ICDP's blog

Image from the Financial Times

Welcome back to 2021 – starting off, much like 2020 ended, except that we now have Covid vaccination programmes. I hope that you had some downtime over the holiday period and have returned refreshed for whatever the new year brings. I did consider making this first blog of the year a personal prediction of what some of the main events might be, but I felt that would be setting myself up to fail, so instead turn to a couple stories that have been doing the rounds over the holiday period related to Apple and Tesla.

…the used car business was straightforward. Take in some trade-ins, buy some cars from the local auction and your mates in the trade, quick polish and stick them on your forecourt with a price sticker until the punters rolled up.

My Tesla Model S finally went back to the lease company at the end of last week, which makes this a good time to reflect on what I learned from running this car for 3½ years and 80,000 km.

The last week was a grim one for anyone involved in what we call high street retail in the UK – the mainstream department stores and fashion stores that are the anchor of big shopping malls and take up many of the store fronts in a typical urban city centre shopping area.

Over the last couple weeks, a repeated theme has been around mergers, acquisitions and cooperations in the auto industry.

Today, Capgemini have published a report advocating the transition to an agency model for distribution networks, supported by consumer and dealer surveys in Europe and China.

As you hopefully noticed, I have missed a few weeks of my blog. I have not been on holiday (unfortunately) or struck down with Covid (fortunately), but tied up in a house move that did not go according to the carefully planned process, therefore continuing during a period when we had a lot on in ICDP.

I was driving past a local dealership earlier today, part of a Top 20 UK group, and saw one of the sales executives returning from a trip to the local shops.

At this time of year, many companies are into their budget processes, determining their priorities for the next fiscal year, what assumptions they make for their markets, and given that, how much they can afford to spend, and on what.

The news over the last two to three weeks has not been encouraging in respect of Covid case numbers and new restrictions on people gathering in significant numbers. There are obviously big differences between markets, and we should praise those countries who seem to have managed their response to the pandemic better than others – even more so given that they are not the ones you would have put money on six or seven months ago

There was a great response to last week’s blog on the Near Term Dealer Model – I appreciate the feedback. It’s always useful and sometimes picks up on specific points that merit further comment. This is an example of that – with respect to the need to reconsider how processes work in dealerships, and whether there are opportunities to improve.

In recent months, members of the ICDP Research Programme have flagged some priority questions for us such as whether Covid has advanced digitalisation and changes in network structures, and whether there are lessons learned from the lockdown experience that can be applied to permanently reduce dealer fixed costs.

Some years ago, a colleague and I had a discussion about why businesses existed. He had a private equity background and asserted that businesses were there to be bought and sold, basically that the businesses were as much of a commodity as the products or services they produced.

Looking at the image, you may wonder what place a very used brake caliper leaning against a can of baked beans has in a blog that is aimed at encouraging people to think about strategic change in automotive distribution, but there is a connection and that relates to the changes that technology has made and will continue to make.

As any good dealer knows, used cars can be your friend in need. If a dealer business is considered as having three pillars, used cars is the one that tends to stand strongest through whatever disruption is going on in the broader market.

I read an article a couple weeks ago in Automotive News Europe related to pricing power.. It was a good piece, citing various researchers, and with data showing how some brands, notably PSA under Carlos Tavares, have done better than others in improving real pricing in recent years.