We’re sure that we will all agree that there are many far more important things going on in the world at the moment, other than the world of commerce, (the automotive industry included), including many personal and tragic stories; and sadly the whole situation is still to play out. However alongside this evolving dynamic is the responsibility those owning and running automotive businesses have to themselves, their families and to those in their employ, to leadership and making the tough calls moving forward, and these will be difficult and highly personal decisions with no blue print of past trading experience to refer to.
Difficult because as much as we all know how important it will be for life to begin to get back to normal, we are all having to plan for a trading environment that is unknown. All the predictability of the past has gone out of the window and we all find ourselves trying to prepare for a trading environment which will be unlike anything we have experienced in the past. So we live in a world of many far ranging opinions, not all of which can be right, and many of those being paid the big money to make the big decisions will be wrong, but we would remind everyone in those positions that “Command is a Lonely Game!”
In our last article; The Automotive Sectors 3 Most Pressing Issues Post The Lockdown? We “Nailed Our Colours To The Mast” and discussed our predictions regarding the most important issues facing automotive manufacturers and their franchise partners, in terms of being ready for when the doors of businesses open again; whether that be on virtual basis and/or a physical basis.
We feel that the current situation has caused enough damage for the dye to now be cast, especially as the duration of the lock-down continues to evolve and lengthen with subtle announcements like the chancellor’s announcement to extend the furlough programme of support until the end of June, (something we’re sure wouldn’t be happening if things were going to get back to a more normal footing before then), which although brought some much needed, (if subtle), clarity still makes planning for the trading landscape of the future very challenging.
And we all have this challenge, (us included), but regardless of the manufacturer you represent you all have the major challenge of returning liquidity to your business, because without liquidity and the oxygen of cash flow your business will be driven into receivership. However, the challenge of returning liquidity to your franchise dealer network, (if you are the manufacturer), or your business, (if you are the franchise holder), will differ from manufacturer to manufacturer, in terms of the processes and initiatives that are going to be involved; and the consequences of getting the planning for this process wrong will be severe.
Although you will all be trading in different markets, to customers from differing socio-economic groupings and involving different “Supply and Demand” drivers, you all have the major challenge of returning liquidity to your business; so we would recommend that you start asking yourselves these questions ASAP: • There will be money out there but can you attract it?
- Do you have the up to date and accurate customer and enquiry data required?
- Do you have the trade networks required?
- Can you afford to implement the pricing strategies required to induce used car sales and return liquidity, in both retail and trade markets?
- Do you know how to use other people’s money to generate sales and therefore cash flow for your business?
- Do you have the team and the expertise right now to be already preparing for the trading environment?
Do you really have sales professionals in your employ, those capable of operating successfully in the likely trading conditions? Although the trading conditions you will be entering will be heavily determined by the brand you represent sadly, for many of you reading this, your options for returning liquidity to your business will be just an unedifying “Race To The Bottom” on price, combined with the ability of “Your” sales team to secure what business is out there before your competitors do.
For others it will be a more nuanced and highly specialised process, but for everyone reading this the key to returning liquidity to your business will be the skills you possess and the success you can then enjoy in the used car market; and by the used car market we include all used car trading disciplines from acquisitions, to retailing, to stock disposal. Now a word of warning; every process involved in adhering to an all-auction disposal policy is not a valuable skill associated with stock disposal, so for many there is much work to do because relying on the your all –auction disposal policy and the associated auction house to return liquidity to your business will be the automotive business equivalent of “Sleeping Whilst Rome Burns!”
So there is much work to be done at the moment and all businesses not acting now and getting “Ready” are likely to find it impossible to keep up with the pace of evolution in the used car market, once the doors of businesses open again; and we focus on the used car market because this will be vital for both manufacturers and their franchise holders. As the manufacturer you must appreciate that your franchise holders will have just one all-encompassing issue upon returning to their business and we would recommend that you are sympathetic to this, if you want to retain your franchise dealer network?
The number 1 priority for franchise holders when returning liquidity to their business, will be the amount of money invested in used car stock holdings and the likely losses involved; this will, (or SHOULD!), be the number 1 pressing issue for those owning and/or running franchised dealerships, because the money invested in used car stock holdings will be “Their Money.” Until cash can be returned to businesses via used car retailing and stock disposal the truth is that many will not have the liquidity to be able to retail new cars for a while, as they may not have the capacity to write out a cheque for a part exchange; not knowing what the market value will be and who will return cash for the car concerned, because the auctions are closed and won’t be working and they all have no skills at stock disposal and/or the trade networks required to continue to operate.
So as much as the damage being reaped on all commodities markets by the Corona Virus is like nothing anyone alive today has seen, help and advice is at hand; we have traded through recessions and market impacting events including the foot and mouth outbreak, the fuel crisis, the events surrounding 9-11 and the financial crisis, for over 30 years, and we know what will be required in order to be ready and to return liquidity to your business; but most importantly we understand that this process must begin now.
Realising how important the operational issue of returning liquidity to businesses will be, we have made the decision to make ourselves available for a free conference call to anyone, whether you are a senior member of personnel based at a manufacturer and/or anyone owning or running a franchised dealership or group. During this call we will discuss your business, audit your current procedures effecting your ability to return liquidity to your business and discuss the skills and operational procedures that are going to be required.
If you would like to take advantage of the opportunity to discuss this with proven used car professionals, then please feel free to contact either Andrew Banning at ajb@autoformance.com or Malcolm Thomas at mgt@autoformance.com in the first instance, in order to arrange a no obligation exploratory discussion.
Alternatively please feel free to call me on 07796 260261.
For more information about our services please visit our website at www.autoformance.com
I look forward to hearing from you.
Andrew Banning.
Used Car Business Development Director.
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