Motoring: Manufacturers accept the necessity of dealers
- Credit: Archant
Peter Vosper, chairman of the Vospers Group, writes for the Torbay Weekly
KPMG forecast the number of motor dealerships in the UK would be halved by 2025 and the past few years have seen many selling out or retiring early.
Now the pace of closure is likely to become even faster as a result of the coronavirus pandemic and the increase in online sales.
Big business has been increasing throughout the world as costs rise and margins fall in a competitive world. This has been also impacted by the growth of the internet and the number of online sales closing many shops on the high streets of many towns and cities. Small business has been struggling for some time with increasing costs of rent, rates, government regulations, including HR and health and safety.
The retail growth on the internet with cheaper prices as a result of lower costs, and large international companies minimising their tax liabilities by accounting ingenuity, have all added to the pressure on small operations.
Not only retail but the corner food shop and local stores have had to cope with the growth of the large supermarkets and the variety of goods offered therein, forcing many to go out of business.
Our city centres are now crowded with coffee shops, restaurant chains and charity shops and many famous names are under pressure or have disappeared altogether.
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Even the motor trade - which has traditionally had an immense choice of product from many manufacturers - is changing as research costs and environmental changes require added investment.
This has lead to many takeovers and amalgamations, platform and engine sharing, and other alliances designed to share and cut costs.
The retail motor dealerships still have a major role to play.
While there is increased innovation in technology, safety, more fuel efficient vehicles, and a growth in the range and choice of product available the market is likely to remain strong.
Add to this the consumers reliance on the freedom of movement, and the lack of investment in public transport for both people or goods.
Is the growth of online purchases not a threat to these dealerships? As we have seen during lockdown, sales of used cars in particular, have risen rapidly but there was no other choice and many chose to reserve their vehicle with the dealership and make the final decision when showrooms reopened.
Should anyone buy a car or a commercial vehicle without driving it and ensuring it can do what the customer requires of it? While it may be OK to not be sure what your computer, smartphone or other pieces of technology is capable of, the safety of the consumer and other motorists certainly needs a competent handover and instruction of what could be a lethal weapon.
Manufacturers accept the necessity of dealers, at least for now, and with the complexity of the technology and the regular inspection and maintenance requirement are upping their standards.
They want larger showrooms capable of showing more of the range of product they have on offer, more demonstrators for customers to try out on the road, more higher qualified technicians, and improved services to further increase customer satisfaction and loyalty to the brand.
This needs more investment and inevitably of large amounts of capital.
For example, Vospers' recent development at Matford in Exeter cost around £15 million in land, buildings and the latest technology and equipment.
More earnings are needed to fund such developments, combined with the increase costs of stocking, so individual dealer territories are being enlarged and the overall number of dealerships will fall.
Customers will travel further as they are already used to when purchasing other large items like furniture, garden plants and accessories, and home electricals such as televisions and washing machines.
The coronavirus effect will mean fewer businesses will be able to raise the capital or be prepared to take the risk so expect more choice but maybe travelling further for the experience.
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