Automotive dealers: Echoing the Monty Python cheese shop sketch

Last month I wrongly called the market and said it was flashing amber. How wrong was I? The used market continues to boom and dealers are making excellent margins. The challenge is replacing stock that has been sold.

Indeed, some dealers forecourts are beginning to resemble the Monty Python cheese shop sketch: “Yes, we do sell cars but not the model you ask for”.

Headline Autotrader figures

• 2021 stock, MoM 6.0% decrease, YoY 8.1% increase
• 2020 stock MoM 12.4% decrease, YoY 45.2% decrease
• Total market MoM 8.0% decrease, YoY 9.0% decrease

Top 5 brands by market share of 2021 stock

• VW 13.8%
• Audi 9.0%
• BMW 7.7%
• Toyota 5.6%
• Mercedes 5.2%

Automotive brief

While it’s great news that dealers are able to rebuild their balance sheets with the margins they’re making on used vehicles, the challenge is the ever tightening used supply.

With new cars taking longer to build (over one year for Land Rovers, and not until 2023 for certain Porsches) then this means delayed trade-ins as well.

Many franchise dealers are beginning to look like non-franchised dealers based on the amount of used vehicles that are not within their franchised brand. They’re also out of the traditional age they would sell a vehicle.

Rolls Royce famously went bankrupt in the 1970s whilst making a profit – they just ran out of cash. Are we entering a period where lack of cash flow is going to start to destroy successful dealers because, despite the margins, they can’t get hold of sufficient stock to cover their overheads? Very odd times indeed.