With Brexit looming and the uncertainty of what that will mean for the industry after 29 March, it’s fair to say that Q1 2019 has been like no other for UK automotive dealers.
It’s interesting discussing what’s happening with dealers and manufacturers. The purchase of a car is only beaten by house-buying in terms of financial cost in the UK, and as such, it’s likely that the impact of Brexit on consumer confidence has more severely affected our industry than any other this past year. It is my belief that if Britain does exit the EU, it is likely cars will become 10%-20% more expensive to consumers, depending on what happens to the value of the pound.
What actions are manufacturers taking for Brexit?
So, against this backdrop of political and industry uncertainty, what options are available to manufacturers to maintain sales? Registering all inventory before the deadline is certainly an option that will achieve a profit over the coming months regardless of what happens. Indeed, I have been told that some VW Group brands have auto-shipped every vehicle in Port of Tyne, Sheerness, and Grimsby to dealers regardless of their ability to store them. Other manufacturers are offering huge incentives for dealers to prepare to register vehicles at the end of March. Could we be heading for the biggest pre-registration exercise in history?
The challenge for dealers
From a car dealer’s perspective, many have seen a reduction in new car sales, and profits, so far this quarter. In fact, there are some dealers I have spoken to who only agreed their Q1 targets mid-March! Many dealers have tried to mitigate this reduction in new car volumes by growing their used car business. However, the increased competition when trying to buy used cars has resulted in reduced margins within their used car business too.
The challenge now for dealers is clawing back some of the Q1 reduced profit in April.
So, what actions can car dealers take in the continuing uncertain climate? My advice would be to take the opportunities on the table! If offered a good enough pre-reg deal by your manufacturer partners take it but be sure to turn your stock quickly to maximise the profit potential. Running a car sales event in April is likely to pay dividends, particularly so if you consider finance penetration and add on products to maximise profit per unit. One thing is for sure, if I was in the market for a new vehicle, I’m pretty sure this would be the time to buy.