John McConnell

AUSTRALIA’S biggest car retailer, Automotive Holdings Group Ltd (AHG), says it has set a target of working more closely with OEMs in order to present its customers with the right products at the right prices and says that the strategy has become a priority for the group.

AHG managing director John McConnell told the company’s annual general meeting (AGM) that there were substantial benefits for manufacturers and their representatives in improving the relationship; as well as for AHG.

“This is a statement of intent from us,” he said.

“It will ensure we are the partner of choice by OEMs. But it’s not a one-way relationship when it comes to management. This should be a two-way collaborative approach to be innovative and to assist each other and the customer,” he told GoAutoNews Premium at the AGM.

“It could be that we are trying to do some things in an innovative way for retail or that the OEMs want to experiment with new ideas. We should be in a position where we are open to engage and experiment.”

The idea comes partly from the recent move by global Mercedes-Benz retailer Lei Shing Hong to buy a 15 per cent stake in the car-maker’s parent, Daimler AG. At the same time, Daimler took a 15 per cent share in LSH.

Mr McConnell said while AHG had discussions with OEMs, it was not anywhere near the scale of the LSH-Daimler agreement and his company would not look at replicating anything like that deal.

He said the scale of that agreement was huge in comparison to AHG’s market and that LSH had considerable other investments including property and had a very wide geographical presence.

Need to expand east coast footprint

He said the aim of trying new ideas – such as forming a closer bond to OEMs – was motivated by the need to reduce the business’ operating costs and AHG’s particular need to expand its footprint to the east coast.

“We have more market share in WA today – it’s about 24 per cent – than we have for a long time,” he said.

“But if you look at the 6.2 per cent share we have of the national market, then by definition we are relatively underweighted in the east coast.

“So I think there is probably a reasonable saturation limit to what we could do with manufacturers anyway in the Perth market, so we will look at opportunities in the east coast.

“That will also be helpful by diversifying the risk away from the exposure to a single market.

“We can work more effectively with OEMs when the relationship is closer so we see it important that we continue to grow in the east coast.”

Western Australian economy was showing “signs of green shoots”

Mr McConnell also said the Western Australian economy was showing “signs of green shoots”.

“We are seeing indicators coming from employment, residential, miners, heavy truck orders and so on, that for us shows the economy has stabilised,” he said.

“Vehicle sales have been artificially high for a while and if you look closely to the data, that is more likely to be due to increases in rental vehicles and heavy trucks.

“But the underlying figures show that the state is showing improvements. In terms of sales, we are only 25 per cent away from the previous sales peak in WA.

“That peak was probably fuelled by mining. Now if you look at the current national sales figures, they are at an all-time high. Now look at the WA market that is down 25 per cent.

“That’s pretty tough for businesses in WA and for AHG in particular because WA represents such a large part of our portfolio. It makes it challenging from a business perspective.

“So if you overlay national regulatory changes with the sales challenges in WA, it hasn’t been the easiest period.”

Restructure of automotive division has been “difficult”

Outgoing AHG chairman David Griffiths said the changes to the company in the past year – including a restructure of the automotive division that reduced some staff numbers – had been “difficult”.

“What we do know is that we must change to meet the changing environment in which we operate,” he told shareholders at the AGM.

“We have been successful in managing costs out of the business and improving our revenue streams across the business to meet the steep drop in insurance and finance income our industry faces as a result of the changes in the regulatory environment.

“We are also looking at markets immediately adjacent to automotive retail and may participate in them if we see good opportunities there. Your board is confident that the company is well positioned to embrace further evolution and to move with, or ahead of, the market.”

By Neil Dowling