You don’t need a crystal ball to anticipate some of the pressures that will face UK dealers in 2025 – a challenging economic backdrop, continuing upwards cost pressures, particularly on staff costs, electrification with the ZEV Mandate targets being ratcheted up another notch, and manufacturers continuing to try to find ways to get cost out of distribution – whether through agency or adjustments to franchise contracts.
We will still face shortages of used cars in the three to four year-old segment due to the pandemic-related new car slump in 2021-22, and aftersales will become an even tougher battleground as the franchised and independent sectors both fight to retain their current customer base and win new price-sensitive customers.
I believe that in addition to this, we will continue to see regulatory actions that squeeze the opportunities for that so-important F&I revenue and reduce the offers available to customers that make cars affordable.
But in parallel to these revenue and cost pressures, there are strategic issues that somehow need to be addressed at the same time that dealers are defending what they already have. More owner-operators will decide that they no longer have the energy for the fight so more businesses will come on the market at possibly more attractive valuations than would have been the case a year ago.
Continuing to invest in digital will also remain critical for those who do not want to slip behind. This is not just enhancing online offers and customer apps, but also the tools to analyse and derive value from data, and staff who can work with those outputs to drive better decision-making across the business.
It will certainly not be an easy year for anyone – but as ever, there will be some who find opportunities, where others only see the problems.
Steve Young is managing director of ICDP