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.
In the first in our series of extracts, the panel share details about what they learnt from 2020 that has changed them for the better…
Adapting to change
David Kendrick, UHY’s head of automotive, opened the discussion by highlighting the resilience of the automotive sector, emphasising that despite the unprecedented operating environment “the majority of dealers had a very good year, in spite of everything going on.”
Both David and Mike Allen, Head of Research at Zeus Capital, commented on the impressive speed owner managers adapted to change. Mike said “when the lockdown first hit, I think the first thing I learnt was how well most operators can cope in an unforeseen crisis. Nobody had a manual for this, and in many cases, it took decades to develop successful businesses, yet days to close down the businesses for an unknown period of time. Despite the inevitable distress this caused business owners, the industry came together to share best practice and cash management appeared to be well executed across the board, albeit aided with strong Government support.” David agrees, adding “it is amazing that, when faced with a pandemic no one had ever experienced before, people just adjust. Those that embraced the change quickly will have been the winners.”
Swansway Group Director, Peter Smyth, explained that Swansway were able to respond quickly thanks to daily Zoom meetings between the senior directors. During these meetings, directors review real time data, with updates on financials, stock, the age of cars and an overview of the previous day’s business. Peter shared that “this meeting takes place every morning at 9.30am. We have found it extremely beneficial as we always know exactly how the business is performing and we will continue to hold these daily meetings following the pandemic.”
Peter Waddell, CEO of Big Motoring World, added that in the last 12 months he has learnt a lot about his company and his staff, including the things that he needs to change. He said “during the first lockdown we had a three month period when we could take a step back and reflect on the business, and there will be a lot of things I will change as a result. How we can help staff more and how we can help customers more; ultimately how we can change the company for the better. It is all about the detail. As a very aggressive company, we had been so busy so we used this time to take a step back and reflect on what works and what needs changing.”
Cutting unnecessary costs
On the subject of staff, Peter Smyth added that Swansway have reduced their headcount by 8% in the last 12 months. Peter said “the reduction in headcount has resulted in a saving of roughly £3m. Our team is smaller but we are still selling just as many cars.” David Kendrick agreed that “cutting out unnecessary costs that have crept back in, streamlining businesses and aligning the cost base to ensure it is fit for purpose has been essential”. Smyth went on to say that the pandemic also made it easier to dispose of any loss making franchises, revealing “it is painful at the time, but these loss making franchises have now been replaced with profit making businesses.”
Pent up demand
From a market perspective, as the first lockdown eased in summer 2020, pent up demand was very strong. Used cars were flying off dealer forecourts with some dealerships reporting a sales ratio of used to new cars as high as 15-1. UHY automotive partner, Paul Daly, commented “2020 probably confirmed what we already knew, but for many dealers it is a lot easier to make a good return when there isn’t too much new vehicle supply.”
However, the demand for used cars was so high, dealers were struggling to get hold of used car stock at auction, resulting in prices soaring. Big Motoring World boss Peter Waddell, who launched his online used car dealership Carzam in 2020 with a stock of 4,000 cars, said “not buying as many cars at auction has changed us for the better. We have found a lot of our cars cheaper elsewhere”. The Carzam website went live in December 2020, offering thousands of used cars for sale available for same day collection or next day delivery, aiming to ‘accelerate and lead’ the digital transformation of the industry. But despite the huge amount of planning and investment into Carzam’s launch, Waddell feels there is always more to be learnt in the digital arena, stressing that 2020 highlighted gaps in their SEO strategy. He revealed that “SEO will be a crucial part of our digital marketing strategy moving forward.”
Lessons learnt
Sharing final thoughts about lessons learnt during 2020, Mike Allen said “my final lesson was understanding monthly trends in a lot more detail. We were following consumer demand closely, OEM supply patterns ahead of Brexit, balance sheet and cash management as well as varying levels of Government support during the year.”
Ultimately, the panel were in agreement that, whilst 2020 was a year no one would want to play out again, the Covid-19 pandemic has given industry leaders a chance to take a step back and revisit the fundamentals of their businesses. Paul Daly concluded “our discussions with a number of owner managers, many of whom have had to go ‘back to the floor’ during the coronavirus crisis due to furloughed staff, have indicated that they are surprised at how some of the basic processes they thought were still in place had fallen by the wayside. 2020 allowed owners the time to correct this and ensure that managers are fully held to account in ensuring that processes are properly followed day in day out, with a view to managing costs, improving operational efficiency and optimising profit.”
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 predictions for the year ahead, the rise of digital, evolution of the high street and much more.
Interview took place in March 2021.
