Aftersales absorption levels continue 'worrying' downward trajectory to 55.5%

Average overhead absorption has fallen to 55.5% in the UK, according to new data from REALtime Communications.

Traditionally, aftersales revenues targeted absorbing (covering) 100% of a dealer’s fixed overheads.

The business tracked data between October 2022 and March 2023 and said the average 55.5% figure is down from 5.7% in the preceding six months.

Richard Robinson, REALTime Communications chief operating officer, called the stats “worrying”.

He said: “The declining trend is something we have been forecasting for many months.

“The loss of circa 2.1 million new car sales in the 2000-2022 period is now impacting the critical nought to three year old car parc for franchised aftersales activities.

“At the same time, the sales of low maintenance BEVs are also playing an increasing role in reducing servicing activities.”

The decline in absorption levels is joined by falling conversions of red and amber work, down 3.9% and 6.06%, respectively, even though work identified in Electronic Vehicle Health Checks (EVHC) increased.

Tyres, an area many retailers have been targeting for growth, saw red work conversion fall by 6.01%.

As well as the decline in new car sales and the emergence of battery electric vehicles (BEV), an ageing car parc and the cost of living crisis are seen as critical contributors to the downturn, it is clear it is a challenge that retailers must seek to address.

Richards concludes: “To an extent, strong used car profitability has masked the challenges facing aftersales, but we can see that gross profit from used car sales has also declined.

“The perfect storm needs to be addressed, and arguably, any moves to any agency model by an OEM may further crystalise the need to develop strategies to reverse the trends we have identified.”