3rd June 2019

A Bumpy Road Ahead For UK Motor Dealerships

With the recent news that car manufacturing output in the UK has plummeted by 45% in the past year, the UK’s leading Motor Dealers are already nervously looking over their shoulders. Plimsoll’s latest analysis shows that dark clouds are circling the retail industry too.

Despite record UK employment and seemingly robust consumer spending, a perfect storm is really starting to buffet the auto-retail market including:

  • Brexit and its ongoing certainty forcing consumers to put off big decisions
  • Governments penalizing diesel cars having championed it as a cleaner option
  • New emissions targets driving up costs
  • Tariffs and other trade worries in the Global market
  • The proliferation of lease deals hitting saturation levels
  • The migration to electric and the lag in infrastructure

Manufacturing output is obviously the weather vein for bad news in the retail market and such a massive drop in finished vehicles has most market watchers deeply concerned.

According to the Plimsoll Analysis examining the latest developments and performance trends at the UK’s 2000 leading Motor Dealers, the following findings should be ringing alarm bells:

  • Average profit margins have fallen below 1% - the lowest in 5 years
  • Average annual sales growth has fallen to just 3% - the lowest since the great recession
  • The number of companies in financial distress is up to 487 – a quarter of the market

The forces pulling at the UK auto-retail market are varied but Brexit remains at the heart of most of it. While consumer confidence has ticked up slightly in May, it remains firmly in negative territory. Against a backdrop of economic instability, stalled investment, shambolic government, and never-ending uncertainty, people appear to be delaying major purchases - especially on luxuries such as a new car.

Across Europe, the picture seems a little more stable. Some key findings show:

  • Annual average growth across the European market remains at around 8%
  • Average profit margins, while low at 1.5% are almost double that in the UK market
  • French dealers are making 1% margins but are still growing at around 7%
  • Performance levels in the Italian market are almost identical to the French

Clearly selling cars to consumers has long been a low margin business regardless of the country. However, facing the same regulatory structures and rules as other EU economies, what has caused such a dramatic decline in demand in the UK?

Plimsoll provides a unique view on the health and financial stability of both the UK and the European markets. For more information click here