£1.3bn aftersales shortfall predicted for franchised dealers

Published:  02 February, 2022

A £1.3 billion shortfall in aftersales revenue for franchised dealers is being predicted over the next four years, resulting from lower new car sales and the rise of EVs, and a knock-on effect for the independent sector is also expected.

The figures are the result of research conducted by REALtime Communications Data Science Team at its REALinsights business.

With 1,6310,64 new car registrations in 2020 and 1,647,181 in 2021 according to figures from the SMMT, when compared to pre-pandemic new car sales, there is already shortfall of 1.3 million fewer new cars in the network.

REALtime Communications projected that by the end of 2022 there will be approximately 1.8 million fewer one-to three-year-old vehicles in circulation. Add to that the impact of more EVs, which require less frequent servicing, and aftersales will come under increasing pressure.

Commenting on the results of the study, REALtime Communications Insights and Data Director John Law said: “We are now at a crossroads where higher volume service revenue from the scheduled third major servicing of new cars sold in 2019 starts to wash through (at the higher pre-pandemic sales volumes). After that, the traditional scale of activity will be impacted by the significantly reduced scale of new vehicles and the subsequent fall in the first and second servicing of cars sold during 2020 and 2021.

“The numbers evidence very clearly a significant shrinkage in aftersales revenues for the next few years. All the result of 1.8 million vehicles between one and three years old having been lost to the franchise network.”

According to John, the impact of a loss of £1.3 billion in revenue could be even more significant: “The number excludes additional upsell opportunities, the chance to place customers back in a new car, the acquisition cost of re-acquire customers that may have gone elsewhere to purchase their used car, the inevitable impact on aftersales of a growing electric vehicle parc and the unknown impact of any switch to agency retailing models.

According to Richard Robinson, COO at REALtime Communications, The situation is likely to get worse unless something is done: “While I’m delighted by the positive impact created by used vehicle sales, retailers should not ignore the pressure on aftersales and its traditional role in supporting overhead absorption. Retailers must look for new ways to increase efficiency and productivity and evolve their operating models to retain and enhance lifetime value customers. This is true for both new and used car sales, notably those recent conquest sales and the all-important service work available to them.”

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