DROUGHTS and a government-enforced credit squeeze is killing off some Australian regional dealerships in a quiet exodus that has negative implications for OEMs and country motorists.

Many of the closures are not reported and barely raise much interest. The trend is almost invisible to city-based Australians and is making country life increasingly isolated and more difficult.

In the past six months, some of the closures include: Porsche and Audi dealerships in Darwin; five franchises in Kalgoorlie; a major franchise in south-east NSW; Southern Downs Automotive in the Queensland town of Warwick; and the five-franchise Bunbury Auto Group in WA’s south-west. Others have occurred with less fanfare.

The volume of sales in some regional centres is failing to make dealerships viable. The impending closure of five franchises under the Westland and Goldfields Auto banners in Kalgoorlie are examples where the business became unviable.

The dealerships, part of Regents Group which is based in Perth and operates in WA and the NT, will close at the end of this month with reports from the dealer principal Robert Murison that the reasons included the weak retail environment, tightened lending criteria and residents choosing to buy cars in Perth rather than Kalgoorlie.

In a report by the town’s newspaper, The Kalgoorlie Miner, Mr Murison said: “When the (current owners) bought the business in 2008 there were about 2500 new cars registered in Kalgoorlie every year. Now it is about 1200 a year.

“People (buying) new cars in Perth makes it extremely difficult for a dealership our size to achieve their targets.”

KPMG automotive analyst and the national lead of its Motor Industry Services division, Steven Bragg, told GoAutoNews Premium that he believed the trend was cyclical and mostly in line with the constant changes of fortunes in rural areas.

However, he said the past two years had seen an almost “perfect storm” for the automotive industry and especially for regional dealerships.

He does not believe the market conditions will improve for the next six months.

Mr Bragg said difficulties were being experienced by brands that historically had few problems with sales.

He cited Holden as being particularly weakened by a multitude of factors, and Mazda was down 12.3 per cent in 2019 as private-sector sales – on which Mazda relies almost exclusively – have fallen sharply.

“We have had 22 months of consecutive car sales declines which has made business difficult for most dealerships in all parts of Australia,” he said.

“But that has been aggravated by issues led by the Hayne report (the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, December 2017 to February 2019) that changes the way a dealer can arrange finance and how able a customer is to get financing for a car.

“There is also the abolishment of the point-of-sale (POS) exemption that is coming into play, forcing dealers to become an agent for a bank or take on the role of a financier.

“Then we have rising rents, falling car sales, a parts industry being taken out of dealer hands by online services including eBay and Amazon, and service income diminished by capped-price service programs.

“If that wasn’t bad enough, regional dealerships are coping with the drought that is cutting into the income of primary producers, a declining customer base, greater demands from OEMs for premise upgrades and equipment purchases, big distances between major centres, large distribution costs and so on.

“Australia is a big country. It’s also one with a small population and that means the market is small. Selling a commodity like a car into this environment and making a business thrive is very difficult.”

The Motor Trade Association (MTA) of WA Group CEO, Stephen Moir, said manufacturer pressures can contribute to the closure of dealerships.

“Impossible sales targets, endless refits and changing colour schemes are among the onerous demands from car manufacturers pushing regional car dealers out of business,” he said.

He said corporate identity upgrades can cost millions of dollars for franchise dealers and are making trading unsustainable in a challenging retail environment, among other pressures from manufacturers.

The issue has been taken on by the state MTAs who, Mr Moir said, were working with OEMs on more sustainable outcomes for both parties.

By Neil Dowling