THE days of $30 million dealerships have gone and the future will be satellite showrooms surrounded by multiple service centres, according to Australasia’s most successful independent automotive distributor.
Ateco executive chairman Neville Crichton said that within five years, massive changes would surface within the retail industry.
He also questioned the speed of returns available today to companies currently buying up dealerships.
“Personally, I think the $30 million to $40 million dealerships have gone,” he told GoAutoNews Premium at the launch of Ateco’s latest vehicle from its American Special Vehicles banner, the Ram 1500.
“Small showrooms with a large number of service centres – perhaps up to 10 – will be the future.
“Firstly, you can’t afford to have the real estate. The costs of land are prohibitive for large dealerships.
“Then we have vehicles that are getting better and better in terms of reliability and the need to be serviced. When electric vehicles arrive, the maintenance will come right down.
“The biggest fight comes from the manufacturer because they are so insistent that their dealers have large showrooms.
“We have trouble getting LDV into some Holden dealerships where the (Holden) volumes have almost halved and the dealer still has to be loyal to Holden. It’s crazy.
“If you look at Muirs (Holden) – how do you replace that site? You can’t.”
Asked where the future lies in retailing, Mr Crichton said: “Online has the greatest potential”.
“We launched Daewoo in NZ with a similar program which was basically just TV and no dealerships at all. That sold 2000-2500 in the first year.”
The Daewoo Direct sales program, a concept devised by former Ateco managing director Ric Hull in the late 1990s, replaced dealerships with a telephone sales team selling direct from the importer (Ateco) to customers using an 0800 telephone number.
It also introduced Daewoo’s Total Care package that included free servicing for three years or 100,000km. The program ended in 2000 when Daewoo returned to conventional dealership sales through a new distributor.
“I think something like that could work again, quite easily,” Mr Crichton said.
But he said he was not confident about the recent change to a new distributor-based sales system introduced in New Zealand recently by Toyota and one that followed on from Honda.
“In New Zealand, Toyota has changed the relationship between itself and the dealer but the sales have dropped for the first two months,” he said.
“The jury is still out. Everything is the same except Toyota owns the cars and there is a fixed price. I don’t know how that will work.
“It is not something that we (Ateco) would look at it at this stage.”
Mr Crichton said he was a strong believer in volume being the linchpin of a successful automotive business.
“We’d love to get a volume brand. That’s what we’re building up LDV for because we have got to have volume – it’s what makes the luxury cars work,” he said.
“We have to be in the volume business. The LDV volume is building and we have cracked 500 a month and it will go to 1000 a month hopefully by Christmas and that’s starting to sell some cars.”
He said that even backed by a volume brand, he was not in the market for any dealerships and thought the payback was too long.
“I think I wouldn’t be paying a premium for dealerships. If you look at the multiple of earnings, they’re coming back,” he said.
“Even AHG was at 14 times earnings – are you going to buy a dealership and wait 15 years to get payback? Not in a million years.
“And that assumes everything will remain the same, which it will not.
“I see a massive change in dealerships and particularly the resale value. The bigger groups have taken control and the multiple of earnings is coming down and down. I think there are a lot of changes (coming),” Mr Crichton said.
By Neil Dowling