operations of the dealers concerned.
Now this is a problem for the dealerships concerned and the ramifications are widespread, everything from;
-
Lack of financial liquidity.
- Two internal competing businesses.
- Inability to trade as a used car business.
- No sound foundations for used car and new car success.
It is an inconvenient truth for everyone that sometimes new car stock has to be “Pre-Registered” in order for the new car business objectives to be achieved, but the ability of your franchise partners to trade their way out of this stock holding is critical to your on-going new car success, and many of them have returned to their businesses with a used car stock holding that is actually going to be in competition with their new car business during the first quarter.
You as the manufacturer want to get off to a great start this year with the new car objectives for the first quarter achieved, unfortunately though there is a problem because the volume of pre-registered stock is in danger of compromising your new car objectives either in the 1st quarter of this year, or the 2nd quarter, depending on how your franchise partners are able to trade their way out of this challenging period.
So what in all likelihood will dictate this? Well this will be varied and entirely dependent on the business concerned, but the business determined to return financial liquidity to both their business as a whole and their used car operation, so they can begin trading as a used car business once again, will have to make the conscious decision to trade out of their “Pre-Registered” stock holding as soon as possible. Why? Well this is a very expensive stock holding which is reducing the ability of the used car operation to invest in the more traditional used car stock holding that reflects demand. Therefore it must be sold and the quicker the better, because whilst this stock holding is in stock, the funds required to acquire traditional and more profitable profiles of used car stock are reduced, thus enabling the independent businesses in their locality to gain access to this stock holding and the customers concerned, which is only going to undermine the stature of their used car operation with local customers.
Unfortunately the “Pre-Registered” stock holding is in effect a new car stock holding that puts the used car operation in direct competition with the new car business and your new car aspirations for the 1st quarter. As I have said before, just because you have double the volume of stock doesn’t mean you will have double the amount of customers, so new car customers will be entering the businesses of your franchise partners and the used car operation will be able to supply them a car cheaper than the new car business can, and this is highly likely to have a direct impact on your ability to achieve the new car objectives required!
The franchise partner determined to ensure that his new car objective is achieved in the 1st quarter will, in all likelihood, deal with things differently. They will ignore the problems of the “Pre-Registered” stock holding in their used car operation and direct their focus to the new car objective for the first quarter. Unfortunately as this is happening the problems are only building up in the used car operation; not only will the “Pre-registered” stock holding remain unsold, but whilst time is passing its disposable trade value is dropping, it is reducing the financial liquidity of the business as a whole and no longer trading as a used car business; it can’t, there will be no funds available to acquire traditional profiles of used car stock, resulting in all the problems mentioned previously.
In reality for this dealer the problems are only multiplying and in the worst case scenario, your franchise partners will be left unable to afford the price of returning financial liquidity to their business, leaving them dealing with the problem of the “Pre-Registered” stock holding during the 2nd quarter, not the 1st quarter. They will have to do this; financial liquidity must be returned the business, it is vital! Remember that businesses don’t always fails due to a lack of profit, but they will always fail due to a lack of funding!
This is also when your franchise partners are likely to compound matters by taking the short term decision to make stock available to 3rd party independent businesses, those that are becoming very powerful within the sector and who actually threaten your medium to long term new car aspirations. Some of these 3rd party independent internet based new car supply businesses are actually now embedded in the businesses of some large franchise dealer groups, to the point of conducting sales training on site at dealerships then posting the training days on business social media platforms! But this is another post!
So what’s the answer? Well in reality, unless the connection is made between the importance of used car success, when it comes to continual new car success, manufacturers will continue to be threatened by the business threats discussed in greater detail in our last 3 posts and used car success can only be delivered by successful franchised used car networks.
Unfortunately though, the strong and resilient franchised used car dealer networks, (those capable of trading themselves and you, as the manufacturer, out of these perilous trading conditions), do not happen by accident, but luckily help is at hand. If this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car dealer network programme on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.
The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com
Alternatively please feel free to call us on 0044 345 057 3177.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning.
Used Car Business Development Director.
Those of you who read my previous post How Safe Is Your Used Car and New Car Trading Model? will know that this is the last article in a series of 3, exploring the challenges of changing consumer behaviour, 3rd party independent businesses, pre-registrations and the importance that resilient and successful franchised used car networks will play in securing your long term new car business objectives.
In the first of the articles, “Pre-Registrations” And Shutting Your Used Car Operation! I began to explore some of the ramifications of “Pre-Registering” unsold new car stock, especially when it is carried out during a period when challenging market conditions unfortunately coincide with a time of great change in our sector, and when our traditional trading models are being targeted by third party businesses who have identified changes in consumer purchasing habits.
During the first article I outlined some of the dangers and challenges that all dealerships faced, when this business strategy was not supported by effective and successful used car operations, skilled at selling used cars profitably and capable of trading the business out of this period, therefore supporting the new car business objectives, and we have been exploring them in greater detail ever since; so welcome to the last of these posts where we will discuss and expand on the last of the consequences and challenges, which are;
-
Drives down the residual values of your new car product.
- Increases the cost of new car ownership.
- Undermines the stature of the franchised dealer network in the eyes of the customer.
There is no doubt that the Automotive Sector in the both the UK and in Europe is going through a time of great change, driven in the main by changes to consumer purchasing habits, and in order to survive manufacturers and their franchise partners must change and adapt trading models, not expect ever more demanding customers to adapt to their business offering. We are not alone in the UK in having our traditional trading model targeted by independent 3rd party businesses, mainly tech based businesses, the likes of We Buy Any Car and Carwow, (to name just a few).
In the last 10 years the purchasing dynamic in both the UK and in Europe began to change and at the heart of this has been PCP finance agreements which, in conjunction with low interest rates, have changed the way new and used cars are purchased. Depending on whose statistics you read it is estimated that up to 82% of all car purchases in the UK are now taking advantage of PCP funding schemes, (with European consumers also rapidly embracing this model of purchase), and this shift in consumer purchasing habits should have been a once in a generation opportunity for all manufacturers and their franchised dealer networks, to secure their new car futures from a foundation of successful used car operations.
Unfortunately few have grasped the opportunity that PCP finance agreements presented and this was because not enough of the used car operations within the networks of the manufacturers, were ready to support the change in the used car business model and support the stock returning, when the PCP agreement ended and the customer purchased another car. It is important to remember that the used car operation is a business in its own right, it is a different business to run, compared to the new car business, it requires a different skill-set at every level of seniority, from sales professionals right through to the senior management, and those responsible for the running and the continual growth of the business.
Unfortunately too few manufacturers identified this and put the development and succession plans in place, to ensure that the professionals required were being developed via manufacturer in-house training programmes and by their franchise partners, and therefore available to their networks as a whole which, at the time, (when new car registrations were growing), didn’t seem that important but now that we enter more challenging times, the industry as a whole does not have the expertise required within the franchised dealer networks, in order to successfully trade through these challenging times and protect the new car business objectives.
So this now leaves the sector in a situation where more and more often, future residual values and therefore the future cost of ownership of the new car, is being influenced by, and is in the hands of, third party independent businesses that are in competition with your business, whilst undermining the importance of your business in the eyes of the customer.
At the moment we have the continual rise of third party independent businesses who are targeting your business model, or certain stages of the business model, and the reason why this undermines your business is that, in the eyes of the customer, these businesses are becoming the place to go to for that element of the used or new car supply process. It is no coincidence that they are not targeting the less profitable sides of the business, of course not; they are targeting the side of the business where there is “Scalability” and the opportunity to make money.
This subject is a post in itself and I will address this in greater detail in a future post, but for now let me just remind everyone reading this that if your business does not have the personnel and/or the used car expertise required, to successfully trade through these challenging markets, (therefore supporting your used car and new car objectives), it is likely that your business will continually struggle to have the financial liquidity required to support cars returning to in-house finance companies at the end of PCP agreements, therefore allowing independent used car businesses access to this valuable used car stock holding, as well as having to make pre-registered and unsold new car stock available to independent internet based new car businesses.
And whilst this “Status Quo” remains just ponder on this for a while; whenever you make stock available to a competitor business, you don’t just give them a stock holding, you give them the most precious commodity to any sales business, you give them the customers for that stock holding! Make 100 cars available and you hand over 100 customers, and customers are habitual, once they have dealt with a business, invariably, that is where they return to first when they look to change again!
So what’s the answer? Well in reality, unless the connection is made between the importance of used car success, when it comes to continual new car success, both manufacturers and their franchise partners, (on an individual basis), will continue to be threatened by the business threats discussed over the last 3 posts and used car success can only be delivered by successful individual used car operations that are part of successful franchised used car networks.
Unfortunately though, the strong, resilient and successful used car operations, (those capable of trading your business out of these perilous trading conditions and growing your business as a whole), do not happen by accident, but luckily help is at hand. If this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car operation on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.
The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com
Alternatively please feel free to call us on 0345 057 3177.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning.
Used Car Business Development Director.
Those of you who read my previous post How Safe Is Your New and Used Car Trading Model? will know that this is the last article in a series of 3, exploring the challenges of changing consumer behaviour, 3rd party independent businesses, pre-registrations and the importance that resilient and successful franchised used car networks will play in securing your long term new car business objectives.
In the first of the articles, Do We Need To Discuss The “Pre-Registrations” Elephant In The Room? I began to explore some of the ramifications of “Pre-Registering” unsold new car stock, especially when it is carried out during a period when challenging market conditions unfortunately coincide with a time of great change in our sector, and when our traditional trading models are being targeted by third party businesses who have identified changes in consumer purchasing habits.
During the first article I outlined some of the dangers and challenges that the sector faced, when this business strategy was not supported by franchised dealer networks successful at selling used cars and therefore supporting the new car business objectives, and we have been exploring them in greater detail ever since; so welcome to the last of these posts where we will discuss and expand on the last of the consequences and challenges, which are;
-
Drives down the residual values of your new car product.
- Increases the cost of new car ownership.
- Undermines the stature of the franchised dealer network in the eyes of the customer.
There is no doubt that the Automotive Sector in the both the UK and in Europe is going through a time of great change, driven in the main by changes to consumer purchasing habits, and in order to survive manufacturers must change and adapt trading models, not expect ever more demanding customers to adapt to their offering. We are not alone in the UK in having our traditional trading model targeted by independent 3rd party businesses, mainly tech based businesses, the likes of We Buy Any Car and Carwow, (to name just a few).
In the last 10 years the purchasing dynamic in both the UK and in Europe began to change and at the heart of this has been PCP finance agreements which, in conjunction with low interest rates, have changed the way new and used cars are purchased. Depending on whose statistics you read it is estimated that up to 82% of all car purchases in the UK are now taking advantage of PCP funding schemes, (with European consumers also rapidly embracing this model of purchase), and this shift in consumer purchasing habits should have been a once in a generation opportunity for all manufacturers and their franchised dealer networks, to secure their new car futures from a foundation of successful used car retailing franchise partners.
Unfortunately few have grasped the opportunity that PCP finance agreements presented, and this was because the used car networks of the manufacturers were not ready to support the change in the used car business model and support the stock returning, when the PCP agreement ended and the customer purchased another car. It is important to remember that the used car operation is a business in its own right, it is a different business to run, compared to the new car business, it requires a different skill-set at every level of seniority, from sales professionals right through to the senior management, and those responsible for the running and the continual growth of the business.
Unfortunately too few manufacturers identified this and put the development and succession plans in place, to ensure that the professionals required were being developed by their franchise partners and therefore available to the network as a whole which, at the time, (when new car registrations were growing), didn’t seem that important but now that we enter more challenging times, the industry as a whole does not have the expertise required within the franchised dealer networks, in order to successfully trade through these challenging times and protect the new car business objectives.
So this now leaves the sector in a situation where more and more often, future residual values and therefore the future cost of ownership of the new car, is being influenced by, and is in the hands of, third party independent businesses that are in competition with your franchise partners, whilst undermining the importance of your franchise dealer network in the eyes of the customer.
At the moment we have the continual rise of third party independent businesses who are targeting your business model, or certain stages of the business model, and the reason why this undermines your franchise dealer network is that, in the eyes of the customer, these businesses are becoming the place to go to for that element of the used or new car supply process. It is no coincidence that they are not targeting the less profitable sides of the business, of course not; they are targeting the side of the business where there is “Scalability” and the opportunity to make money.
This subject is a post in itself and I will address this in greater detail in a future post, but for now let me just remind everyone reading this that if your franchised dealer networks do not have the personnel and/or the used car expertise required, to successfully trade during these challenging markets, (therefore supporting your used car and new car objectives), they will continually struggle to have the financial liquidity required to support cars returning to in-house finance companies at the end of PCP agreements, therefore allowing independent used car businesses access to this valuable used car stock holding, as well as having to make pre-registered and unsold new car stock available to independent internet based new car businesses.
And whilst this “Status Quo” remains just ponder on this for a while; when you give stock to a competitor business, you don’t just give them a stock holding, you give them the most precious commodity to any sales business, you give them the customers for that stock holding! Make 100 cars available and you hand over 100 customers, and customers are habitual, once they have dealt with a business, invariably, that is where they return to first when they look to change again!
So what’s the answer? Well in reality, unless the connection is made between the importance of used car success, when it comes to continual new car success, manufacturers will continue to be threatened by the business threats discussed over the last 3 posts and used car success can only be delivered by successful franchised used car networks.
Unfortunately though, the strong and resilient franchised used car dealer networks, (those capable of trading themselves and you, as the manufacturer, out of these perilous trading conditions), do not happen by accident, but luckily help is at hand. If this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car dealer network programme on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.
The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com
Alternatively please feel free to call us on 0345 057 3177.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning.
Used Car Business Development Director.
At first glance this question might seem unimportant, after all you are the manufacturer, you produce the product and only you decide who will get the new car product to sell, and on this basis you might be tempted to ignore the ramifications of the question.
However, those of you who read my last post; Do We Need To Discuss The “Pre-Registrations” Elephant In The Room, will hopefully be aware that for some of you, your traditional trading model may well be under threat and worse than this, some of you will be inadvertently already supporting the third party independent businesses that are in direct competition with your franchise partners and who threaten your current trading model.
In the post referred to above I began to look at how over supply of new car product and the process of “Pre-Registering” unsold new car stock, was making it difficult for franchise partners to operate effective and successful used car operations, and how this situation was supporting competitor business models and changing the trading model in both the UK and in other European markets.
I began to explore the ramifications and promised that I would explore them all, so in this post let’s look at the some of the other dangers mentioned in the original post, that over supply of new car product and “Pre-Registrations” can cause;
-
It forces desirable used car stock into the hands of competitor businesses, therefore feeding the growth of your competitors.
- Franchise partners are more likely to have to make new car and pre-registered stock available to competing internet based new car supply businesses.
- Drives your customers to competitor businesses.
In my opinion the 3 points above are probably the most threatening to your business and your current trading model, and at the moment all 3 of the above will already be occurring, and the long term trading dangers of not combating the points above is that both your current new car and used car businesses will be under threat.
In the UK we have seen how 3rd party independent Tech Businesses and independent used car operations are targeting the existing trading model and changing consumer habits, and I have watched with interest how these companies and these business models are now targeting European markets, building on the success they are having in the UK, where alarmingly for manufacturers, they are now changing consumer purchasing habits, undermining the importance of the franchise dealer networks in the eyes of the customer and taking customers directly from manufacturers and their franchise dealer networks.
In the UK, as it now is in Europe, every part of the purchasing process is being targeted by independent businesses; everything from the disposal of the customer’s current car to the supply of their next new or used car, is now a business model for an independent business in direct competition with you and your franchise partners. In the UK some of the biggest purchasers of customer part exchanges are independent electronic trading companies, we have independent internet based companies advertising on national TV as the most competitive supplier of new cars and in the some of the largest towns and cities, the largest and most successful retailers of used cars are now independent used car businesses and having been emboldened by their success, many of these companies are now targeting European markets.
This a dangerous time for the Automotive Sector because the illiquidity caused by the process of “Pre-Registering” unsold new car product, is leaving franchise dealer networks unable to purchase more traditional profiles of used car stock, because they are inheriting this expensive, nearly new stock profile which is actually in direct competition with the new car operation within their own business. Therefore they are unable to support more traditional profiles of used car stock as it returns to the market, driving it straight into the hands of independents businesses, and forcing franchise dealer networks to make unsold new car stock and pre-registered new car stock, available to independent internet based new car companies, the likes of which are now moving on to targeting European markets.
Now as threats to business models go, the situation above is very serious, but it is happening and for many manufacturer based professionals reading this post, the most successful retailers of new and used car product may well not be some of your franchise partners, they will be these independent businesses successfully targeting your current trading model and who are, (by stealth), becoming very powerful in your market. If the current situation doesn’t change then I predict that it will not be long before some manufacturers are having to discuss trading strategies and solutions with these independent third party businesses, as well as their franchise partners, because in the eyes of the customer, they have become the businesses to go to, because they are making parts of the purchasing process either easier or cheaper, or both!
Some of you may doubt that the situation is so threatening, but I assure you all that it is; I have watched with interest how these well-funded and very professional businesses have targeted the Automotive Sector, and how they are now increasing market share by changing the way business is done, and as long as they have access to new and used car product, they will continue to grow and take customers from you and your franchise partners. I will not name them here, but I will happily discuss them, their trading models and the threats they pose to your current trading model in more detail, with any of you who wish to contact me directly, so please feel free to do so.
However I will add the positive note that, as powerful as these independent businesses are becoming, the answers to dealing with the threats they pose are in your own hands. It is important to remember that they only have a business if they have access to product; remove that access to your product and the customers will have to return to the franchise dealer networks. It is our opinion that now is the time to meet “Head-On” the challenges that these businesses represent, otherwise for many of you, your new car success in the future will lie in the hands of independent businesses with no loyalties to you as the manufacturer and no trading restrictions of a franchise agreement, the dangers of which I will be discussing in my next post in January.
But it is important to remember that the process of removing access to new and used car product for independent businesses, can only be achieved via a franchise dealer network that is successful at selling approved used cars and supporting your wider aims as the manufacturer.
Unfortunately though, the strong and resilient franchised used car dealer networks, (those capable of trading themselves and you, as the manufacturer, out of these perilous trading conditions), do not happen by accident, but luckily help is at hand. If this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car dealer network programme on your behalf, (in order to keep your new car and total business objectives growing and on track), then we would very much like to hear from you.
The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com
Alternatively please feel free to call us on 0345 057 3177.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning.
Used Car Business Development Director.
At first glance this question might seem unimportant, after all you are a franchise partner of the manufacturer, it is the manufacturer that produces the product and only they decide who will get the new car product to sell, and on this basis you might be tempted to ignore the ramifications of the question.
However, those of you who read my last post; “Pre-Registrations” And Shutting Your Used Car Operation, will now hopefully be aware that for some of you, your traditional trading model may well be under threat and worse than this, some of you will be inadvertently already supporting the third party independent businesses that are in direct competition with you and your fellow franchise partners and who threaten your current trading model.
In the post referred to above I began to look at how over supply of new car product and the process of “Pre-Registering” unsold new car stock, was making it difficult for franchised dealerships to operate effective and successful used car operations, and how this situation was supporting competitor business models and changing the trading model in both the UK and in other European markets.
I began to explore the ramifications and promised that I would explore them all, so in this post let’s look at the some of the other dangers mentioned in the original post, that over supply of new car product and “Pre-Registrations” can cause;
- It forces desirable used car stock into the hands of competitor businesses, therefore feeding the growth of your competitors.
- Forces franchised dealer networks to have to make new car and pre-registered stock available to competing internet based new car supply businesses.
- Drives your customers to competitor businesses.
In my opinion the 3 points above are probably the most threatening to your business and your current trading model, and at the moment all 3 of the above will already be occurring, and the long term trading dangers of not combating the points above is that both your current new car and used car businesses will be under threat.
In the UK we have seen how 3rd party independent Tech Businesses and independent used car operations are targeting the existing trading model and changing consumer habits, and I have watched with interest how these companies and these business models are now targeting European markets, building on the success they are having in the UK, where alarmingly for manufacturers and their franchised dealer networks, they are now changing consumer purchasing habits, undermining the importance of the franchise dealer networks in the eyes of the customer and taking customers directly from manufacturers and their franchise dealer networks.
In the UK, (as it now is in Europe), every part of the purchasing process is being targeted by independent businesses; everything from the disposal of the customer’s current car to the supply of their next new or used car, is now a business model for an independent business in direct competition with you and your fellow franchise partners. In the UK some of the biggest purchasers of customer part exchanges are independent electronic trading companies, we have independent internet based companies advertising on national TV as the most competitive supplier of new cars and in the some of the largest towns and cities, the largest and most successful retailers of used cars are now independent used car businesses and having been emboldened by their success, many of these companies are now targeting European markets.
This a dangerous time for the Automotive Sector because the illiquidity caused by the process of “Pre-Registering” unsold new car product, is leaving franchise dealer networks unable to purchase more traditional profiles of used car stock, because you are inheriting this expensive, nearly new stock profile which is actually in direct competition with the new car operation within your own business. Therefore your used car operation is unable to support more traditional profiles of used car stock as it returns to the market, driving it straight into the hands of independents businesses, and forcing franchise dealer networks to make unsold new car stock and pre-registered new car stock, available to independent internet based new car companies, the likes of which are now also moving on to targeting European markets.
Now as threats to business models go, the situation above is very serious, but it is happening and for many senior franchised dealership based professionals reading this post, the most successful retailers of new and used car product may well not be some of your businesses, or those run by your fellow franchise partners. They will be these independent businesses successfully targeting your current trading model and who are, (by stealth), becoming very powerful in your market. If the current situation doesn’t change then I predict that it will not be long before some manufacturers are having to discuss trading strategies and solutions with these independent third party businesses, as well as you as their franchise partners, because in the eyes of the customer, they have become the businesses to go to, because they are making parts of the purchasing process either easier or cheaper, or both!
Some of you may doubt that the situation is so threatening, but I assure you all that it is; I have watched with interest how these well-funded and very professional businesses have targeted the Automotive Sector, and how they are now increasing market share by changing the way business is done, and as long as they have access to new and used car product, they will continue to grow and take customers from you and your fellow franchise partners. I will not name them here, but I will happily discuss them, their trading models and the threats they pose to your current trading model in more detail, with any of you who wish to contact me directly, so please feel free to do so.
However I will add the positive note that, as powerful as these independent businesses are becoming, the answers to dealing with the threats they pose are in your own hands and those of the manufacturers you represent. It is important to remember that they only have a business if they have access to product; remove that access to your product and the customers will have to return to the franchise dealer networks. It is our opinion that now is the time to meet “Head-On” the challenges that these businesses represent, otherwise for many of you, both your used car and your new car success in the future will lie in the hands of independent businesses with no loyalties to you or the manufacturer you represent, and no trading restrictions of a franchise agreement, the dangers of which I will be discussing in my next post.
But it is important to remember that the process of removing access to new and used car product for independent businesses, can only be achieved via a franchise dealer network that is successful at selling approved used cars and supporting the wider aims of the manufacturer.
Unfortunately though, the strong and resilient individual used car operations and franchised used car dealer networks, (those capable of trading your business, themselves, as well as the manufacturer, out of the current perilous trading conditions), do not happen by accident, but luckily help is at hand. If this post has resonated with you and you would like to know more about our used car business development consultancy programmes, because you would like to partner with an organisation of professionals who have faced the challenges of fast paced evolutionary markets and know how to develop a successful and profitable used car operation on your behalf, (in order to keep your used car, new car and total business objectives growing and on track), then we would very much like to hear from you.
The owners of Autoformance have owned and run successful used car operations and been at the forefront of the development of approved used car programmes for a host of manufacturers. For an exploratory conversation regarding our services and how we can develop bespoke used car business development and consultancy programmes on your behalf, please do not hesitate to contact one of our Used Car Business Development Directors; Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com
Alternatively please feel free to call us on 0345 057 3177.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning.
Used Car Business Development Director.
