ICDP's blog

When there is so much uncertainty around, it’s always good to have something you can count on. In the world of automotive retail, that is usually aftersales.

It is difficult to watch the news coverage of the Russian invasion of Ukraine and think about anything other than the human suffering. You would have to be inhuman to do otherwise. However, we all have a business life, and within that the impact of the conflict is likely to be significant. We have been asked by a number of members over the last couple weeks what that might mean. Will chip shortages look modest by comparison?

The big news in the automotive world last week – other than the possible effects on our industry of the shameful events in the Ukraine – was the announcement by Jim Farley of Ford that he was going to split the business into two separate divisions, one focused on electric vehicles ‘Ford Model e’, and one on combustion engine vehicles ‘Ford Blue’.

For many years, a move from ownership to use has been flagged as a major threat to the traditional business model that is focused on every individual having access to their own car. Progress has been slower than the various commentators have suggested and many schemes have been launched and failed over the years.

Last year, when we published the latest edition of the European Car Distribution Handbook (ECDH) I wrote about the slow pace of change in the size of dealer networks over the years since the end of the Global Financial Crisis. Some conversations in the last couple weeks have come back to this subject, not so much about the principle of reducing dealer density, but about the timing and the risks.

One of the hot news items over the last few weeks has been the significant drop in the share price of Cazoo along with other ‘tech’ stocks. The markets appear to have decided that they need to pay more attention to profit than to Powerpoint, and are applying a more realistic valuation to businesses that are burning through investor cash, but are yet to turn a profit.

I’ve talked before about the need for a more disciplined approach by manufacturers to balancing supply and demand – the traditional ‘stock push’ approach is not only the driver of a lot of waste in terms of distribution cost, but it will make any attempt to deliver a true omni-channel seamless customer experience impossible.

You might recall that a couple months ago, I commented in my blog on the acquisition by Constellation – the parent company of British Car Auctions and online used car retailer start-up cinch – of a majority stake in Marshalls Motor Holdings, the 6th largest UK dealer group, 15th largest in Europe.

When I joined ICDP in 2010 our first projection of the size of the aftermarket had just been published, looking at the market volumes to 2015. It showed declines relative to a 2008 baseline of around 15%, driven by changes in the parc, longer service intervals and improved reliability.

Last week saw the announcement that the new CEO of Volvo Car Corporation will be Jim Rowan, replacing an industry veteran Håkan Samuelson who seems to have done a pretty good job of improving Volvo’s fortunes over the last ten years, and presumably disappointing a number of internal candidate who might have aspired to the top job after decades of service.

Welcome back, and best wishes for 2022! At present the new year looks pretty much like the old year, but we can only live in hope that the coming months will see our way out of Covid impacts on us all personally and professionally, and chip shortages specifically on the new and used car markets.

As we approach the end of the year, and my last blog until January, it seems appropriate to look back at what we have experienced and what we have learned. My late friend and colleague, Martin Leach, warned against using the past to predict the future – he used to call it managing by looking in the rear view mirror – but if you are selective with your focus, you can hopefully pick out what is significant from what is transitory

I seem to be writing a lot of blogs related to dealers at the moment, but that’s because there’s a lot going on. The reduction of the number of dealer investors is well-established, leading to the emergence of the very large national and regional groups that have taken a growing market share in many markets.

Twenty years ago, Jim O’Neill, then an economist with Goldman Sachs, came up with the term ‘BRIC’ to represent four major economies that appeared to offer exceptional growth opportunities in the years ahead – Brazil, Russia, India and China.

Most people looking at the three company logos in this blog would perhaps, at best, recognise only that of Marshall Motor Holdings – the 6th largest UK dealer group, number 12 in Europe, and the only one which is a consumer-facing brand.

This week, we will publish our latest update of the European Car Distribution Handbook (ECDH) – the only source of information on the size and structure of franchised dealer sales and service networks on a pan-European basis.

When you read the headline, and if you’ve been keeping up with the news this week, you might have expected this blog to be about the Rivian stock market listing in New York last week.

The global car industry continues to struggle with supply in the face of the shortage of semi-conductors with extended lead times, restricted product offers and cancelled contracts. The casual observer might then expect this to lead to huge losses, slumping share prices and dealer investors rushing to leave the sector. But if anything, the opposite is true.