Car dealers wave white flag on manufacturer standards

Increased manufacturer-imposed standards do not help dealers to sell more cars, the RMI National Franchised Dealers Association (NFDA) is warning.

In a recent survey, NFDA dealer members said that despite manufacturers raising their standards requirements, sales of new vehicles had not followed suit. 84 per cent said increased demands did not improve sales volumes.

A staggering 94 per cent of respondents said their manufacturer’s demands have increased over the last three years. These dealers have spent an average of £683,071 on implementing manufacturer standards since 2003 and 87 per cent of them feel that these demands are excessive.

Despite whole year sales forecasts for 2006 down by more than 4 per cent, 81 per cent of dealers surveyed told the NFDA that their manufacturer had not reduced investment requirements, while more than two thirds said their manufacturer had not even reviewed their standards.

‘In a market down 9.1 per cent in April and year-to-date sales down by 5.5 per cent, continuing to force dealers to increase their expenditure on these standards is simply not a sustainable business model,’ says Sue Robinson, director of the NFDA.

‘At a time when dealers have to fight for every sale in return for average profits of just 0.5 per cent, every penny counts. If these standards do not help to shift more stock, it is difficult to justify the "investment" dealers are required to make in implementing them.’

The survey shows that the majority of manufacturer-imposed expenditure is on branding and premises, such as signage, building and showroom refurbishment, and furniture, with relatively small sums required for items that would provide tangible improvements to the level and quality of service, such as diagnostic equipment, tools and training.

Robinson believes this money could be spent more appropriately.

‘While the NFDA understands the importance of branding, surely in the current economic climate such vast sums would be better applied to improving customer acquisition and retention,’ she says.

‘We are calling on manufacturers to remove the overbearing pressure of non-essential standards on dealers and let them get back to what they do best – sell and repair cars – instead of having to spend hard-won revenue on non-productive assets.’