Dealers need to have “high confidence” of breakeven in year three with new Chinese entrants to the UK market or else they will look elsewhere.
That’s the view of And Goss, chairman of Vertu Motor Group and the author of a new report from automotive recruiter Ennis & Co.
“Retail sales to private consumers are the bedrock of market success, and this primary route to market is therefore the priority to implement. First and foremost, this means getting the dealer proposition right.
“It is a buyer’s market for dealer franchises, and new entrants need to have a compelling answer to the question: why partner with us?
“To achieve this, they need to understand the dealer’s business case and then ensure that their proposition delivers an attractive balance of risk and reward to the dealer.
Goss said: “Any new market entry needs to have done their homework well in terms of product plan and market opportunity, such that they can propose a credible franchise opportunity.
“The retailer needs to have high confidence of breakeven in Year 3, else they will look elsewhere.”
Goss also emphasised that new entrants need to understand the investment required to build their brand, and that the investment must be made primarily by the manufacturer and not the dealers.
Clarity must be delivered on dealer standards, especially around showroom expectations, to enable long term planning by dealer groups, and to build a partnership of trust.
According to Goss, a dealer’s new vehicle net margin is a key driver of dealership breakeven, as it is of the NSCs own breakeven, and any proposition must reflect the realities of customer discounting, finance deposit allowances and all the other tools regularly provided to dealers to close a sale.
He said this is especially true for start-up BEV franchises, with no aftersales business and initially very little used car business.
The entrant needs to have a “concrete product pipeline” delivering three or more products within 12 months of initial brand launch.
“Even given the speed of Chinese product development cycles, this means that the vehicles in the dealer’s business plan have already had prototypes at the Beijing Auto Show and are not just on a designer’s wish list.
