Marshall would "wholeheartedly embrace" new car agency model

Daksh Gupta, Marshall Motor Holdings chief executive, has said the business would happily switch to an agency model for new car sales and thinks plans to introduce them have sped up due to Covid-19.

In an interview with AM following Marshall’s interim results, Gupta said moving to an agency model would bring immediate cash benefits for his group.

He said: “I would wholeheartedly embrace an agency model on new cars and if car manufacturers were to introduce a scheme I would move to it tomorrow.”

Gupta said most manufacturers are already looking at moving to an agency model, where dealers are paid a set handling fee per new car.

He said: “The benefits would mean we would not be carrying stock costs, which in Marshall’s case, would hand back tens of millions of pounds in cash back for the business.

“Moving to an agency fee would immediately rid us of our fleet debt.

“I think we could be closer to a market transition to an agency fee as a result of Covid-19, I know some brands are.”

While Marshall’s revenues and profits have been adversely affected by the pandemic, Gupta is confident the group’s second half performance will be able to absorb the losses from the first six months of the year.

He said the company is on track to break even and he’s confident with orders ahead of the key month of September.

He told AM: “I think given the context of what’s happened we have done really well.

“It feels odd to say that given the losses, but we have outperformed the market and I have the confidence to say that I think our H2 performance will absorb what’s happened and we’ll break even or perhaps better by the end of the 2020.”

Since reopening, Gupta said dealerships have been busy. He acknowledges that some of that is pent up demand from when the market was on pause in Q2, but he is encouraged by what he has seen so far.

Gupta said: “The million dollar question is what is the real level of the market? The boost in July wasn’t the real picture so I think we’ll have a better view before the end of Q3.”

Marshall has not made any redundancies as a result of Covid-19 and this is due to Gupta taking a longer-term view about the size of the market and the greater impact of the pandemic.

He said: “I think it’s slightly disingenuous to use the furlough scheme, which is there to protect jobs and then to make redundancies.

“We don’t know what Q4 is going to bring, but we would all be kicking ourselves if we let people go and the market recovers more quickly than expected.”

Gupta knows the trading conditions will be challenging and is predicting UK dealer networks to drop from 4,500 to 3,600. This is a prediction he has made over the last three years.

He thinks this drop will be sped up as a result of Covid-19 and manufacturers’ network rationalisations, as well as franchise exits like Mitsubishi and brand mergers like FCA Group and PSA Group.

He said that while it will be difficult for the businesses and those that lose their jobs as a result of this, the fact remains that a 20% drop in dealer numbers will make the market more profitable for those that remain.

“...How can smaller groups compete?”

Gupta said: “I think there will be five or six £5bn turnover groups in the UK because how can the smaller groups and dealerships compete?”

Gupta applauded the job by National Franchised Dealer Association (NFDA) and Society of Motor Manufacturers and Traders (SMMT) to lobby for more Government support during the pandemic.

He said: “I know the industry was disappointed there was no additional support post-lockdown but I think while there is pent up demand the Government will be looking at what’s happening in the automotive market.

“You want to see that support if things go horribly wrong in Q4.

“I’m not convinced that a scrappage scheme would be beneficial, but I think there could be a way to apply some kind of grant for all car manufacturers.”