Car dealers still finding market conditions tough

Business failures amongst motor traders fell by 18.8 per cent during quarter three compared the same period in 2006, according to the latest insolvency figures from Experian, the global information solutions company.

The motor trade sector saw the eighth highest fall in business failures, going from 69 motor traders failing in 2006 to 56 in 2007. So far this year, the number of businesses going bust in the sector has dropped by 27.2 per cent – the fourth biggest improvement compared to other sectors.

These figures are part of a review of 34 industries in which Experian found that the overall number of business failures across all sectors in the UK fell by 0.4 per cent.

Kirk Fletcher, Managing Director of Experian’s Automotive division said: “Although business failures among dealers have dropped, the reality is that dealers are still finding the market conditions tough.

“What needs to be taken into account is the size of the motor traders that this quarter’s figures actually include. Take for example the recent demise of Dixon Motors, which was one of the biggest dealer groups in the UK. It is one of the biggest casualties the industry has seen for a while and is a barometer of where the industry currently is. With dealers this size going bust, the downturn in business failures does not necessarily paint a rosy picture for the industry.

“Furthermore, it is possible that many of the smaller dealers seeking to leave these difficult trading conditions have instead merged with bigger dealers, which may also be contributing to the downturn in the insolvency numbers.

“There is an oversupply of younger cars on the market and with interest rates affecting consumer buying habits, car prices have been falling, putting dealers under more pressure. It is inevitable that focus on competitive market pricing will increase and, as a result, operating profitably has become more complicated than ever before.

“Reducing unnecessary costs and catching the right customers are the right time through effective marketing techniques becomes key not only to remaining in business but also to remaining profitable.”