THE third annual Cox Automotive and Grant Thornton Automotive Insight Report, has highlighted significant opportunities for dealers developing their business model in response to the rapidly changing global environment.
Arguing dealers must take a short-term approach to immediate challenges, as well as a long-term view of paradigm shifts within the marketplace, the report provides a strong platform for dealers building into 2021 and beyond.
Key market dynamics identified in the research include low emission motoring, innovative vehicle finance models, digital retail and connected technology. The report also explores market consolidation and agency models.
Clearly the impact of COVID-19 has played a significant role in dealer performance in 2020. The report looks at how dealers have responded, featuring input from the National Franchised Dealer Association (NFDA) and Cox Automotive US.
Sue Robinson, Chief Executive of the NFDA, said: “A healthy relationship between dealers and manufacturers is vital, particularly as we respond to the impacts of COVID-19, Brexit and recessionary economic trends. It is imperative they retain an open channel of communication to discuss the main issues affecting businesses and continue to cooperate to allow the automotive sector to thrive through this period of changes and challenges.”
With England in a period of National Restrictions, Wales having just completed a 17-day ‘firebreak lockdown’ and Scotland managing under a five-level system, it is clear dealers will continue to be impacted by COVID-19 for weeks and months to come. Research in both the UK and US highlighted three areas of change for dealers: accelerated adoption of online retailing; a need to staff dealerships differently; and innovation of new services in response to social distancing.
Owen Edwards, Associate Director at Grant Thornton UK said: “The automotive industry is undergoing significant development. To maintain viability, it is critical to create a business strategy that embraces evolution. It is difficult to plan for the unexpected, so dealers should conserve cash where possible and focus on a three-month rolling plan for immediate impact. Longer-term, businesses need to ensure their strategy allows them to evolve with the market.”
Underlying the need to respond to immediate challenges, the report identifies a longer-term trend away from ‘normal’ market conditions. It suggests that, when reviewing new and used car and van markets since 2000, there has very rarely been a long period of stability before external forces made an impact. If not COVID-19 and Brexit, then Real Driving Emissions (RDE), World Harmonised Light Vehicle Testing Protocol (WLTP), the 2007/8 financial crash and upcoming Block Exemption.
Philip Nothard, Insight and Strategy Director at Cox Automotive, said: “Dealers need to understand the conditions that underpin industry transformation, prepare for the large-scale changes which are affecting the industry today; and have a contingency in place to deal with potential future challenges. Data is essential, and businesses which are to remain viable need to understand consumer behaviour when it comes to driving technology adoption.”
Dealers need to understand the conditions that underpin industry transformation, prepare for the large-scale changes which are affecting the industry today; and have a contingency in place to deal with potential future challenges
The Insights team has also forecast the used car market, projecting 6.41m transactions by the end of 2020. With a shortfall of more than one million transactions against initial forecasts, it is clear that 2020 represents a fundamental shift to the market. However, it had already been in decline since the height of 8.1m transactions in 2017, and the 7.4m average across 2001-2019. For 2021, Cox Automotive and Grant Thornton UK expect to see 6.66m transactions.
Alongside the focus on dealer business strategy for 2021 and beyond, this year’s Cox Automotive and Grant Thornton Automotive Insight Report also looks at the subscription economy and Big Data, electric vehicles and the digital retail landscape, as well as providing forecasts for the new and used car markets for the rest of 2020 and beyond.
View the interactive report here.