Car dealers ‘maximise opportunities’ to achieve £2,900 December profit

By Tom Sharpe

6 February 2019

Car dealers showed their ability to adapt to challenging market conditions by achieving an average profit of £2,900 during December, ASE has reported.

While the turnaround from a £400 loss a year earlier was described as not being a “massive outperformance” by ASE director and monthly report author Mike Jones, he said that it was a good indication of retailers’ ability to adapt.

“It shows the stability of the current market and the way retailers have switched their focus to maximise current opportunities,” Jones said.

During the rolling 12 months to December the average car dealer return-on-sales figure rose from 0.87% in 2017 to 0.98% in what Jones described as “a very creditable result”.

The used to new ratio shifted towards pre-owned in the period, moving from 1.35:1 to 1.46:1, meanwhile, as the average days to turn figure rose slightly from 57.7 to 58 and the return on used car investment declined from 87.1% to 85.6%.

In aftersales overhead absorption rose slightly from 52% to 52.3%, with a rise in labour efficiency and service gross profit.

Variation among manufacturer brand franchises remained a key trend in the profitability picture for the automotive retail sector in the UK during the last month of 2018, ASE reported.

Jones said that some brands had yet to catch-up all of their delayed Worldwide Harmonised Light Vehicle Test Procedure (WLTP) sales during December, with “this hangover continuing into 2019”.

He said that other brands were prospering with their electric vehicle (EV) offerings and a lack of reliance on diesel.

Jones said that it was a good job that the UK’s motor retail sector coped well with “shocks and change”.

Summarising his findings from the month’s profitability data, he said: “In response to the impending Brexit deadline at the end of Q1 we have seen some brands attempt to ramp up sales, with others taking a more cautious approach.

“As we move into the remainder of the year, new car sales will clearly be impacted by the trade deal struck, assuming the period of uncertainty isn’t prolonged through extensions to, or the cancelling of, Article 50.

“One thing is for sure – UK motor retailers will find a way to adjust their business model to react to the wider political factors to ensure they remain profitable.”