It is expected to be an earnings driver for the nation’s biggest automotive retailer in 2018, said outgoing AHG managing director and former CEO Bronte Howson.
Speaking at last week’s annual general meeting, Mr Howson said the rollout strategy was based on success with its trial warehouse in the Perth northern suburb of Joondalup.
“We have been trading since January and became profitable in mid-March,” he said.
“Now we can take significant market share with that model. The used-car operation can fit into any PMA and can start up in any shed.”
But Mr Howson would not disclose where he would target the next used-car outlets.
AHG CEO John McConnell (left), MD Bronte Howson and chairman David Griffiths
At the shareholder meeting, Mr Howson said growth in AHG’s used-car sales share this year was up 13 per cent compared with the same period in 2015.
“If we want to expand, new dealerships are an expensive asset,” Mr Howson told GoAutoNews Premium after the meeting.
“The easyauto123 concept is very flexible and can be established very quickly.”
Despite a slowdown in the vehicle market of its home state of Western Australia, Mr Howson said easyauto123 was “a good opportunity”.
“It’s a driver because it’s a good format,” he said. “The guys have done a good job on the business.
“It’s in a massively fragmented market but it has the advantage of having the backing of AHG behind it.
“Expand this used-car operation outside of WA and that’s a fantastic opportunity. We have the scale and ability necessary to get it moving.”
Mr Howson said that because it has now proven itself in WA, it could be leveraged forward in the same way that AHG expanded its new-car operations nationally.
“We make income from finance and insurance and the metal margin,” he said.
“It’s a low service business because there’s not much of a car park.
“It does not have the big investment of showrooms, but leverages the strength of AHG.”
Asked if easyauto123 would cannibalise the used-car businesses of AHG’s existing new-car network, Mr Howson said “it’s a different segment of the market”.
“We don’t compete with our existing showrooms because the type of models are different – different price points and different ages (of vehicles) which gives us an ability to operate incrementally.
“We are certainly not cannibalising existing operations.”
Easyauto123: In a nutshell
AHG’s used-car warehouse concept isn’t new but has been enhanced through almost a year of testing and by its backing of the retailer’s national group.
The easyauto123 used-car system centres on warehouse buildings located in high-density suburban areas that can house up to 500 vehicles. It has fixed prices and provides for ready on-site finance with trade-in valuations. AHG said all vehicles pass a 10-point safety inspection and have clear titles. The trial site in Perth’s northern suburbs became profitable three months after launch, becoming the catalyst for fast-tracking plans to spread the business to the eastern states in 2017. AHG said it was open to considering using warehouses vacated by large-goods retailers such as Masters hardware.
By Neil Dowling
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