Almost half of car dealerships could close by 2025, says KPMG survey

Up to half of UK car dealerships will close within by 2025 according to respondents to KPMG’s Global Automotive Executive Survey 2018. A bleak future was mapped out by the survey’s 907 respondents, who occupy position of chief executive, president, chairman or C-level executive, as 75% said that between 20% to 50% of the brick-and-mortar automotive retail sector could disappear in just seven years. Many felt that the shift to online would spark a dramatic shift in the make-up of the car retail sector in the coming years, with the evoltution of the vehicle ownership model and data security concerns also among consumers key concerns. Justin Benson, UK Head of Automotive at KPMG, said: “In the UK, our findings are clear on one thing, there are more significant disruptors to the automotive sector than Brexit. “Electric vehicles, autonomous vehicles and Mobility as a Service (MaaS) are going to drive change in the automotive sector for the foreseeable future. “New business structures and new economic models are on the horizon, driven by these disruptors and the associated new technology. Full...

Sytner acquires The Car People and almost doubles its car supermarket operation

Sytner has acquired The Car People, its second used car supermarket group takeover within 12 months. The UK’s largest franchised dealer group has now established a car supermarket division with almost £500m annual turnover, in which The Car People and CarShop will operate separately, led by Car Shop chief executive Jonathan Dunkley. Jonathan Allbones, The Car People’s sales and marketing director, becomes its operations director under Sytner’s new structure, while Kirk O’Callaghan is operations director for CarShop. Both report to Dunkley, who in turn reports to Sytner chief executive Darren Edwards. Edwards told AM the acquisition was in line with Sytner’s plans to diversify into used car operations as it sees good growth opportunities ahead in the UK’s used car market. Prior to the latest takeover, Edwards had already given Dunkley a remit to identify new areas where the division could establish more car supermarkets, and it has bought two suitable properties in line with this ambition. The Car People has four dealerships in South Yorkshire, West Yorkshire, Cheshire and Lancashire, while CarShop currently has five at Cardiff, Swindon, Northampton, Doncaster and Norwich.   Full...

Pendragon to sell US retail group and reduce premium UK presence

Pendragon will dispose of its US-based retail group and begin the reduction of its premium franchises in the UK as part of a revised business strategy. The business announced a revised plan to shareholders, which chief executive Trevor Finn said “will provide more reliable and sustainable returns”, today. The group’s new strategy will see the disposal of its five franchised outlets – with Jaguar Land Rover, Aston Martin and Chevrolet – with its California-based Hornburg group and a reduction in the representation of premium franchises which fall within its Stratstone business on UK soil. In statement issued via The London Stock Exchange Pendragon chief executive Trevor Finn said: “Following our strategic review, we have focussed on reshaping the business to accelerate transformation and ensure capital allocation is optimised across the group. “The actions I am announcing today are a further step towards achieving our strategic objectives. “I believe this strategy will provide more reliable and sustainable returns.” Full reading...

Dividends: Part Finance, Part Psychology

If a company values the ability to distribute dividends, it should consider several factors that go beyond the financial aspect. Psychological behavior also plays a role, which tends to take on greater importance when establishing a proper dividend policy. If a company is profitable, has cash and does not know how to invest it for a return, that money should be given back to shareholders. This is a basic principle from a financial point of view. But these rules generally don’t apply, since other aspects related to human behavior come into play. Thus, the question arises whether it is a financial or psychological matter… and the latter, as it turns out, has a considerable influence. Dividends must be maintained Shareholders get used to dividends once they start rolling in, so they must continue to be paid out over the course of time. Indeed, determining a proper dividend policy requires more than looking at profitability or the amount of cash the company is generating. The company must also consider its ability to sustain the dividends in the future. It may seem like the most obvious practice would be to explain to shareholders every year whether the company was profitable enough and determine the dividend based on performance. However, that is not the case, since the information available to shareholders is inconsistent. Those who have received dividends expect to get at least the same amount in the future unless it is well justified that the company needs cash. All we have to do is look at the behavior of large companies, which predominantly define their dividend policy as a fixed amount per share,...

Mercedes-Benz chief Gary Savage: ‘Prepare for direct sales’

Mercedes-Benz franchisees have been challenged to think hard about their business opportunities when manufacturer direct sales take off. UK chief executive Gary Savage believes it is “an inevitability” that carmakers’ national sales companies will take on direct sales of new cars to consumers in the future, but he is convinced it is not a threat to dealers. “In reality, to genuinely be able to realise online selling, you have to do it direct. Because of all the components of competition law, you have to be in a position where you can set the selling price, in order to offer the customer the best price consistently,” he said. As such, direct sales couldn’t happen overnight, but he was unwilling to suggest a timeframe for the development. Full...