Accountants predict the worst but what’s really happening?

PricewaterhouseCoopers forecasts tough year ahead for car industry.
Although there is obviously a lot of reality to this story in global terms, our information is that there happens to be a fair bit of good news as well. This could, of course be confined to certain manufacturers or down to regional variances, but we are hearing that not only are new car sales thawing slightly due to some pro-activity by franchises and car makers, but also finance acceptance, penetration and indeed income is healthy and in some cases increasing.

This has a lot to do with the great value being represented by used cars at present but access to credit at reasonable rates is being taken up by both new and used car customers alike. Whilst none of the dealers we receive feedback from are stating that the recession is over, and whilst accepting that the new year and recent press coverage – informing buyers that the ‘deal of a lifetime’ awaits – means the numbers, for some at least, look good, it flies in the face of most press reports stating that credit is hard to obtain and buyers have neither the confidence or cash to make the luxury purchase of a new car.

We have been saying for a while now that there will unfortunately be more casualties both in the manufacturing and retail side of the trade, but most of the businesses which are hitting the buffers are probably not equipped to handle a downturn and dealers and car makers alike that produce quality products and service at value for money prices will ride this out and create stronger brands. We at MTI think it’s important to present a balance to what is being said nationally and globally and if there is any good news out there you can be sure that we will be reporting it. It is much easier to keep talking everything down but when there is hope and short term successes it is vitally important, at the very least from a confidence point of view, to put that news across.

As we have regularly stated the unique factors of historically low interest rates, lower inflation than the last downturn and cars which are cheaper in relative terms than ever before, means (despite what you may have heard) many buyers are in the market for a purchase. Believe it or not (and it does sound incredible) some dealers are actually increasing prices on their used stock as a shortage of cars is taking hold and in some cases by quite substantial amounts.

One insider who represents a well known main dealer franchise even stated recently that cars he was buying for stock from manufacturer backed auctions were selling at more than £1,000 more than before Christmas!

The picture remains mixed of course as we have heard from dealers that 2009 has been a complete disaster so far but there seems to be a clear line between some franchised and independent dealers against other independents, supermarkets and auctions who are selling volume and achieving acceptable margins.

Like most recessions many will predict and many will get it wrong but clearly a large number of car businesses are getting it right, perhaps they need to spread the magic dust on those that aren’t!