Monday, 2 September 2019

New car sales are down, month on month, for 16 consecutive months since April 2018. 2019 sales are down 8% on 2018. This is not news to you, or to industry participants, but market wide trends are far from the whole story, even if this downturn reverses in the near term; challenges, options and opportunities warrant a deeper dive.

Key Highlights

1. Declining sales and tail revenue
16 consecutive months of declining sales – revenue streams start with new car sales – selling margin, finance and insurance, servicing, dealer fitted accessories: no sale, no tail revenue.

2. Brand is everything
New car dealers are typically exposed to one or two brands, with limited options to change brands in the short term, and no immediate influence on product. If a dealer’s brand range is not resonating with the market, there is little that can be done. Brand is absolutely key to identify dealer distress, current or coming.

3. Premises are specialised; the dealership model is changing
Improvements are specialised and can’t readily be repurposed for traditional industrial or retail uses. A move toward shopping centre, high street and convenience locations has commenced, challenging property values in dealership strongholds. The wholesale to public, mega outlet, warehouse second hand model is growing, challenging used car revenues for traditional dealers.

4. Consumer and  technological change
Consumer behaviour is in transition. Consumers are looking for a more convenient ‘retail’ experience and brands are responding accordingly, challenging the current dealership model. Technology is changing behaviours through on demand services (ride-sharing/car-sharing), electric vehicle and driver-assistance/autonomous vehicles which are expected to further depress new car sales.

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