Motor dealers remain tenacious in tough trading conditions

The management of South Africa’s motor dealerships generally remain tenacious and resourceful in tough economic times and this year they continue in this vein, according to John Templeton, the Marketing Head Operations at Sewells-MSXI South Africa.

Brian Joss – Sewells-MSXI is a leading global consulting and outsourcing company which specialises in the automotive industry and has been active in South Africa since the early 1980’s.

“Although gross profit (GP) as a percentage of sales is falling on a year-to-date basis in 2017 (to the end of August) in terms of passenger cars, luxury vehicles and trucks, the key indicator of dealer health, return on operational assets (ROA), remains amazingly steady, which is a tribute to good management,” explained Templeton.

John Templeton, Marketing Head Operations, Sewells-MSXI

Sewells-MSXI obtains its monthly data by detailed analysis of the monthly financials of a large proportion of the franchised retail dealers in South Africa, which enables it to track these dealers’ financial and operational performances. Sewells-MSXI then uses this information to assist the dealers to improve underperforming areas in their operations.

Passenger cars and heavy commercial vehicles are faring far better than luxury vehicles in terms of retained income (profit before tax as a percentage of total gross profit), while in terms of activity (annualised sales divided by operational assets), passenger cars are steady, trucks are up significantly, and luxury vehicle activity has slumped since the beginning of the year.

Aftermarket absorption, which is the outcome of resourceful management of the service and parts departments, is proving the saviour, with trucks doing particularly well while both passenger cars and luxury vehicle are above the linear average.

Productivity which is derived from dividing the dealership’s total gross profit by the total number of employees, remains steady for cars and luxury vehicles, but for trucks it has fallen significantly in the first eight months of 2017.

The strong demand for used vehicles, which his measured by the number of vehicles retailed per salesperson is mirrored in the upward trends for trucks and passenger cars, while it remains steady for luxury vehicles. New car sales per salesperson are on an upward curve, but the trend is downward for trucks and luxury vehicles.

“We continue to find that motor dealers in South Africa are able to manage their businesses efficiently and profitably in changing economic environments, which is a tribute to the high calibre of management and the quality of training in the major groups and companies,” concluded Templeton.

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