A seasoned veteran with 40 years of expertise within the business insists that franchise motor retailers will proceed to be the indispensable interface between producers and prospects.

Talking on the Automobile Remarketing Affiliation’s (VRA) newest seminar, Graeme Potts, CEO, Eden Motor Group, acknowledged the long-standing hypothesis surrounding the demise of franchise retailers. Drawing on Mark Twain’s well-known quote about exaggerated studies of its loss of life, he mentioned franchise sellers would stay the essential interface between motor producers and prospects, suggesting that any perceived risk may really spur innovation and resilience.

With a view to ensure the business stays related, viable and of significance in that chain between producers and prospects dealerships must depend on their current abilities that are characterised by flexibility, innovation and stoicism, abilities which they’ve already needed to develop in a bid for survival. “It isn’t a straightforward life now,” he admitted.

Amid the continued transformations within the business, Potts touched on the rise of on-line platforms, partnerships, and the perpetual evolution of the franchise mannequin.

Addressing the looming challenges dealing with motor retail in 2024, he highlighted the necessity for ardour and a perception within the business’s specialisation. “Motor retail is a specialism that generally is undervalued, however we’ve to imagine in it, or there’s going to be no future in any respect.”

Discussing the emergence of latest enterprise fashions Potts spoke of the need for these to work seamlessly for all stakeholders, together with producers, retailers, and, most significantly, prospects and identified {that a} vital proportion of latest automotive prospects within the UK nonetheless want the normal in-person shopping for expertise.

“Company is in its infancy, however wherever it is being piloted around the globe, it has been an unproven case and there are numerous, many subsets of what company really means. However there’s one factor that’s sure. If a brand new mannequin of distribution, if a brand new interface with prospects goes to actually acquire traction and work, it has to work for all stakeholders.”

He acknowledged that OEMs producers have to scale back their prices with a view to address quick change cycles and new expertise in extremely aggressive marketplaces however identified that they cannot ponder decreased quantity or scale back market share – with these final two issues are at risk of being compromised consequently.

Delving into the potential advantages for retailers, Potts explored the prospect of decreased working capital and stock prices below the company mannequin.

“It might be that for the retailer, decreased working capital, decreased stock prices, decreased property all over may imply that there is a viable answer for each events. However the third stakeholder and a very powerful of all, it should work for the shopper. I’ve heard horror tales of producers who’re saying the shopper should eliminate their half trade earlier than they’ll place the order for a brand new automotive. What utter nonsense.”

“In the mean time, there is a binary view. Some say undoubtedly a community, some say undoubtedly not. However people who say undoubtedly not do have networks. They only strive to faux that they have not. And take a look at a few of the disruptors who’ve tried to get into the used automobile market. Virtually solely, they’ve a bodily property of dealerships – simply by one other title.”

Expressing concern about political influences in the marketplace, significantly within the electrical automobile phase, he mentioned that the promotion of electrification was having a dramatic affect on franchise retailers.

“The actual fact of the matter is that stock, advertising and marketing, pricing, and so many different components are being pushed by the need for change of expertise that isn’t but entrance and centre in individuals’s minds and it’s massively distorting {the marketplace}. I’ve only a few inside combustion engine automobiles unsold in inventory in my enterprise, however I’ve at present acquired £6 million price of unsold EVs.”

“I am not political, I am simply making an attempt to ship to {the marketplace} the place prospects are telling us they need. And in the intervening time, it’s resulting in a maintain again within the total scope of the market. It is also main to cost increments, not only for EVs, however for related ICE vehicles. Subsequently, we as retailers are dealing with the value escalation on behalf of our prospects that isn’t instantly associated to enter costs.”

He mentioned the shift to EV would seemingly result in additional producer consolidation, additional franchised motor retailer consolidation and extreme liquidity challenges within the business.

Shifting focus to the worldwide perspective, Potts mentioned the curiosity of overseas traders within the UK automotive business. Highlighting undervalued motor property, a mature market, and excessive retail requirements, he outlined why overseas capital sees a chance within the UK automotive retail sector.

“We’re characterised by not being complacent, but additionally by our retail requirements that are among the many highest on the planet. Subsequently, there’s the chance for traders who could also be working automotive companies elsewhere and get some reverse finest observe into their buy of a UK enterprise. And, after all, very related is the sophistication and scale of our used automotive and aftermarket enterprise, lots of which is managed throughout the franchise community.”

Potts concluded with a mirrored image on the inflow of latest model entrants, cautioning that a rise in manufacturers does not essentially correlate with market progress.

“The variety of manufacturers rising doesn’t improve the scale of the market. The variety of prospects and the variety of people who find themselves assured to buy determines the scale of the market. So let’s not child ourselves that each new entrant grows the market and that everyone makes extra money. There must be a price related to new entrants in that income will get unfold extra thinly so there shall be winners and losers.”

The challenges confronted by new entrants, together with model consciousness, time to attain crucial mass, and the affect on residual values, had been emphasised.

“Model consciousness is slowly eroding within the UK, but it surely’s nonetheless far stronger than most different markets. It additionally takes a very long time to get to a crucial mass and due to this fact there must be appreciable funding by new entrants into {the marketplace}.

He mentioned the opposite enormous problem for brand spanking new entrants is the impact of residual values. “The factor that prospects are more and more acutely aware of is whole-life prices and due to this fact the preliminary buy worth if it is accompanied by a very weak residual signifies that the whole-life value is now not aggressive.

“Established manufacturers are reacting by way of decreasing the ranges This isn’t an excellent factor for retailers. A few of them are decreasing their ranges with a view to have fewer vehicles and loads of margin versus quantity in reverse. That’s very unusual behaviour that we’ve not seen earlier than.”

Asserting that franchise motor retailers will proceed to be the indispensable interface between producers and prospects, Potts concluded: “OEMs want us. Generally they deny it however OEMs want us and a mutually rewarding enterprise proposition will persist in a technique or one other. My conclusion is ‘we’re right here to remain’.”