The ‘economics of the box’: prospects for the dealer business model

While there’s no immediate cause for alarm, the business conditions for car dealers – especially small independents – may get more difficult if new engine technologies and changing attitudes to car ownership become more widespread. The big consultancies and researchers expect electric car ownership to grow fast, if the technological, cost and infrastructure hurdles can be solved. If so, the immediate effect for car dealers will be a fall in after-sales revenue as electric cars substitute for conventional internal combustion engine ones. Electric cars generate around 25% of the service and parts revenue of conventional ones. Their expectation is that, by 2030, EV cars may become mainstream in cities and in some countries, such as China. Following closely on that forecast are two more. First, that urban dwellers may be willing to trade car ownership for mobility. Put simply, they continue the transition from ownership to leasing – which has already happened – and take the next step from leasing to on-demand mobility packages. Firms like Uber and Lyft are betting that change will happen, at least in cities and suburbs with high congestion and car ownership costs. So too are Peugeot, Renault, BMW, Audi and Mercedes-Benz. If that took place, the retail new car market would shrink even faster from the 2030’s onward. Second, there’s the much vaunted arrival of autonomous driving cars. Most experts expect this is thirty years away at least but they are all convinced that personal car ownership will cease to be mainstream if it does occur. The future for traditional car dealers who think that existing franchise protection laws and manufacturer’s investments in dealer networks will act as a bulwark to change and do not consider and assess these trends will not be bright.

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Digital and Social Media for Car Dealers Part 1: The Digital Landscape

This article is the first in a series on the use of digital and social media for automotive retail managers in an increasingly dynamic world. This post is freely available. The rest in the series are Pay To View   Aren’t all motor dealers being disrupted by digital and social media? They’re not alone. Take newspapers. According to the 2016 Carat Ad Spend Report, more than 2.7 Billion people read newspapers last year – up on the year before – but fewer companies spend their advertising budgets in them and, those that do, spend less of the available money, which is the trend since 2005. Apart from a few regions such as south-east Asia and parts of the US the result is declining newsprint profitability, job cuts and a frantic search by newspapers to generate income online. Taking the UK as an example, in 2016 the national advertising spend was around £20 Billion with over half going to digital media. Print media took just over £1 Billion, and is declining by 10% (‘quality’ press) – 15% (tabloids) each year. The continuing closure of local newspapers makes year-on-year comparison impossible, but the trend is similar to the nationals. Advertisers aren’t spending because readers are declining and fewer readers means lower response to advertising. And that includes dealer ads. For car sales managers, both new and used, accustomed to press advertising and classified listings generating a reliable stream of enquiries, the problems faced by newspapers has become theirs. They have to learn how to invest and manage in the fast-changing digital media space but, few are convinced that it works for independent or small group franchisees. “Facebook doesn’t sell cars”. Mostly true. However, digital and social media is about selling your business values, awareness of its location and generating positive attitudes and […]

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Digital and Social Media for Car Dealers Part 2: Digital Strategy

The digital space is almost limitless but for motor dealers wanting to make an impact there are two key channels – each with many options: Digital – the Internet using a website; and, Social Media – a wide range of platforms for communicating and interacting with an audience of your choice. Making the decision about where to invest , why and how can be complex. This post simplifies it for a motor dealer or distributor in any market.

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Oil Prices and Car Dealers:”Peak Oil Demand”

If oil prices stay low, expect a clash between government’s emission and environment aspirations and car users financial self-interest. Low fuel prices make switching to alternative fuelled vehicles less likely. So, the subsidy costs are likely to be higher and last longer. But that is unlikely to deter policy makers . They see larger prizes: opportunities to re-shape global car production and grab a larger slice of profits for the future and to reduce the capital flow to the oil-producers. Electric cars is the game changer of the 21st century.

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After the Arab Spring Part 3 – the outlook for car markets in the GCC

At the time,  the GCC markets seemed largely unaffected by the Arab Spring, apparently insulated by oil wealth and strong sovereign wealth funds, whose proceeds need only be shared among a small population. But, if you take a closer look there are two ‘blocs’ of states within the GCC measured by income per capita: the rich, UAE, Qatar and Kuwait; and the ‘relatively poor’ – Bahrain, Saudi Arabia and Oman. Those differences have great implications as each country deals with three important – and region-wide- market undercurrents: youth unemployment and renewed emphasis on employment nationalization programmes, accelerating modernization of the transport infrastructure and a changing landscape for personal consumer credit. Each will have an impact on the size and shape of GCC car markets. Moreover, the medium-term, region-wide political effects of the Arab Spring were also overlooked: the power struggle between Saudi Arabia and Iran; the split within the GCC over Qatar’s position; the struggle to control the entrance to the Red Sea at the Bab Al Mandab, which has underpinned the conflict in Yemen.

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The “Arab Spring” and car markets in MENA and beyond

Originally published in 2011. this paper was updated and re=-published in 2017   “Progress lies not in enhancing what is, but in advancing toward what will be”, Kahlil Gibran Only a few wise birds predicted the Arab Spring and its financial and economic impact. But, as it progressed, it didn’t take long for the immediate impact of actual regime changes in Tunisia and Egypt – and the threat of them in Bahrain and Libya – to become clear. Between the day the protests broke out in Tunisia in January, the price of oil (Brent Crude) rose from US$94.90 on the 4 January to US$116 a barrel in early March, its highest level since January 2009 when it traded at $40. Still off its $145/barrel peak of July 2008 but already worryingly high for European motorists and hauliers. Of course, while European governments wring their hands about the impact of oil prices, keep in mind that their taxes on oil consumption far outstrip the income to the oil producers. For example, in 2011 at current prices, the UK will generate about 1.8 times as much tax as the oil costs. In Germany it’s twice as much and in Italy 2.4 times in tax as the oil costs! But, if the price for long-term stability is only a few months of excruciating pump prices, many consumers might be willing to pay it. However, as we have seen, the human and financial costs turned out to be more expensive and enduring than that. 

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After the Arab Spring: Part 2 – the outlook for car markets in the Levant

The Arab Spring began in 2010 in Tunisia,North Africa and travelled eastwards. First, into Egypt and Libya in 2011. Then, in 2012, into Syria, in the Levant. And, in this part of the world, as governments, rebels, terrorists and infiltrators arrived, it has caused chaos. The modern Levant includes Lebanon, Syria, Jordan and the Palestinian Territories and – historically – Turkey as well. It has been described as the “crossroads of western Asia, the eastern Mediterranean and north-east Africa”. It fringes the eastern Mediterranean over a distance of 1,100 miles, with a population of 35 MN, excluding Turkey. The Levant economies share three common characteristics: they are net oil importers; they depend on other states or entities for their economic well-being – through remittances, exports or subsidies; and they share a politically unstable region. Consequently they are, more than usually, economically volatile and vulnerable. In addition, they share exposure to economic downside risks:global economic slowdown: the continuing Euro Area crisis, weakness of Advanced Economy Sovereign risks and the volatile oil prices.

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