Its used-car operation, easyauto123, incurred a $1 million cost in the 2017 financial year but AHG managing director, John O’Connell, said the concept had proven itself and was being expanded.
AHG now has four easyauto123 outlets – two in WA and one each in Victoria and NSW – with a fifth to be open at Hendra in Queensland in November.
This week AHG took responsibility for its New Zealand franchised business out of the hands of executive Tony Salerno and gave him full control of the used-car operation.
Effective from tomorrow, AHG’s chief operating officer of Australian Franchised Automotive, Paul Morris, will have an expanded role to include AHG’s operations in New Zealand. This was previously under the control of Mr Salerno.
AHG said Mr Morris’ more inclusive role will now allow Mr Salerno the time to focus on his role as executive general manager for the easyauto123 operation. Both Mr Salerno and Mr Morris will continue to report direct to AHG managing director John McConnell.
In its recent annual report, Mr McConnell said: “We are also accelerating the roll‐out of the easyauto123 fixed‐price used-car warehouse model in conjunction with our acquisition in July of a majority stake in the Carlins auction and wholesale business.
“The easyauto123 model is resonating with customers without affecting used-car sales at our franchised dealerships.”
Mr Salerno’s appointment is seen as a decisive move to put new emphasis on its innovative “big box” retailing concept and particularly into used cars at a time when Western Australia’s new-car sales – the core of AHG’s business – continues to tread water.
New-car sales in WA are down 22 per cent on 2012 and the state has an oversupply of new cars. This has weakened AHG’s 2017 financial results (see separate story) and put new focus on expanding used cars.
Given the continuing depressed nature of the new-car business, especially in WA where the bulk of AHG’s operations are centred, it clear sign that used cars have taken on a new profile in the company’s future.
It shows that used cars have the potential to be more vital to AHG’s future growth and profitability as its new-car operations.
AHG is off to a good start with easyauto123. The pilot site opened in January and is selling 200 vehicles a month and AHG said this first store, previously a Bunnings outlet, was showing a profit only six months after opening.
In its latest financial figures, AHG put a $1 million cost against establishing the first easyauto123 operation but indicated that this was predominantly one-off payment for staff training, uniforms and general administration that could be amortised over future outlets.
Mr O’Connell also said in the annual report that there was an oversupply of new cars in the WA market – with sales down 22 per cent on 2012 – that had weakened AHG’s 2017 financial results.
This puts further weight on plans to accelerate its used-car operations.
In the 2016 calendar year, AHG sold about 83,000 new vehicles – including fleets – compared with about 40,000 used cars.
By comparison, Autosports Group Ltd (ASG) – which announced its financial results this week – sold almost the same new cars as used cars (16,766 new and 16,794 used) in the 2017 financial year.
ASG CEO Nick Pagent said that one of the biggest contributions to the better-than-expected profit was used-car sales, up 8.7 per cent, and especially luxury used-car sales.
The easyauto123 stores are painted a bright yellow for high visibility and are “big box” designs, usually former Bunnings or Masters buildings.
The concept operates around used cars at fixed prices with staff trained to inform rather than sell.
Mr O’Connell previously said that concerns about easyauto123 cannibalising AHG dealerships in the same area were ill founded and he saw no sign of this occurring.
“It appeals to a broad buyer demographic that want a choice in a different selling format,” he said of the concept.
By Neil Dowling
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