Automotive predictions for 2019

Repositioning of UK brands and networks

At the start of 2018, SMMT expected new car registrations to slide by 5.4 per cent to 2.43m. The year to date stats for November 2018 showed the market was actually down 6.9 per cent, as the downward trajectory of consumer demand has been further fuelled by regulatory changes and knock on supply issues.

Our forecast for the year ahead is that the new car market is likely to dip further before stabilising late in 2019 and into 2020. As ever, there will be winners and losers across the major brands and dealer groups. The continued decline in new car registrations will mean that some tough, but ultimately inevitable, decisions for manufacturers and dealers will finally come to the fore. Dealing with loss making sites, underperforming used car operations, management limitations, shrinking territories and the need for further investment will top the to-do lists in 2019.   

Look after the pennies

Whilst new car registrations are still critical to dealer profitability, strategically most operators have already shifted focus to other sources of income and cost reduction to plug the gap.

For 2019, realistic new car targets; manufacturer backed finance offers; and new product launches will be key to new car performance. Operators have already tightened their belts on cost base, expanded used vehicle operations, and are benefiting from high vehicle parcs and warranty work in the aftersales departments.

Running a tight ship where every penny counts is a matter of testing and enforcing effective and consistent process across every area of the business. Having a proactive and collaborative senior management team across sales, aftersales and finance departments is also critical. Recognising, rewarding and retaining those linchpins has never been more important.

The data effect 

One of the few certainties in the current climate, is that new technologies, and the way and rate in which manufacturers and dealers embrace them, will be the key to success in 2019 and beyond.

The demand for alternative fuelled vehicles (AFVs) is perhaps the most visible indicator of the changing market; and barometer of consumer influence. Year to date November 2018 reported a 22 per cent increase in AFV registrations. Whilst electric vehicles might not be the industry’s silver bullet, they have demonstrated the speed at which manufacturers can evolve; consumers trends can change; and how government policy can be an immediate influencer.  

Data based technologies have already impacted the sector - from consumer facing finance solutions to dealer-based profit enhancing tools - to streamline the car buying journey. It will be interesting to see if manufacturers harness data-based technology to collate and interpret information around consumer buying patterns and dealer activities to overhaul the current ‘new car registrations’ based reward model. The pressure from dealers is undoubtedly mounting given the extent of alterative ‘non-dealership’ buying channels.    

The B-word

Whilst the Brexit deadline looms, industry bodies are continuing to lobby for a ‘good’ deal; manufacturers are undertaking scenario planning; and funders are cautious. But most UK dealers are finding it difficult to see what strategic actions they can take or influence over and above those already taken in response to the declining new car market.

Import tariffs, weakness of the pound, interest and inflation rates will all heavily impact on consumer spend, which is already hugely under pressure which can be seen across the struggling UK retail sector.

Dealers need to go back to basics and look after their customers, their key employees and their brand relationships to weather what looks to be a bumpy road ahead.