Dealer ambitions revisited in half year review
As we pass the half-way point of the year, how are dealers fairing versus their plans and ambitions? We ask the question and revisit the investment ambitions we first explored at the end of 2018 and compare the results.
Given 2019 is the year of Brexit, dealers could have been forgiven for not making too bold a prediction about business investment for the year ahead. However, when we asked dealers at the beginning of the year, "What best sums up your ambition for your used car business in 2019?", almost two-thirds said they planned to grow.
Dealers on track but caution ahead
When we returned six months later to revisit, almost half of those surveyed said they were either on track or performing above their half-year forecasts.
It all points, on the whole, to a positive first six months of 2019. However, as we begin to drill down into some of the investment pledges made by dealers, and compare them with their half-year performance, a more cautious picture starts to emerge.
At the start of the year, 52% of dealers said they planned to invest in additional stock. As we reach the half-way point the reality on the forecourt shows around only 30% of dealers have increased their stock volumes.
Similarly, when it comes to investment in facilities and additional locations, the ambition has so far not been matched by the reality.
When asked six months ago, 21% said they would be putting more money into preparation facilities such as dedicated areas for valeting and getting vehicles retail-ready. The number of dealers keeping their cash pledge stands at only 3% - the most significant gap between aspiration and actuality.
For investment in additional locations, the gap is less pronounced, with the 7% of dealers committed to increasing their number of sites has dropped to 3% at the half-way point of the year.
Tough market conditions
While the results indicate a reigning back on dealer ambition, they are understandable in the light of current market conditions. Dealer margins are becoming increasingly squeezed and used car values have consistently dropped during the first half of 2019.
Recently, Cap HPI reported used car values hitting a record July decline of 2.2%, as the realignment of values in the market continues to gather pace.
With the ongoing uncertainty around Brexit also adding to the market headwinds faced by dealers, some of the underlying signs of caution starting to appear are understandable.
However, despite tough market conditions, there is plenty of optimism to be found among dealers The one in five dealers planning no investment in their businesses at the beginning of 2019 has reduced to almost one in six, as dealers encouragingly rethink their business investment decisions for the rest of the year.
Dealer funding increasing
Better still, 3% of dealers committed to taking out additional funding at the start of 2019 has risen to 10%, as more dealers look to grow their business.
It shows an increasing recognition among dealers of the benefits of using more than one source of funding. Using complementary sources, dealers have the flexibility required to capitalise on opportunities that arise even in the most unpredictable of markets.
While caution is expected to remain on the agenda for the second half of the year, there is still an opportunity for businesses to prosper. Undoubtedly market conditions point to a bumpy road ahead but dealer plans do not have to be put entirely in reverse.
Those dealers operating smartly by utilising data-driven market intelligence to identify the best and most profitable stock can still find reward. Using complementary funding sources to act on those opportunities will also help to ensure dealer ambitions are realised at the end of the year.