• COSTS HIKE SEES ARNOLD CLARK PROFITS FALL
• NEW CITROEN BOSS PROMISES 1.5% ROS
• SUZUKI AIMS TO REGAIN HIGH NFDA SURVEY SCORE 
• WLTP STOCK PUSH STILL HITTING PRICES
• MOTORPOINT SEES MORE FLY/DRIVE BUYERS
• NISSAN RETAILER WINS MOTABILITY AWARD
• CHECK MINIMUM WAGE OR FACE FINES, COMPANIES WARNED
• JOIN OUR ECONOMIC FORUM FOR POST-BREXIT ADVICE
• WORLD NEWS – BMW digs for better deals on EV raw materials, Aston Martin wants up to £5 billion IPO valuation
• STOCKWATCH – gains for Inchcape
• LAUNCH DIARY
• COMING UP – Financial Conduct Authority report on motor finance
• MONEY MATTERS
• OUR BLOG – Can we learn from the Americans?

Costs hike sees Arnold Clark profits fall

Increased apprenticeship levy costs, removal of the cap on debit card fees and higher property rates have left Arnold Clark, the UK’s largest franchised retail group, tackling a higher cost base which eroded profits in 2017, according to the firm’s annual accounts.

The three areas highlighted amounted to a hike in costs of £5.56 million in 2017 compared to 2016. In its 2017 accounts, group turnover increased by 7.3% to £3.93 billion. However, it it noted that “a combination of decreased new car profitability and an increased cost base led to a 13.2% reduction in group operating profit to £117.9 million.”

Chief executive Eddie Hawthorne’s report added: “Given the magnitude of these additional expenses in the period, a profit-before-tax of £106.6 million is a significant achievement for the Group.”

On top of that the fall in Sterling following the Brexit vote pushed up the price of imported cars just as the new car sector was slowing but the company’s proficiency in used car retailing helped limit the financial damage.

New car sales were down to 70,167 amid `a significant decline in new car profitability’ but used cars retailed rose to 218,188 from 197,842 in 2016.

New Citroen boss promises 1.5% ROS

Citroen’s new managing director Karl Howkins is aiming to reverse the falling fortunes of the brand’s retail network through increased sales and better communication.  However, Mr Howkins believes the network is currently “10-12 too heavy”, despite having a few key open points in areas such as Cambridge, Oxford and Reading.

Commenting on the worst performers within the Citroen network Mr Howkins said: “For the bottom 10% there is probably nothing we can do, they don’t want to work with us and we don’t want to work with them.” However, he added that he would help the rest of the network improve their fortunes.

At the start of this year Citroen reported it had 167 franchise points. This is now down to 158, according to PSA network boss David March. In the same period the average network return on sales has gone from just above break-even at 0.1% to 0.6%.

Mr Howkins added: “Within two years I want the network to be at 1.5% return on sales.”

After three years of falling new car and van sales Mr Howkins said he was confident Citroen would increase sales this year and next through the introduction of several new key models.

* To read the full range of Mr Howkins plans, pick up a copy of sister publication Auto Retail Bulletin in October.  If you’re not already a subscriber, click here for a free trial.

Suzuki aims to regain high NFDA survey score 

Suzuki expects to be back up at the top of the NFDA Dealer Attitude Survey ranking at the start of 2019 after a significant fall in the August chart.

Suzuki, which was the third biggest faller in the most recent NFDA Dealer Attitude Survey, fell to seventh position this summer due to a self-admitted poor performance with vehicle supply in the early part of 2018.  Suzuki had been in the top five brands since 2014 and more recently in the top three.

Speaking to Auto Retail Agenda, Suzuki boss Dale Wyatt said: “We have rerun the exact questions from the Dealer Attitude Survey and the results would have put us third.”

Mr Wyatt added that Suzuki was on track to sell around 40,000 cars in 2018 and gain a 1.7% market share.  He added that the average return on sales for the whole network was 2.2%, but those retailers running solus Suzuki operations were up at 3%.

WLTP stock push still hitting prices

Retailers are still offering five figure discounts on new cars during the 68-plate month after being forced to take more pre-WLTP stock this summer.

Car-buying site, Carwow, has claimed models such as the Nissan Qashqai, Seat Leon and Skoda Kodiaq are in showrooms with around £4,000 off. Leaving aside the specialist sector, the biggest reductions are among premium German makes with Mercedes, Audi and BMW discounting between £7,500 to some £11,000 on popular cars.

It said: “Dealers and manufacturers have been stocking up and pre-registering new motors throughout the summer. That led to registrations of new cars jumping by 23% in August but more savings can be had before the end of this month.”

https://bit.ly/2NTbxlV

Motorpoint sees more fly/drive buyers

Used car retail giant Motorpoint says it is gaining business with `fly-drive’ buyers from more remote regions who are happy to spend on the cost of an air or train ticket if they can save money on the purchase and perhaps get a bigger choice than at their closer dealers.

A spokesman said its Widnes branch is seeing people fly in from the Isle of Man and its Glasgow site is getting sales with customers catching a train down from the Scottish Highlands.

He said: “We are seeing a useful amount of `fly-drive’ business from buyers coming from quite a significant distance away. Some travel across the Irish Sea from the Isle of Man to our retail site at Cheshire and others catch a train for a few hours from the Highlands to Glasgow. We have several thousand cars in group stock and our sites typically have a few hundred. That and our prices is attracting drivers from hundreds of miles away.”

Nissan retailer wins Motability award

Nissan retailer West Way Hanwell has become the latest to pick up a Dealer Award from the Motability scheme.

Based in the outskirts of London and servicing the west of the capital, the business won a regional award recognising its `outstanding’ customer service based on reviews and user feedback.

All winners of the quarterly awards are automatically entered into the national annual awards announced at the beginning of next year.

Tony Groves, West Way Hanwell’s Sales Manager, said: “All of us at West Way are incredibly proud to win this Motability Dealer Award and are pleased to be recognised for our dedication to working in partnership with the scheme.”

Check minimum wage or face fines, businesses warned

Businesses must check they are paying the correct age-related minimum wage or risk being fined and directors banned, the government has said as it puts record funding into enforcement.

In the past year it has uncovered a record £15.6 million of underpayment with some 200,000 workers being short changed.

Firms found to be underpaying were fined £14m as well as having to reimburse their staff.

Tom Neil, of employment advice and conciliation service Acas, said firms breaking the law face fines of £20,000 per worker and directors can be banned for up to 15 years.

The National Living Wage varies from £7.83 an hour for over-25s to £3.70 for apprentices.

Auto Retail Network Forum on life after Brexit

Auto Retail Network is hosting an Economic Forum on 16 November to examine the impact of Brexit on the UK’s auto retail industry.

The Auto Retail Economic Forum is a unique event examining these business-critical issues. It will be the only event of its kind dedicated specifically to auto retailing and will offer practical analysis to help you trade to a successful future.

Speakers include George Parker, political editor of the Financial Times, Sir Keir Starmer, Shadow Secretary of State for Exiting the European Union, Keith Wade, group chief economist, Schroders and Andy Barrett, chairman & managing director, Ford of Britain.

For more details or to reserve a place log onto https://bit.ly/2PXOcwu

WORLD NEWS

BMW digs for better deals on EV raw materials

BMW plans to sign more deals with mining companies to secure cheaper raw materials for its electric vehicle batteries than rivals but only with socially responsible corporations which don’t exploit workers or use children in extracting the minerals such as cobalt.

Board member, Klaus Froehlich, said “We have one agreement, there will be more, but a key issue is securing (it) from mines that do not exploit workers or employ children.”

He added: “In electromobility, you have to be a cost leader. If you are not a cost leader you will not survive.”

https://reut.rs/2xqWR32

Aston Martin float next month could size it like Royal Mail

Aston Martin will become the only UK car maker on the London Stock Exchange when it floats next month. The price range for the company’s London listing is between £17.50 and £22.50 per ordinary share, valuing it between £4.02 billion and £5.07 bn, about the same as Marks and Spencer or Royal Mail.

Porsche ditches diesel

Porsche has stopped making diesel cars as it readies itself for a new generation of hybrids and EVs.

Oliver Blume, Porsche Chief Executive, said in a statement on Sunday: “Porsche is not demonizing diesel. It is, and will remain, an important propulsion technology. We as a sports car manufacturer, however, for whom diesel has always played a secondary role, have come to the conclusion that we would like our future to be diesel-free.”

Porsche said demand for diesels is dropping and its share of its worldwide sales was 12% in 2017. It has not had a diesel in its range since February.

https://reut.rs/2xJw4yZ

STOCKWATCH

Closing prices at Friday 21 September and weekly movement.

BCA 214.0 (-4.5p)

Cambria 53.5p (no change)

Caffyns 425p (no change)

Inchcape 695.5 (+28.5p)

Lookers 108.4p (-2.2p)

Marshall Motor Holdings 155.0p (-1.0p)

Motorpoint 215.0p (-15.0p)

Pendragon 25.9 (+1.2p)

Vertu 43.6p (3.4p)

LAUNCH DIARY

October 4: order books open and prices confirmed for BMZW Z4 roadster, first deliveries from March 9.

2019 Q1:

January: SEAT Tarraco 7 seater SUV flagship, its first car in the sector.  Prices tbc.

Honda CR-V hybrid, the company’s first i/c-electric SUV. Prices tbc.

Mercedes-AMG A 35 4MATIC, new entry level performance model for the series.

COMING UP

September: Financial Conduct Authority completion of investigation into motor finance

November: Friday 16, Auto Retail Economic Forum https://bit.ly/2PXOcwu

MONEY MATTERS

Growth forecast downgrade

Brexit uncertainty has seen the British Chambers of Commerce chop its 2018 economic growth forecast to 1.1% from its previous prediction of 1.3%. If growth is as weak as expected, it would be Britain’s worst annual performance since the 2008-09 recession. Its prediction for growth in 2019 has dropped to 1.3% from 1.4%.

https://reut.rs/2QUOO7k

OUR BLOG

For this week we‘re going across the pond to look at an event which happened the other day in New York and which just may one day land on our shores.

A digital dealership, Carvana, which says it does for used cars what Amazon does for most other retail goods, set up its service in NY which is now the 78th city or town it operates in. Buyers research a car on line, choose it, can sort the finance with Carvana if they want and have it delivered to their home without needing to visit a showroom. They get a seven day return option – what you or I would consider an extended test drive – and the usual warranty.

Laugh if you want but its trajectory is impressive. In Q2 it has been selling approx. 250 cars a day and making around £1,500 per unit. Its platform shows some 11,000 makes and models and it says 1 in 5 customers do the whole transaction, from start to finish, on their smartphone.

Carvana says it is a `capital-lite’ business which does not need fancy showrooms or highly paid sales/workshop staff. It PDIs cars from a couple of warehouses but does use retailers for servicing work.

The interesting thing is who is behind all this. In the case of Carvana, it’s a privately owned group of traditional dealerships, the DriveTime Automotive Group, and similar operations fronting mainstream retailers are now appearing around the country.

So far their slice of the £750 billion US car market is pretty small beer but maybe that’s because until now buyers haven’t had much of a credible, reliable alternative to the usual showroom format.

Why are dealers funding this? Aren’t they cutting their own throats – or is it a realistic assessment of the way the millennial generation buy their goods these days?

Which brings me to Mazda. As you may know, this week Mazda announced an extension of its MazdaMyWay service beyond the London hub. You know the thing, you book an appointment and a nice, non-pushy `ambassador’ brings the car to your door, invites you to take a test drive and with a bit of luck later gets your signature on an order.

So I rang the press office and asked: `Why are you rolling out your home delivery service beyond London? The cost per sale must be pretty high.”

“Because we hope to make incremental sales from people who may not bother traveling into a busy city centre or big retail park and so wouldn’t look at and choose our cars but who might do if we took it to them,” was the reply.

Taking cars to customers instead of getting them to come to you. Every journey starts with a first step, as they say…I wonder where this one will go.