Progress but at what price?

The economic downturn – which incidentally is or isn’t getting better depending who you speak to – is still likely to claim victims both in terms of jobs and businesses going under as, with margins under pressure like never before, car dealers struggle to compete for a smaller share of a declining market.

There has been a near 25% increase in insolvencies in the sector compared to the same time last year, with many of these businesses likely to be smaller independent dealers who don’t have the cash reserves of the big boys or the same access to funding for cash flow.

The irony is that in the UK car sales have actually increased year on year both in new and used which makes the level of bankruptcies even harder to swallow.

The worry from a consumer point of view is that it’s ultimately likely to mean less choice and having to travel further to buy and have their cars maintained. As a result the bigger players are likely to get bigger with the smaller ones continuing to struggle. We have heard stories of long established, well run, professional businesses that cannot make money in this climate which has forced them to close the doors. This is due in part to customers demanding more bang for their buck but also the inability to actually make selling cars profitable.

When we look at the likes of Kwik-Fit and Halfords and the battle lines drawn in their quest to win business from the franchised dealers, it has given customers a better choice in terms of servicing and maintenance but ironically the smaller “Fred in the shed” type repairers, who have been looking after local motoring needs for decades, have been getting caught in the crossfire and ceasing to be able to compete as a result.

How long is going to be I wonder before there are, like with supermarkets, towns and villages with superstores and supergarages and not much else in between? We are already seeing car dealers incorporating coffee shops and restaurants into their businesses in a kind of mall style American way of trading so it is likely that in their quest for prospective customers it’s only a matter of time before you can go get your car serviced, have lunch while you wait and take in a movie whilst it is cleaned and polished.

It is I suppose progress but at what price?

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