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Traders expect recovery to start in 2011
publication date: Nov 27, 2009
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author/source: Robin Roberts
Six out of ten car dealers expect a wait of at least a year before the motor retailing sector begins to pull out of recession. The stark prediction comes despite the majority of dealers expecting to remain profitable this year thanks to good used car margins and strong aftersales. Baker Tilly’s latest Retailing in the Recession survey, conducted with key decision makers in franchised motor dealerships, gauged their current views and future predictions for the motor retail industry, with results including: - 59 per cent think the industry won’t begin to pull out of recession until 2011 - 18 per cent of respondents (or their businesses) area looking to exit car retailing in the next two years - 56 per cent see the pending return of VAT back to 17.5 per cent (or beyond) as a factor which will adversely affect their turnover and profitability - Half of dealers cite ‘used cars’ as the area of sales the recession has had the most positive impact on – yet 75 per cent of total respondents are seeing a decline in used car demand overall However, the scrappage scheme and relatively healthy used-car margins in the nine months to September have led to many dealers showing their resilience during the economic downturn: - 53 per cent of dealers expect to end the current financial year in profit with an additional 24 per cent “just about” in profit - 80 per cent of dealers remain confident that their business remains viable despite the recession - New car sales under the scrappage scheme have been profitable for 72 per cent of those polled Graham Bushby, Head of Motor, Baker Tilly Restructuring and Recovery, said, “We have seen stoic behaviour in the face of adversity over the past year from many dealers. However, this strong outlook is waning with a concensus amongst dealers that the trading will remain hard for a least another year. "This isn’t surprising considering used car profits and volumes are fading fast and the continuing reduction in the demand for new cars. “The motor industry never fails to show true grit and determination – but dealers will need to monitor their costs and their overall business plan more than ever throughout 2010 before the predicted upturn kicks-in.” |
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