Profitability is at risk as car dealers react to the declining new car market by not filling staff vacancies.

Coachworks Consulting, the independent automotive consultancy, has identified a growing trend towards dealers freezing recruitment and said this is severely limiting their ability to grow revenues.

“Cost-cutting is being used as a blunt instrument across the franchised dealer sector and it’s having a harmful effect,” said Karl Davis (pictured), managing director of Coachworks Consulting.

“We are seeing too many dealers taking the short-term option of not replacing staff when they leave, and this is limiting their potential to hit quarterly targets.

“Recruitment freezes are also putting additional pressure on the remaining employees and this is prompting further staff churn.

“Many car brands have lowered their volume targets because of declining new vehicle sales but we’re noticing some dealers are using this as a reason to reduce headcount across their operations.

“However, by not replacing revenue generating staff, especially salespeople, service advisers and technicians, dealers are seriously damaging their profit potential.”

Davis warned that staffing levels in some service departments are now too lean with many service adviser and technician vacancies being left open.

“A failure to replace service department staff is impacting the ability of some dealers to sell enough service hours and it is damaging their profitability at a time when they are already seeing reduced chassis profits.”

In contrast, Davis said upper-quartile dealers are retaining their headcounts by refocusing sales staff on prospecting and selling used cars where demand is high and are maintaining optimum levels of workshop staff.

“You can’t just take an accountant’s view on staffing. For dealers to succeed in a falling new car market staffing levels have to be optimised not cut to make an easy saving.”