I HAVE READ with interest about profitability of UK dealers in the wake of the United Auto Group's recent entry into the UK.
I believe our company has an almost unique perspective. We have run a mid-size group of dealerships in the UK since 1975 and a group of dealerships in Chicago since 1981.
On almost every measure, running a dealership in the UK is far less profitable, less enjoyable and less desirable than running one in the USA. I make this unequivocal statement despite the fact that our operations in the USA themselves are in a relatively over-dealered area.
One writer recently referred to the difficulties we face in the UK because vehicles are being sold on the Continent at much cheaper prices and are easily imported into the UK. The writer is correct, but that is only one of many factors that undermine the worth of owning dealerships in the UK as opposed to the USA.
I list below some other factors, but for the sake of brevity, certainly not all:
1. Except for luxury franchises, new-car margins are a pittance compared with the USA.
2. Chances for finance revenue and service-contract/warranty profit has gradually eroded and is far less than in the USA.
3. Vehicle production has been, for political and social reasons, sustained at levels that outstrip demand for many years. That puts downward pressures on margins and used-car values. The person at the end of the supply chain, the dealer, suffers the most.
4. No national legislation specifically protects dealers, as is the case in virtually every US state. Manufacturers, therefore, can pass their inefficiencies and costs on to dealers. For example, a dealer or group of dealers taking a manufacturer to court to get reasonable margins on warranty parts would be inconceivable in the UK.
5. Although it varies by region, costs in the UK are much higher than in similar areas in the USA.
You might ask why, having said all the above, do we still own dealerships in London. It is a question we have often asked ourselves. In short, the answer is because we can afford to.