More repairs and parts businesses are closing down too
Since the first Ford Model T rolled off the production line in Detroit in 1908, car and motor vehicle sales have been an integral part of the economy for virtually every country in the world.
There have been an incredible amount of changes in the intervening 115 years but people still need vehicles so the new and used car sales markets are fundamentally well established.
There is almost a greater need for new parts, accessories and repairs and for the braver customers, motorcycles come under the umbrella of motor vehicle sales too.
So what does the picture of motor vehicle industry insolvencies look like over the past five years?
|Motor Vehicle Sales
Insolvencies reduced sharply across most of the categories (repairs excluded) in 2020 but all have increased in the intervening time with repairs and motor vehicle sales seeing the most, taking 44% and 39% of the total respectively.
Parts and accessories suppliers were 13% of all associated motor vehicle insolvencies since 2019 with motorcycles being the final 4%.
In the first post-Covid year of 2022, motor vehicle dealer insolvencies rose by 73%; repairers insolvencies rose by 43% and parts by 31%. All are on a trajectory to see more insolvencies in 2023 than in 2022 with the exception of motorcycles but there are fewer of these dealers than other motor vehicles to begin with.
What are the main causes of motor vehicle industry insolvencies?
Apart from the effects of the pandemic and subsequent lockdowns which saw near universal collapses in customers across many industries and sectors, there are some specific factors that affect the car, van and motorcycle sales industries and supporting businesses.
- Rise of online car sales
The image of the pushy and quick-talking car salesperson is a common stereotype but many customers don’t like browsing for vehicles in person for a new or used car for good reasons. The atmosphere can be quite pressured, especially near the end of the month/quarter or sales period and it can be intimidating to spend a large amount of money based on relatively quick interaction with a vendor and a test drive.
More and more customers, familiar with the internet for buying many other products, are now comfortable with purchasing their car from an online site which is cutting into the sales of traditional physical car dealerships.
- Cost of physical dealerships
In a cost conscious industry such as motor vehicle sales, dealers and manufacturers are aware that the cost of rent, wages, energy prices and insurance have all risen by varying amounts since 2020 and this is making it even more difficult for some dealerships to stay profitable.
- Shortage of new vehicles
A global semiconductor chip shortage in 2022 made it difficult for car manufacturers across the globe to produce new cars to meet what demand there was which impacted on these sales, which provide a greater profit margin for manufacturers. The backlog has eased somewhat but the episode illustrates the inherent vulnerabilities in global supply chains, especially for specialised parts.
- Shift to electric vehicles
Electric vehicles are becoming increasingly popular so only newer dealerships and businesses are totally equipped both to sell and service this class of vehicle.
- Mergers and acquisitions
The motor vehicle sales and support sector is like any other in some respects so some fall due to consolidation such as merging with a competitor or being acquired. Others including some independents find they are no longer able to compete in the current market and close like any other business would in the circumstances.
Looking at the current state of the vehicle sales market it is firmly recovering from historic lows in 2022.
1.61 million new cars were registered in the year which was down 700,000 on pre-Covid levels and down 2% on 2021.
It’s a similar story with used cars. In 2020 the market fell 15% annually with 6.7 million cars sold. It recovered in 2021 adding 11% to the total although it was still 5.5% below the pre-pandemic five-year average for the industry.
The Society of Motor Manufacturers and Traders (SMMT) expects to see improved growth in 2023 with electric cars leading the way but this is dependent on several factors including more investment in nationwide charging infrastructure.
They estimate an annual 11.1% growth in new car sales in 2023 or 1.79 million units.
Every driver knows that timing is critical and it’s the same if you’re the director or owner of a car dealership or any other motor vehicle industry related business.
If your company is financially misfiring and you need an expert to look under the bonnet then you should get in touch with us today!
We offer a free initial consultation with one of our team of advisors to go over the issues your business is facing and what the potential solutions could be.
Whether you want some breathing space to restructure the business and get it back on its feet or you’re ready to close the doors for the last time and move onto your next venture through a liquidation process – we’ll let you know what options you have.
But only if you take the first step and arrange a chat first.