In our 2021 Automotive Sector outlook we asked a panel of automotive experts for their views on how the landscape is likely to look for the sector through the rest of 2021 and beyond. Commenting on the market were UHY automotive experts, David Kendrick and Paul Daly, Swansway Group Director, Peter Smyth, Big Motoring World CEO, Peter Waddell, and Head of Research at Zeus Capital, Mike Allen.
Over the coming weeks we will be publishing extracts from the interview. To read the interview in full, download our 2021 Automotive Outlook and read our panel debate on page 22.
The evolution of the high street
Both Peter Smyth and Peter Waddell think the high street will evolve but do not foresee the death of the high street. Smyth comments “There is a reluctance to use public transport so people will still want to visit their local high street. I think we will see the exit of the big department stores and these will be replaced by smaller owner operated businesses that sell specialised products. I expect the high street to become a mixture of boutique style and residential.”
Paul Daly thinks the evolution will be more fundamental and suggests that high streets are increasingly going to be more about experience than the practicalities of shopping. He said “I think the high street will become more of a shop window for products that people may then choose to purchase online. I can see car showrooms being a potential good fit into this new environment.”
David Kendrick points out that car retailing is very different to other retail as there are the aftercare and servicing elements. He says “there will be a change to car retailing, but it will not be as severe as perhaps the high street has been hit. There are also winners and losers, some high street operators remain profitable with a strong online presence also.”
All are in agreement that people will still want to visit car dealerships. Peter Waddell sums it up by saying “I’ve been in this industry for 37 years and the actual structure of how people buy a car has not changed in those 37 years. People still want to see the product, touch it, haggle etc. They still want to come to a dealership.”
The business rate burden
We went on to ask our panel if they felt the burden of business rates on traditional retail businesses was a fair one.
Paul Daly feels strongly that the burden of business rates on traditional retail businesses is unfair. He explains “I think that rates typically represent 50% of rent cost. This is outrageous and a real cost drag on physical retail businesses compared to online. I think the Government has to respond to this and ensure the online businesses pay their fair share, with VAT being the obvious area to target to allow a more level playing field.”
Mike Allen agrees that this is an area that needs to be reviewed, adding “motor retailers operate from large premises and are low operating margin businesses operating off high fixed cost bases. The industry is critical to the wider automotive supply chain in the UK, which needs to be supported in a post-Brexit world. I think this needs to be reviewed by the Government and OEMs alike.”
Interestingly, the two motor dealers on the panel, Peter Waddell and Peter Smyth, do not think there will be any changes to business rates. Both agree that the Government has to generate the income somewhere, so they can not see there being any change to business rates on traditional businesses. When quizzed on whether the rates are fair, Peter Smyth commented “I did think business rates were fair until the rise of the internet, but now with so many online businesses it does not seem fair. If there was an online tax to be paid it would be fairer, however, as our business model is moving more online, we don’t really want that now!” Peter Waddell points out that even his online business still has to have a warehouse to store the cars and therefore has to pay rates on that.
Want to read the rest of the interview?
Download our 2021 Automotive Outlook and turn to page 22 to read the rest of the interview where our panel discuss whether the difficulties of 2020 changed the sector for the better, share their thoughts on the rise of digital and impact of Brexit, and much more.
Interview took place in March 2021.