Johannesburg - South African has about 100 motor dealers fewer than a year ago. This is the estimate of McCarthy chief executive Brand Pretorius.
The picture could have been much worse.
"If dealers had room to manoeuvre and could extricate themselves more easily from expensive facilities (contracts for franchise buildings), many more would have shut their doors by this time," says Pretorius.
Most businesses are under incredibly high pressure as a result of, inter alia, reduced sales of new cars and a weak market for second-hand vehicles, elevated stock levels and the burden of fixed costs.
Pretorius says in good times McCarthy dealers managed their businesses at average gross profit levels of 17%. The average level is now 10.5%, and only 8% for entry-level models.
He reckons a dealer can survive one or two months in the red. But by the third negative month the bank is on the phone and shareholders become worried. By the fourth and fifth months the dealer has no capital with which to run his business.
Speakers at the conference generally forecast that 2009 will be even more challenging.
Paul de Vantier, managing director of KA Smart Management Consultants, and marketing director of RGT-Smart, points out that there are too many competitors in the market with more than 48 vehicle brands. "We are getting back to the volumes sold in 2003/04 - with twice the number of players."
Most dealers sit with average 60-day stock levels - usually of models that people don't want.
Pretorius says the high used-car stock levels result in depreciation levels nearing those of European countries. Vehicles at McCarthy are being marked down by about 3% each month to ensure that the prices of the vehicle at the end of the demonstration period are still market-related.
- Sake24
