MG – AM Franchise Guide 2014

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THE 2014 FRANCHISE GUIDE
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The MG brand is one of the best known marques of the British car industry. Under its Chinese owner, Shanghai Automotive Industry Corporation, MG Motor UK is gradually re-establishing itself with an increasing range of cars and a strengthening network of dealers. So far this year, the brand has 1,483 registrations, a 777% increase on the same period in 2013.

It returned to the UK in 2007 with a revised version of the old TF assembled at the MG Rover plant in Longbridge, while the first all-new MG for 16 years, the MG6, arrived in 2011.

2014 will be the first full year of MG3 sales, following the car’s introduction in September 2013, while it has also gained visibility from competing in the British Touring Car Championship with the MG6 since 2012, scoring a number of race wins.

According to its bosses, MG is aiming to grow market share organically rather than chase it for its own sake, enabling a more profitable business model in the long term.

Growth will be based around the introduction of new models that it believes will appeal to the retail buyers as well as having a profitable presence in the small business and fleet sectors. The company claims the MG3 supermini, which starts at £8,399, provides “a million personalisation combinations”, together with low insurance and class-leading interior equipment and space.

Registrations for the year to date are already almost triple the 2013 total, at more than 1,400 and while its market share is currently 0.1%, it is on a steep upward trajectory.

AM spoke to MG head of sales and franchise Sam Burton earlier this year about his strategy for the brand.

In terms of sales points, MG wants 80 by the end of this year and 100 by the end of 2015, giving 90% UK coverage. However, the network has been challenged by winning sales and service business with what has been until late 2013 a one-car brand. Now that the MG3 is turning heads and getting positive press, thanks partly to price positioning, low 4A insurance rating and 42% 3yr/60,000 mile CAP Monitor residual values, there has been an increase in interest from prospective dealers.

MG has also approached XPart, the independent service and repair network that specialises in MG Rover cars. It appointed 15 XPart locations as MG authorised repairers in 2013 and may  add 20 to 25 this year in order to boost service coverage from 50% of the UK to 70%.

On margins, with the MG3 the company introduced no-haggle pricing, rather than build in a “big fat distributor and dealer margin” that ultimately is given away. It had tried the latter with the MG6, but dealers weren’t hitting the volumes because the car was overpriced.

“We took that on board with the MG3 and decided on a range of fixed margins with no haggling on price,” said Burton. “Our dealers are able to then present to the customer with a fair price. And it’s working for them. They are retaining good margin, £800-£900 a unit, or 5% to 8% depending on the model.”

MG sees itself competing with Kia, Hyundai, and Škoda. As those carmakers have moved up the price chain, MG wants to capitalise on the value-oriented buyers left behind: “The consumers we are talking to are coming from the likes of Hyundai and Kia, and mainstream B-segment car owners, someone who has a three-year-old Fiesta, but can’t afford the price hike for a new one. A top-of-the-range MG3 is £10,000, a Fiesta is more like £13,000.”

Dealer case study

WH Brand is a family-run dealer business in Lincolnshire established almost 90 years ago, and recently it took on the MG franchise.

Sales manager Adam Brand said: “MG is one of the best known names in the UK automotive industry and under its new owners it offers us exciting prospects for the future.

“The MG6 family car is good value, modern, spacious and drives as well at it looks, while the sporty and compact MG3 compact hatchback joined the range at the end of last year and is already our fastest selling car since we were established in 1925.

“The most expensive model in the MG3 range costs less than the entry-level model of some rivals.

“There is strong appeal for these cars.”

Learn more about this manufacturer on MG's AMi page. Dealers can register here for a free AMi membership.