How do you solve a problem like used car supermarkets?
Welcome to this week's biggest Car Dealer headlines digested and analysed by editor-in-chief James Baggott
Welcome to this week’s Car Dealer Briefing – a new weekly digest from me, the editor-in-chief of Car Dealer Magazine.
Every Friday I’ll be summarising the week’s car dealer news for you in a quick and easy to read bulletin to keep you up to date – and I’ll be giving you my opinion on what the stories mean along the way.
Of course you can keep up to date with the very latest on the CarDealerMagazine.co.uk website every day, in our popular WhatsApp groups and via our weekly Podcast.
But this briefing is designed to bring you the headlines and the need-to-know topics so when you’re a time poor automotive industry leader you can still keep abreast of the need-to-know news.
It’s being hosted here on Substack, a paid-for subscription newsletter site, so to keep getting these briefings you’ll need to be a subscriber. The first three editions will be free, but if you like it please hit the button below and subscribe now.
What’s happening?
We’re well into results season now and the plethora of car dealer accounts we report on are showing 2023 was somewhat tough.
But is that any surprise? We’re comparing 2023 numbers to righteous 2022 numbers when new car supply was still short and consumers were paying list prices, and sometimes more, for their new cars. Used car prices were also still strong and when you compare the like-for-likes in accounts they don’t make for pretty reading.
But they’re the stats we have to work with. I’ve fielded some calls and messages from disgruntled dealers who don’t like the way the numbers have been positioned with headlines that use phrases like ‘profits slump’ and ‘take a tumble’.
The fact is, compared to the year before, they have. We’re not here to positively PR individual car dealers and if they want to position their numbers in a different way, they have the opportunity to give them context in their accounts.
The Top 5 Need To Knows
1. Losses deepen at Motorpoint
Motorpoint this week revealed its results to the London Stock Exchange showing revenue down by nearly a quarter to just over £1bn but its was the pre-tax loss that will worry investors at £10.4m. This time last year, results for the previous financial year showed a loss of £600k. Chief executive Mark Carpenter labelled the results its ‘most difficult financial year ever’. He blamed rising borrowing costs, subdued customer demand and lower inventory for its poor performance.
What do I think?
This is yet another used car supermarket experiencing serious issues with performance as a direct result of reduced used car supply. Four years on from Covid and there’s far less supply around, especially the sort of low mileage early plate cars these supermarkets thrived on. We’ve seen Pendragon shut their CarStores, Cazoo go spectacularly pop and Peter Vardy shutter his Carz brand all as a direct result of these problems. Some dealers asked me this week if the used car supermarket model is broken? I wouldn’t say completely, but it’s sure in need of a major service.
2. EU threatens 25% tariffs on Chinese EVs
The European Union has said it will introduce 25% tariffs on Chinese EVs which are beginning to flood markets across the continent and threaten its home-based manufacturers. The likes of BYD, Omoda and Xpeng will be subject to additional duties when imported to bloc countries. The deal is said to have been pushed by the French and Spanish with the Germans warning against a ‘costly trade war’.
What do I think?
At a time when selling new EVs is harder than ever, making them more expensive is exactly the opposite of what the market needs right now. But the Europeans want to protect their own manufacturers who are struggling to get the price down of their own electric offerings. The tariffs aren’t as punitive as the 100% tariffs imposed by Biden’s administration in the States, but will still rile the Chinese. All eyes are now on what happens in the UK. If I was a betting man I’d say an incoming government might find it hard to follow suit with the tough ZEV mandated targets already proving a struggle. The last thing consumers need is EVs being more expensive.
3. Motors closes in on buying Cazoo
Reports suggest Motors is close to completing a deal to buy the Cazoo brand. Sources said the online marketplace has negotiated a ‘cut price’ offer for the failed online used car dealer turned advertising marketplace. Administrators Teneo were appointed to Cazoo last month and have yet to release their findings. The sale would follow G3 Auctions buying Cazoo’s Bedford operation which it plans to turn into a new auction site.
What do I think?
What would Motors want with Cazoo then? Well, if Cazoo built anything successful it was a brand that is known up and down the country. It blew tens of millions on fanciful sports sponsorships which thrust the name into households and that has some equity. Motors would benefit from a huge SEO boost to its platform and even if it filled the Cazoo website with its own inventory, those consumers who find Cazoo will be served their stock. It’s a clever marketing play and a canny move by Motors.
4. What will the political parties do for drivers?
As the election campaigns heat up, this week the main parties have released their manifestos and with it their pledges to motorists. The Tories focus on undoing Ulez and 20mph speed limits while Labour will fix more potholes and tackle car insurance costs. But the big promise is that Labour would reinstate the ban on petrol and diesel cars for 2030. Meanwhile, the Lib Dems want to improve access to electric vehicles and reintroduce the plug-in car grant.
What do I think?
Labour promising to bring back the ban is big news and yet more changes for the car industry to deal with. We’ve seen this deadline set, pushed back, and now – if this actually happens – changed yet again. This constant moving of goalposts is the last thing the industry needs, but with Labour a seeming shoe in to form the next government, it looks likely there will be more upheaval for car dealers and manufacturers to contend with.
It’s disappointing to see that the two main parties are not taking electric car incentives seriously. It’s like they’ve both buried their heads in the sand about the near-impossible ZEV mandate targets that many car manufacturers will struggle to hit.
EV buyers need some carrots to make the switch and that means either a cut in VAT, a scrappage scheme or some other discounts to assist with charging costs.
5. Dieselgate claims are said to be worth £6bn
Car manufacturers Mercedes-Benz, Opel and Vauxhall, Nissan and Renault, Volkswagen and Porsche, Peugeot and Citroen, Jaguar Land Rover, Ford, BMW, Stellantis, Suzuki, Volvo, Hyundai-Kia, Toyota and Mazda are all facing claims over alleged emissions cheating. In what will be the biggest legal claim of its kind in English history the is pegged at least £6bn. Some 1.5m claims have been issued as part of the mass legal action which centres on allegations that manufacturers tried to ‘cheat’ emissions tests by using banned ‘defeat devices’ on diesel vehicles.
What do I think?
With costs for this case already topping £300m, lawyers are having a field day fighting this one out and with the potential of ‘£4,000 payouts’ per car, it’s no wonder the men in wigs are salivating at the prospect. Mercedes is said to be facing some 300k cases alone and hearings are expected to last for a number of years. The car makers will vigorously defend their cases, but with the motor trade facing action from the FCA over car finance too it’s another poor PR story no one really needs.
Quote of the week
‘Cambria has benefited from an extraordinary 2.5 years in the industry, the likes of which has [sic] not been seen before. This ended during the year ended 31 August 2023 and the year turned out to be a year of two halves; the second half was much tougher than the first.’
Paul Buddin, Cambria Automobiles, in the firm’s annual accounts that showed losses deepened to more than £1.3m
On this week’s Car Dealer Podcast…
In this week’s Podcast, Jon Reay and I chatted to Farhad Tailor, the founder of V12 Sports & Classics. Despite what the name might suggest, the business is actually a successful used car supermarket selling around 1,400 cars a month. Interestingly Tailor and his team AA check every single car they sell and have a team of 10 AA-trained members to do the work.
Tailor started his business at home getting up to selling 120 cars a month before he found his first premises and now has six retail sites across the Midlands. His story was an inspirational one from starting out buying classic cars to creating a used car supermarket with his own prep centre and team selling finance.
I particularly found his pricing strategy interesting – he sells cars at Auto Trader’s ‘great’ or ‘lower price’ points only and it seemingly works. Last year he turned over £180m and made EBITDA profit of £3.1m.
The episode will be published on Friday afternoon and you can listen to it on Spotify, Apple Podcasts or your favourite platform by searching for the ‘Car Dealer Podcast’.
And the pick of the rest of the week’s headlines that caught my eye…
Elon Musk pay deal approved
Tesla shareholders approved Elon Musk's record-breaking £35bn pay deal for the second time, aiming to make him the highest-paid executive in American history. The approval comes after a Delaware judge had invalidated the deal in January, citing Musk's influence over the board. Tesla is appealing the ruling, hoping the shareholders' renewed support will sway the court. Despite the approval, the deal remains entangled in legal disputes and will not immediately result in Musk's payout. Tesla will be pleased its boss got this public backing especially after he’d threatened to develop crucial AI technology outside of the company if it failed.
JCT600 profits fall
The move to agency sales reduced turnover at family-owned car dealer group JCT600 by £64m last year, its most recent accounts show. The group saw turnover fall from £1.45bn to £1.41bn and profit dropped to £36m from £43m the year before. Still, an impressive set of numbers from the Tordoffs who have an enviable portfolio of car brands.
Turnover up but profit falls at Barretts
Turnover rose at Barretts of Canterbury by 6% to £276m in 2023, show the firm’s latest accounts, but EBITDA profit dropped from £6.9m to just over £4m. The group represents Jaguar, Land Rover, Mini, Honda and BMW, having decided last August to shut its Citroen and DS dealerships in Canterbury, ending a 20-year relationship with the brand. The firm said trading conditions had returned to more ‘normal’ trading following the Covid-19 pandemic.
Pendragon owner looks to make $150m savings
More job cuts could be on the cards at Pendragon as its new American owner Lithia Motors reveals it wants to make annual savings across its businesses of $150m. It says it will do that by cutting jobs and is targeting ‘under performing general managers’. If the cuts leak across the pond to the UK, it’ll be yet another example of these new American firms coming here and slashing costs. We’ve already seen job cuts at Lookers (acquired by Canadians) and are yet to see if the same will happen when Group 1 takeover Inchcape.
Dealer fined for failing to ID driver
This must be a worry for anyone running a car dealership – do you really know who is driving every one of your cars at any given time? If you don’t you could land yourself in hot water. Vansco Ltd were ordered to pay £1,600 after claiming ‘data protection laws’ meant they couldn’t tell police who was driving at a time an offence was committed.
Thanks for reading and until next week… goodbye for now.
James Baggott
Editor-in-chief, Car Dealer Magazine