As we all now approach the time of year when finalising plans for next year is well underway, we have been giving some thought as to where the UK used car sector is heading; quite important really because it affects us too and therefore how we will be working next year.
Like every business we are looking at our target markets, looking to leverage our offering and to continue to grow, and the process made us all realise that the UK used car market is a bit of a conundrum at the moment; in fact we have all never known a time of such little direction as we are experiencing now!
During this process we always come up with a “One Liner” that sums up the problems in a national used car market and what our general advice to our target audience in that market would be. This is vital for us because understanding our target used car markets drives the tone of our content articles, articles just like this one, that we publish every week in order to engage with our customers and readership base; and this year for UK based manufacturers our used car business “One Liner” would be:
“It’s Make Your Mind Up Time!”
We say this because as we have watched the fracturing and breaking up of the used car market in the UK we have been left wondering “Wow,” some manufacturers really are handing their used car business over to their competitors on a plate. In fact the only point we all struggled to agree on was when this process would reach a “Tipping Point” for UK based automotive manufacturers and could no longer be retrieved?
However, we all agreed that the “Tipping Point” was close, although some of you are nearer this point than others. The reasons for this are wide ranging and nuanced for every manufacturer, but we all agreed that no manufacturer in the UK appeared to have the strategic thinking in place to secure used car market place share and protect the investments made in the new car trading model by both themselves and their franchise partners; and this caused us to then ponder on why? In reality it can only be down to one of two reasons;
Manufacturers Don’t Know How To!
It’s Not Part Of The Manufacturer’s Business Plan Moving Forward!
Now of the two options above the most worrying would be that it is not part of the manufacturer’s business plan moving forward, probably because with evolving new car retailing models the manufacturer is just not interested in supporting, or having a franchised dealer network, in the same way as we have been used to them. Now this is serious for those invested in multi £million buildings which are worth far less with no franchise model and/or business attached. Sadly though and having been franchise owners ourselves, we realise that it is important to remember that, (even as a franchise partner), first and foremost you are always part of someone else’s journey and that the journey may not always be to your liking! We have read with interest how some new car trading models are evolving in the UK and what the ultimate direction of travel may be; the move towards the technology based new car sales and servicing models where sadly, the need for fully committed franchise partners and franchised dealer networks looks like it may be disappearing.
We will not name names in this article but it has been interesting to read how some very big manufacturers in the UK are looking to evolve their trading model and how some long term invested franchise partners are now selling their associated businesses because they don’t like what they see and they need to get out before everyone else realises what is going on!
Now we understand the new car model is evolving and that this poses some operational and logistical challenges upon manufacturers, but it does leave you with some very serious operational challenges to address; namely, what happens then to used car retailing? It’s fine having glitzy new pop up retail sites, doing away with the problem of dealing with franchise partners by leveraging technology in the new car sales process, but the UK retail model is now a finance selling model where customers purchases are dictated by their monthly budget, which in turn needs good residual values to underpin competitive personal leasing rates.
Critical to residual values of course will be successful used car retailing, so it will interesting to see how manufacturers build the relationships and business models required with committed used car retailing partners? Unless of course the manufacturer wants to look to try and leverage technology further, with ambitions to evolve into the used car retailer themselves, which will need a lot more thought than the evolving models for new car retailing, to succeed.
The other reason is that manufacturers just don’t know how to and this is leading, (with some manufacturers), to the “One Trick Pony” approach discussed in our recent article; Looking To Grow Used Car Sales?,,,, Beware The “One Trick Pony” Solution! We won’t explore or expand on the points covered by this article again here, those wishing to read the article again need only click on the embedded link above to read it on our Used Car Business Development Blog.
But in brief, it warned against the fatal mistakes that are being made by some manufacturers and the big PLC’s owning vast swathes of franchised dealer networks in the UK. Because there is a “Well How Hard Can It Be” mind set to used car retailing many of you have no comprehension of just how far the bar of used car retailing has been raised by the competition over the last 10 years. This has resulted in many of you opting for the quick fix solution, “The Emperor’s New Clothes” if you like; which as a process of used car business development is akin to trying to start a bonfire by flicking matches at a pile of wet leaves.
As an example of how to get things wrong you only need to look at the brief life of Car Store; now we aren’t privy to the internal records of what happened here and it is extremely sad for all those involved but from the outside it just looked like an ill-conceived business model being launched 10 years too late and without the expertise required to make it work! We will say no more on this for now as this will be explored fully in our next article, but it is lesson in how the used car and new car businesses are evolving, but very differently to each other!
Thus our statement that “It’s Make Your Mind Up Time!” 2020 will be a make or break year for many manufacturers when it comes to used car retailing and of course there are going to be winners and losers, depending on the brand, your position in the market and the strength of your franchise dealer network, but one thing is for sure; those of you who ignore the importance of used car retailing moving forward will end up with a new car model that is struggling in the monthly budget purchase age.
We are at a time of great change and there is still a lot that needs to play out; we have a range of new propulsion models being launched and many new cars being launched with no idea of what demand there will be for these cars in the used car market. Without committed used car retailing partners and fit form purpose programmes of used car business development, you risk leaving the residual values for not just these cars, but your entire model ranges, to those with whom you have no business relationship with and you are likely to find this a harrowing situation.
This situation will then leave unknown used car businesses more in control of the cost of new car ownership than yourselves; is this really the grand plan? The most important business and trading lesson manufacturers can learn is that they do not control the value of their new cars when they hit the used car market! With committed trading partners and fit for purpose used car business development programmes residual values, (and the cost of new car ownership), can be protected; but lose this and you are in the hands of used car businesses who are only investing in stock when there is defined and genuine demand.
In this situation you can think what you like, in terms of future values, but when a business and/or market has unspecified or little retail demand for an asset type, prices go into freefall and you can protest as much as you like, but no one will be listening! That will leave you in the worst of all situations, in terms of keeping the new car cost of ownership competitive and this will require very deep pockets indeed!
Unfortunately with the under investment in used car business development over the last 10 years, the professionals required to develop the used car retailing models you require are in very short supply at both manufacturers and within franchised dealer networks. Regardless of the course of action you decide upon, successful used car retailing will still be required to underpin your new car retailing ambitions, and for many of you there will be no proven and experienced used car professionals to draw from during this critical period.
Now we appreciate that finding genuinely successful used car professionals is very difficult for both manufacturers and their franchised dealer networks 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 me on 07796 260261.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning.
Used Car Business Development Director.
No comments:
Post a Comment