Following on from our 12 month overview of motor dealership performance for 2023, we are delighted to launch our new Motor Dealerships Cross Market Report for the April.
Supported by Snap-on Business Solutions (SBS), we will be publishing monthly comprehensive KPIs that will allow you to benchmark your dealership performance against over 80% of brands available in the UK industry (applies to cars only).
A selection of the key performance indicators are set out in the table at the end of this article, and below you’ll find a summary of some of the key elements that stood out to us from 1st January 2024 to 30th April 2024.
Sales
Following on from the theme in 2023, the KPIs for April and the year-to-date shows that the cost of selling vehicles, in proportion to the margin achieved, is still too high. Used vehicle gross profit has stabilised at £1,437 p/u but used vehicle return on investment of 78%, in conjunction with a stock turn of 6.3, shows there is some improvement available as continued cost pressure through wages and customer incentives is suppressing departmental profitability.
Service
Service department expenses for year to date at 70% of GP are running significantly higher than have been seen for several years. This is in part driven by inflationary wage pressure aligned to a continued shortage of skilled technicians. Overall efficiency at 81% means that the workshops are not managing the resource effectively, resulting in too many lost income generating hours.
Parts
Parts departments continue to track in line with the benchmarks delivering a net margin of 11.5%, falling slightly on the year to date result of 12.9%. Continued cost pressure is beginning to be reflected in the result.
Expenses
We continue to see this as a focus area for dealerships. The rapid revenue growth seen in the last few years, being driven by market forces such as the pandemic, lack of product supply and pent up customer demand, has created an expense base which appears to be running unchecked. With the reduction in revenues currently being experienced, again driven by market dynamics, this is becoming more of an issue to dealerships. There is likely a need for dealers to return to a value-based analysis on all expenditure, asking what will the return on this cost be? This will help protect against further market realignment.
Year to April 2024 Overview
There is cause for optimism with the Return on Sales percentage (ROS%) for the 4 months to 30 April showing levels at 1.24%, being up on that from the previous 12 months to December 2023 (0.99%). It’s still early in the year, but perhaps this continues to show some stability and return to dealer profitability(?)
However, we may have now moved into an oversupply position of vehicles once again, with brands choosing to offer incentives for registrations, and with a number of new entrants entering the market at the same time as cost of living pressures and election uncertainty, there’s a risk that the market could be out of equilibrium for some time. This will put further pressure on margins and mean the focus on cost control is more important than over recent years.
While costs continue to be the focus, they are also the area that can provide the most potential for improvement to dealerships across the country.
April 2024 and Year to Date KPIs
We have set out below some of the KPIs we believe are of most interest to dealerships. If you would like additional information and/or there are other KPIs you would like to see, please do not hesitate to reach out to us.
Each month we will continue to keep you updated on market conditions, and in particular any fall-out from the election as it begins to impact the motor industry – hopefully for the better.
MONTH TO DATE
KEY PERFORMANCE INDICATOR
BENCHMARK
YEAR TO DATE
APR-24
MAR-24
Feb-24
ROS % - Summary
3%
1.24
0.06
3.68
-0.24
Parts Department Profit % - Summary
15%
12.87
11.48
16.11
12.27
Absorption % - Summary
80%
53.43
45.70
67.57
53.27
Total UV GP (includ. Other income) PU Sold
1500
1436.70
1404.11
1555.34
1412.49
Gross Profit % - Total - Workshop
75%
71.44
70.81
72.02
71.41
Overall Efficiency - Workshop
100%
80.79
80.65
86.05
80.77
Parts Total GP %
22%
20.62
19.87
23.76
19.96
Used Retail : New Retail Ratio
1.5
3.38
4.05
1.78
7.20
New Vehicle Departmental Expenses % Gross Profit
50%
65.74
93.65
35.48
182.99
Used Vehicle Stock turn
8
6.38
6.28
6.08
6.69
Parts Stock turn
8
9.01
9.20
13.18
12.60
Service Retail Hours per retail job card
2.5
1.48
1.50
1.43
1.45
Used Vehicle Department Expenses % Gross Profit
50%
54.65
55.93
51.65
55.04
Service Department Expenses % Gross Profit
40%
70.25
74.59
67.40
69.51
Parts Department Expenses % Gross Profit
40%
37.74
42.34
32.28
38.73
Return on Used Stock Investment
100
78.41
78.38
77.58
75.98
If you’d like to discuss any of the findings of this latest report, please contact Steve Preston.
