Well, our last post; Developing A Successful Used Car Business; It Could Be Now Or Never, seems to have caused some debate with differing standpoints, depending on whether or not you have outperformed the new car market as a whole or not?
However the thread of our argument for European Manufacturers, as European markets continue to transition to used car markets that outperform new car markets, (in terms of volume of sales), and into a market conditions that are evolving at such a pace, that success will no longer be secured solely by your level of success in the new car market, we would maintain still stands true.
If you take the UK market as an example of trading conditions that European markets are heading towards, you only need to look at the SMMT new car registrations figures for 2018 to see how some manufacturers, those who have not invested in fit for purpose approved used car programmes, are now struggling. With as many as 10 manufacturers retailing cars in the UK market, experiencing year to date decreases in new car registrations of between 20% and 75%, the dangers of not enjoying a franchised dealer network that is successful in retailing used cars has never been more prevalent.
Of course we appreciate the importance of the new car market to the manufacturer, but catastrophic declines in new car performance such as this, put at risk everything the manufacturers concerned are trying to achieve. Regardless of your success today in the new car market, (due to many factors), you are going to experience downturns in new car performance; during model run outs, economic down turns etc. and these downturns are likely to become more frequent as the used car markets in Europe continue to evolve. But these unavoidable downturns can be dramatically reduced if you enjoy a franchised dealer network that is successful in the used car market, which will be critical as demand for used car product from the consumer continues to increase.
Looking at the figures from the SMMT for new car registrations in the UK thus far in 2018, it is no coincidence to us that the manufacturers experiencing the biggest year to date reductions in new car registrations, are those either not enjoying franchise dealer networks that are successful in the used car retailing arena and/or those not taking the measures required to develop and support used car retailing within their franchise dealer networks.
We appreciate that at times of challenging new car trading conditions, it may seem counter intuitive to be diverting your attention to a separate part of the business, but the reality is that if you want to build successful new car trading foundations that are fit for purpose in the likely trading environment of the future, an integral part of this process and your future success, will be a fit for purpose approved used car programme that is then supported by a franchise dealer network that is successful at retailing used cars.
However, some manufacturers in the UK just never grasped this concept, they thought the new car business could stand alone and be successful as well as deliver growth year-in year-out, but it can’t! Imagine you represent one of the manufacturers experiencing 20% plus declines in new car registrations in your market during the first half of 2018, and then ask yourself how this can happen? What is it that makes a manufacturer experience a decline in new car registrations of this magnitude and in such a short period of time?
For sure there may be reasons at the margins of this decline, model range run outs etc. but it would be folly to blame substantial declines in new car sales on operational or economic factors that are at the margins of your under-performance. Sometimes we have to look inwards, stop blaming the outside forces and face realities that we may wish to ignore. As the famous Arthur Conan Doyle quote from his Sherlock Holmes novels goes; “Once you eliminate the impossible, whatever remains, however improbable, must be the truth!”
And the truth is that the operational disciplines and the investment in businesses required to ensure that you have a network of franchise partners that are successful at used car retailing, will then ensure that you do not suffer the declines in new car sales that some manufacturers have experienced in the UK market.
I won’t go too deeply into the reasons for this in this post, (I will be covering these issues in future articles), but it should be no coincidence to anyone reading this article that in markets where used car sales volumes outstrip new car sales volumes, the businesses that are most successful, in terms of new car sales, are also the businesses that are most successful at used car retailing. Within these evolving markets it will also be the manufacturers who support development of used car retailing strategies and have the training and initiatives in place for franchise partners to develop used car businesses, and to develop the personnel responsible for running used car operations, that will be the manufacturers securing their future long term used car and new car success.
In the UK now the inconvenient truth is that for those manufacturers who have suffered the biggest falls in new car registrations, there is years of hard work ahead and investment required, if the successful used car programmes and franchise dealer networks required are to be built, and future new car success is to be secured. The benefits to European manufacturers of developing franchised dealer networks that are successful at retailing used cars are too numerous to mention, and were covered in my last post, so can be found by following the direct link above.
The pressures on our retailing trading model were also discussed and these threats are not going away; in a market that is both evolving and fragmenting at a dizzying pace, the time to be securing the future of your used car and new car trading model is now, before it is taken from you by the aggressive independent business models targeting the sector in Europe.
These threats will not be going away; with independent internet based new car supply businesses now both moving into European markets and now openly targeting expansion into the used car market in the UK, (the natural progression for which will be to also target European used car markets), we would caution that the sector, and the franchised dealer based trading model, has never been under such threat. The time for action is now and the main area of your business requiring your focus, will be your used car programmes and retailing model.
In the trading conditions of today it is another inconvenient truth that European manufacturers will only be able to develop strong and resilient franchise dealer networks, those capable of supporting their new and used car aspirations, and free from high levels of manufacturer support and subsidies, if they invest in and promote the expansion of approved used car business development programmes, those that will be required to ensure that a network of successful used car operations can be built.
Unfortunately though, strong and resilient used car dealer networks 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, (both in the UK and Continental Europe). 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 0044 7796 260261.
For more information about our services please visit our website at www.autoformance.com
Andrew Banning.
Used Car Business Development Director.
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