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UK AUTO management publication, AM-Online, is reporting that one of MG’s top dealers has stepped back from selling new cars to become an independent retailer because of the pressure the huge growth in MG sales in the UK has been putting on the business.

The reasons for the move are potentially a warning for Australian dealers to think about and plan for as they find themselves selling low-priced, high-volume growth Chinese brands in an increasingly over-supplied new car market.   The move also points to one of the strategies being outlined by Pitcher Partners which has been suggesting that there is a path forward for some dealers as independent auto retailers operating under their own brand to customers they own and nurture through used car sales and service.

Motor Industry Services lead at Pitcher Partners Steve Bragg told GoAutoNews Premium that considering transitioning some new car brands to used brands may be beneficial as long as its done with intent and is completely thought through. 

“The role of the new car franchise is to attract the customers to your dealership. It’s the billboard that allows the dealer to sell a new car, but also offer the customers all the other products and services the dealership offers including used cars and F&I service, parts and panel.”

Dealers need to evaluate all their businesses and brands to ensure they are getting the appropriate return on sales and return on investment. 

Steve Bragg

“If the economics don’t stack up, a change in the strategy or structure of the business is imperative; including changing the brand, moving off the brand or going independent.

“This is not exclusive to Chinese brands, however, brands that are volume-focused with little gross profit require significant working capital investment before they provide the returns needed,” Mr Bragg said.

AM said that Summit Garage in Dudley near Coventry was one of the best-selling dealers for MG in the UK but the family owners came to the conclusion they could not afford to sell new cars because the costs were not sustainable.

The company wrote to customers citing the rapid exponential growth of MG as the principal issue. The problem essentially was low margins on large numbers of cars with high holding costs, but there was also concern that the high volumes were straining the service department and this was affecting Summit’s reputation for customer service.

“While our partnership with MG has been positive, we believe that refocusing our efforts will better serve the needs and expectations of our customers,” it said.

The family-owned business, which is 80 years old, told customers that after careful consideration it would cease as a MG Motor UK new car sales franchise. 

AM said that Summit Garage will now concentrate on selling approved used cars and providing aftersales services, including official MG warranty, servicing and repairs.

The third-generation business said that the strategic shift aligned with its core values of integrity, reliability and customer satisfaction. This was reflected in the number of annual awards it had received from MG Motors UK as aftersales dealer of the year.

Co-owner and sales director John Newey told AM: “The motor trade in general is facing some difficult times at the moment with the decline in the number of customers actually purchasing. 

“I know that MG has in their own words been growing exponentially but the reality is, this year, there is more pressure with less and less retail business.”

He said that because much of the retail business was being driven by Motability (transport for people with disabilities) and fleet sales, the resulting lower margins prompted the business to take a strategic look at the sustainability of new car retailing.

“There have been quite a lot of things that have brought this to head, but from our point of view as a business we felt that because MG has grown so massively, there has been a lot of pressure on our workshops to be able to deliver the service in time.“We felt that being independent would be a better opportunity for us.”

Funding new car stock was also a challenge. 

“Over the past few months, what has been evident is that we had quite a lot of extra finance offered to us through Santander which provides the MG stock financing facility.

“Last November, we had a lot of new MG stock arriving but at the start of this year the market was just a little bit more depressed so we had to pay quite large interest amounts on this facility. It was just not sustainable.”

“We looked at that, and also the pressures on our workshops and our service area and we believe we can give a better service to our customers by being independent.”

Mr Newey said that Summit is planning to source used cars from brands that it has not previously carried such as Audi, Lexus and Mercedes as well as modern day classics similar to MG.

By John Mellor

AdTorque Edge