New car dealers need to start preparing for the end of the scrappage scheme, even though it is still expected to run for several months, according to motor industry consultancy Network Automotive.
The company says that the artificial boost provided by the scheme has helped many dealers during what may prove to be the toughest part of the recession but that they need to be ready for a return to a new car market without subsidies.
Managing director Colin Bruder said: “Despite initial doubts from many quarters, the scrappage scheme has worked remarkably well, being responsible for more than 150,000 registrations, with cash left for about the same number again.
“However, when the money runs out, there is likely to be a fall off in business, and dealers need to ensure that they are properly prepared at that point.”
Bruder explained that there was no magic solution to maintaining levels of business at the end of the scrappage scheme but that dealers needed to ensure that they were carrying out the fundamentals of good new car sales practice.
He said: “Really, there needs to be a two pronged approach. Firstly, sales people need to ensure that they are ready to sell cars without the £2,000 subsidy by returning to CRM techniques that are proven to maximise results, such as interrogating their database for customers that have owned their current vehicle for two or three years and may be thinking of changing their car.
“Secondly, they need to ensure that aftersales continues to be a important source of profitability by capturing servicing and maintenance work for all the vehicles that they have sold under the scrappage scheme. These customers could contribute to dealership profitability for many years into the future.”
An additional problem Network has identified is that the end of the scrappage scheme is likely to coincide with the worst shortages of used car stock.
Bruder explained: “Usually, it would appear logical for dealers to concentrate more on used car sales as the scrappage subsidy ends but the current dearth of quality used car stock will make that a very difficult strategy to follow.”
He added that it was important for dealers to have a plan ready now because it was tricky to predict when the scrappage scheme would end.
“Because it is based on a finite pot of money, it is difficult to know exactly when the scheme will end, but it is likely to come quite quickly and probably quite suddenly. At that point, the dealers that cope best with the likely fall in sales at that point will be the ones that are best prepared,” Bruder said.
Dealers should also be talking to their manufacturers about the marketing initiatives that they are planning for the end of the scrappage scheme, he said.
“We know that manufacturers are already discussing how to handle the end of the scrappage scheme, although their exact plans are not yet clear. However, it seems reasonable to assume that many will continue to offer the £1,000 element of the subsidy that they are providing under the scrappage scheme.
“Dealers should certainly be in dialogue with manufacturers, talking about the kind of marketing that they believe could provide a softer landing for the new car market as the scheme ends. It is our belief that manufacturers are listening to dealers much more closely during the recession than at any other time in recent years and their frontline experience should be listened to carefully.”