A seasoned veteran with 40 years of experience within the industry insists that franchise motor retailers will proceed to be the indispensable interface between manufacturers and customers.
Speaking on the Vehicle Remarketing Association’s (VRA) latest seminar, Graeme Potts, CEO, Eden Motor Group, acknowledged the long-standing speculation surrounding the demise of franchise retailers. Drawing on Mark Twain’s famous quote about exaggerated reports of its death, he said the franchise dealer would remain the crucial interface between motor manufacturers and customers, suggesting that any perceived threat might actually spur innovation and resilience.
So as to ensure that the industry stays relevant, viable and of importance in that chain between manufacturers and customers dealerships could have to depend on their existing skills that are characterised by flexibility, innovation and stoicism, skills which they’ve already needed to develop in a bid for survival. “It will not be a straightforward life now,” he admitted.
Amid the continued transformations within the industry, Potts touched on the rise of online platforms, partnerships, and the perpetual evolution of the franchise model.
Addressing the looming challenges facing motor retail in 2024, he highlighted the necessity for passion and a belief within the industry’s specialisation. “Motor retail is a specialism that sometimes is undervalued, but we have now to consider in it, or there’s going to be no future in any respect.”
Discussing the emergence of latest business models Potts spoke of the need for these to work seamlessly for all stakeholders, including manufacturers, retailers, and, most significantly, customers and identified that a big percentage of latest automotive customers within the UK still prefer the standard in-person buying experience.
“Agency is in its infancy, but wherever it’s being piloted all over the world, it has been an unproven case and there are a lot of, many subsets of what agency actually means. But there’s one thing that is for certain. If a brand new model of distribution, if a brand new interface with customers goes to actually gain traction and work, it has to work for all stakeholders.”
He acknowledged that OEMs manufacturers have to scale back their costs as a way to deal with short change cycles and latest technology in highly competitive marketplaces but identified that they can not contemplate reduced volume or reduce market share – with those last two things are in peril of being compromised in consequence.
Delving into the potential advantages for retailers, Potts explored the prospect of reduced working capital and inventory costs under the agency model.
“It could be that for the retailer, reduced working capital, reduced inventory costs, reduced assets all over might mean that there is a viable solution for each parties. However the third stakeholder and crucial of all, it must work for the client. I’ve heard horror stories of manufacturers who’re saying the client must get rid of their part exchange before they’ll place the order for a brand new automotive. What utter nonsense.”
“In the intervening time, there is a binary view. Some say definitely a network, some say definitely not. But those who say definitely not do have networks. They only try to pretend that they have not. And take a look at a number of the disruptors who’ve attempted to get into the used vehicle market. Almost exclusively, they’ve a physical estate of dealerships – just by one other name.”
Expressing concern about political influences available on the market, particularly in the electrical vehicle segment, he said that the promotion of electrification was having a dramatic impact on franchise retailers.
“The actual fact of the matter is that inventory, marketing, pricing, and so many other aspects are being driven by the will for change of technology that will not be yet front and centre in people’s minds and it’s massively distorting the marketplace. I actually have only a few internal combustion engine vehicles unsold in stock in my business, but I’ve currently got £6 million value of unsold EVs.”
“I’m not political, I’m just attempting to deliver to the marketplace where customers are telling us they need. And in the intervening time, it’s resulting in a hold back in the general scope of the market. It is also resulting in price increments, not only for EVs, but for associated ICE cars. Due to this fact, we as retailers are handling the value escalation on behalf of our customers that will not be directly related to input prices.”
He said the shift to EV would likely result in further manufacturer consolidation, further franchised motor retailer consolidation and severe liquidity challenges within the industry.
Shifting focus to the worldwide perspective, Potts discussed the interest of foreign investors within the UK automotive industry. Highlighting undervalued motor assets, a mature market, and high retail standards, he outlined why foreign capital sees a chance within the UK automotive retail sector.
“We’re characterised by not being complacent, but additionally by our retail standards that are amongst the best on the earth. Due to this fact, there’s the chance for investors who could also be operating automotive businesses elsewhere and get some reverse best practice into their purchase of a UK business. And, in fact, very relevant is the sophistication and scale of our used automotive and aftermarket business, a whole lot of which is managed inside the franchise network.”
Potts concluded with a mirrored image on the influx of latest brand entrants, cautioning that a rise in brands doesn’t necessarily correlate with market growth.
“The variety of brands increasing doesn’t increase the scale of the market. The number of shoppers and the variety of people who find themselves confident to buy determines the scale of the market. So let’s not kid ourselves that each latest entrant grows the market and that everyone makes more cash. There must be a price related to latest entrants in that revenue gets spread more thinly so there shall be winners and losers.”
The challenges faced by latest entrants, including brand consciousness, time to attain critical mass, and the impact on residual values, were emphasized.
“Brand consciousness is slowly eroding within the UK, however it’s still far stronger than most other markets. It also takes an extended time to get to a critical mass and subsequently there must be considerable investment by latest entrants into the marketplace.
He said the opposite huge challenge for brand spanking new entrants is the effect of residual values. “The thing that customers are increasingly conscious of is whole-life costs and subsequently the initial purchase price if it’s accompanied by a very weak residual implies that the whole-life cost is not any longer competitive.
“Established brands are reacting through reducing the ranges This will not be a superb thing for retailers. A few of them are reducing their ranges as a way to have fewer cars and many margin versus volume in reverse. That’s very strange behaviour that we’ve not seen before.”
Asserting that franchise motor retailers will proceed to be the indispensable interface between manufacturers and customers, Potts concluded: “OEMs need us. Sometimes they deny it but OEMs need us and a mutually rewarding business proposition will persist in a method or one other. My conclusion is ‘we’re here to remain’.”
This Article First Appeared At www.am-online.com
