What The Last 18 Months Is Telling Me About UK Used Car Markets!,,,,

A time for a bit of reflection this week and a break from the strategic acquisitions and used car business development discussions; albeit important but probably not best shared during the weekend of the new registration plate in the UK. A time when many of my target audience will have their attention elsewhere.

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Business activities aside and from the commercial strategic alliances that I look to build with a select band of the best used car businesses in the country; those who know me and who read my articles will know that I am always buying in my target used car markets. Always looking for opportunities to disrupt target markets via acquisition and looking for the next used car market opportunity.

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This is important for many reasons; professional credibility, market intelligence from the coal face and due diligence, being just a few. There is also no better way to understand and therefore predict how target used car markets are evolving (and therefore how associated new car markets are performing), than investing in them with your own money, and from both ends of the equation; both acquisition and sales.

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The last 18 months has been a fascinating time in many of my target used car markets and for many reasons. New opportunities in used car markets are forming, others are closing (for good on the basis of disrupting without commercial partners) but all used car markets are evolving at a rate of knots and as a consequence some things are becoming very clear.

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The first is that there is tremendous opportunities (at the moment) in some used car markets for both businesses (in terms of profit margins) and for the customers, in terms of value. As an example the montage of pictures contained throughout this article is a selection of the cars I have purchased, owned and sold during the last 18 months; all apart from one are now with their new owners, one of which I bought, owned and sold twice in 12 months.

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Sadly though and despite returning net profits in excess of 25%, the cars throughout the article do not represent a long term business opportunity. There is just not enough of this profile of stock available, of the quality required to make the leap to then being the car that the target customer just has to purchase. On top of that prices are now rising and the cars that replaced many of the examples throughout the article are not sought after in the same way; not at the moment.

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As ever listening to those selling and purchasing these cars has also been interesting, in terms of both customer sentiment and market intelligence. Bar none (and I speak to a lot of customers), everyone shares my views about owning an EV; one of “They Will Never Take Me Alive.” Now this is my personal view and this is not an article to rehash the whole Zero Emissions Mandate again (over the next few years it will become apparent who was on the right side of the argument or not); only to take the market intel and use it for commercial benefit.

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Believe me though when I say that, if I thought there was money to be made from disrupting used EV markets via strategic acquisition, then I would be the first to get my cheque book out and jump in with both feet; the fact is I don’t. Not yet and not for quite a while either.

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There is a little doubt that there is an organic new and used car market for EV’s but the existential trading problems are mounting for the EV market, including but not limited to; what successive governments have done (in terms of the legislation), how this is manipulating (negatively) both new and used car markets in the UK, and a consumer that I think will never be on board in the numbers required.

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Ironically this interference in automotive markets by successive governments actually threatens the EV project itself, because it is resulting in the worst of all market contagions; chronic over supply matched with no/or a flawed (in the main but not all) used car retailing strategy, from either manufacturers and/or their franchise partners.

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Personally I think the “Tipping Point” has already been reached in both the used and new car markets and that failure is “Baked In” for many; so it will be interesting to watch how the government reacts (in terms of the legislation) when the job losses and business failures start mounting.

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However, the commercial effects of all this in the EV market, will cause such a challenging landscape to form, that opportunity may present itself at the bottom of the market for prices; something I still think is a long way off. That said I’m not sure that this opportunity should occupy the minds of myself and my generation of used car professionals; in terms of gambling the capital and dedicating the time required. In all likelihood this is an opportunity to be assessed by the next generation.

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It will though (IMHO) result in increased demand for non EV’s in used car markets and across all used car markets, in the here and now. Unfortunately though, due to both changes in the purchasing behaviour of many customers and lost new car production during the pandemic, the numbers no longer add up. So as a consequence (sadly) I think that we will see a rate of business failures approaching 25% across certain new and used car markets in the UK over the next 1 -3 years.

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However some used car markets will be better insulated from this Darwinian Culling Process than others; those with the right sociodemographic of customers and therefore with the potential margins required to attract the used car stock acquisition and used car business development talent they will need, in order to survive and prosper. Those not enjoying these commercial advantages will be left in a race to the bottom (one which has already started) on both prices and margins; and relying on tech to drive both acquisitions and sales opportunities to their doors. Not the recipe for financial wellbeing.

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So who do I think has the greatest opportunity at the moment, in terms of developing used car retailing, increasing volumes and margins? Without doubt it is those franchised businesses trading in premium, specialist, high-performance and/or “Big Ticket Price” new and used car markets. The likes of BMW, Audi, Land Rover, Volvo, Bentley etc.

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Only brands like these (and others not mentioned but similar and in competition with the former) will offer the margin increase potential to attract the professionals required; whilst also ensuring that the increased retailing profits required by the business concerned, can be achieved.

In all likelihood the business will be privately owned as well, and not owned by one of the PLC’s owning vast swathes of franchised dealer networks in the UK; why? Well direct access to, and the relationship with a committed and ambitious business owner, will be pivotal to success. Success will come from committing to change, being agile in thinking and fleet of foot, in terms of decision making.

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All the things it is impossible for professionals like myself to find in the “Overly Regulated” management environment and the stifling atmosphere that exists in businesses owned by the PLC’s. In these businesses (I know from experience) change takes too long and continual access to decision makers is impossible. For these reasons they will struggle to attract the most talented used car stock acquisition and business development professionals to their businesses.

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Most independent used car businesses will also struggle; mainly because they have no new car franchise business to leverage and none of the associated used car stock acquisition advantages. And I include the large used car supermarkets in this category; probably one of the toughest trading categories to operating under in the coming years, and one where I personally think there could be many business failures.

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So yes some businesses have a once in a generation opportunity to do things differently and increase profits from used car retailing during the next 1 – 3 years. However I caution with the help of a famous African proverb; “If you want to go far, go together.” No one person or one business can succeed on their own in the battle to secure access to profitable used car stock holdings; it will take the “Stars to Align” to ensure that those possessing the skills and expertise can come together with the businesses holding all of the commercial advantages.

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At the core of any success will be a business relationship of trust that exists between the owner of that business and the professional delivering the acquisition and business development expertise required. As the used car stock acquisition and business development professional will have to bring with them the expertise required to deliver on the brief, they will only look to align themselves with businesses where that will be possible. Their success will be your success.

To any business owner sensing the opportunity I would say this; I doubt anyone can do this on their own. It will take a premium franchise business, a dedicated team and access to the used car business development and used car stock acquisition expertise required. I can supply the latter; anyone in possession of the former and wanting to explore synergies and the potential to collaborate, can feel free to reach out and contact me directly.

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