MT checks out the state of play at the Nissan franchise as dealers prepare for sales of the all new Qashqai
What a year to take up the new job. Andrew Humberstone was appointed as managing director of Nissan Motor GB in January 2020. By the time he had got his feet under the desk in Nissan HQ in Maples Cross, West London, the pandemic had struck and he, like everyone else, was looking at a market under siege with showrooms shut for business.
In fact, Nissan Motors GB did quite well when it came to dealing with the pandemic although satisfaction levels did tail off in the second half according to the most recent NFDA survey. Dealers gave the brand a above average rating in the measures it introduced to keep dealers in business.
The UK is Nissan’s biggest market. In 2019, pre pandemic, Nissan sold 92,372 cars in the UK, giving it a market share of 4.4%. In the year to May 2021, its car share stood at 4.3% and van share at 4.1%. Humberstone oversees a network of 166 dealers in the network with 67 partners. Like so many brands, the aim is to have more volume pumping through a network of fewer, bigger dealer.
“We have a very clear, ideal network plan in place. What we are moving to is fewer, bigger, better. It is about efficiencies and understanding where the retail model is going. It is about understanding what the challenges are. Where do we see this in 20, years, 15 years, five years? COVID has been an accelerant for online development and investment in terms of the quality of leads we generate online and how we support our network with that.”
In the NFDA survey the Nissan network is currently performing above average when it comes to current profitability, in joint sixth place. For future profitability it is also in sixth place. And the network gets an above average score when it comes to the overall rating for the franchise. For Humberstone profitability is tied closely to customer satisfaction performance.
“The key thing is to deliver the right customer seamless experience and to have the right partners in place to do that. And then if you move slightly upstream, it is about the profitability of the dealer network. We are currently sitting on 1.4%. We are higher than the national average.”
Much has been said of consolidation in the sector, which has been going on for decades. So, where will the Nissan network be in three years’ time, for example?
“I think in all honesty it is dangerous to give a number on that. While we have a very clear plan, we all know there are so many disruptors knocking on the automotive industry at the moment. There is so much turmoil in terms of digital technology and new entrants disrupting the way we do business. How quickly consumers change their buying behaviours will influence the speed at which we work with our dealer network to modify their scale.”
If disruptors are changing the way dealers do business, then the industry has created its own home cooked disruption with the shortage of semi-conductors. Last year, when the pandemic hit, car production was cut back. It bounced back quicker than expected and we are now seeing this in supply shortages of semi-conductors. The motor industry has less clout in this supply chain as it accounts for just 15% of the market. So, how is this impacting Nissan dealers in the UK and what is the forecast?
“It has affected all car manufacturers. It is a global, industrial problem. We haven’t really seen that much of an impact as we stand but of course it is work in progress and everybody is driving towards finding a solution. Fortunately, we have been able to navigate those waters quite successfully,” said Humberstone.
I ask Humberstone can he tie it down. Is it possible to quantify the impact on supply to Nissan dealers in the second half?
“To be honest, we do not know because it is moving sands. It has been a very limited impact so far and I think moving forward, everybody is in discussion with the supply chain, up and down, all of the stakeholders are negotiating on that. There was a challenge with one of the semiconductor plants in Japan. We are hoping to get some clarity on that as soon as possible.”
On the used car front, Nissan dealers are facing the same issues that other networks are facing. Fewer new car sales translate into shortages in the used market with prices on the rise. This looks set to continue. But Nissan does have a ready supply of used cars from employees at the Sunderland plant.
“We have seen significant improvement in residuals, largely driven by supply and demand, which we predicted. With the factory we have a wonderful supply of used cars which we ship directly to our network, supporting dealer profitability.”
For Humberstone, the model is working for dealers, and he does not want to tinker with it.
“Overall, it is not something I would like to tamper with because it really is so profitable for our network at the moment. I understand where the disruptors are coming from, but we have a significant pipeline of used cars coming to us, we manage it very efficiently and it is a significant profit centre for the dealer network.
“I know some manufacturers are looking at bringing it in house, but we recognise it as a very important revenue generator for our network. Our focus is on making sure our dealers are profitable because we want to focus on value and customer satisfaction. The more profitable dealers are the more inclined that are to invest in training,” he said.
I ask Humberstone what plans, if any, Nissan has for an agency model in the foreseeable future? Currently, under the franchise system, dealers buy the cars from carmakers and sell at a recommended Retail Price, which is often discounted. Under an agency scheme, the stock remains with the carmaker and the prices are set in stone. There is no discounting,
“For me, the agency model is an interesting one. It is not at the forefront of our strategy today, but it is absolutely on our radar. A lot of the industry is looking at that. What is driving it is the total cost of distribution.
“At the end of the day, we have to put the customer first. Would we adapt to an agency model? If it works for our customers. If it works for our dealers, absolutely we would consider it. We would rather be driven by our customers and dealer network than the other way around.”
One issue the NFDA survey did throw up is increasing concern among Nissan dealers over volume targets. The survey was carried out in January 2021 so it looked back at a year hammered by the pandemic. Overall, when it came to targets the market saw a slight improvement while the Nissan network declined, although it was still above average.
“That is an expected result given the uncertainty around production and semi-conductors, this is a national concern. Dealers have done exceptionally well, profitability is above 1.4% which is above the national average but of course any commercially astute dealer is going to ask how this affects me, is it going to affect my targets.
“We have been incredibly supportive of the network during the COVID period, we withdrew targets at certain stages, delayed payments that were due, supported them in terms of their stock management and in the event of any sort of crisis we should step in and support the network. That is part of our role and part of our remit. But in terms of their concerns around targets, they are based on what our business was what we think our product capabilities are we are still looking for a market share. We want to focus on value over volume We think the targets are very reasonable. I think the concern reflected in that report are simply driven by concerns over production.”
And finally, we get to Qashqai, which has been such a success for Nissan dealers over 14 years. The Juke is also a strong crossover and the Leaf the biggest selling electric car.
“We’re very optimistic. We invented the [crossover] space and have been the leaders since its inception in 2007. With a seven-year-old vehicle we are still the number one in the segment, and we are introducing a significantly improved vehicle. We fully expect to maintain that lead position.
“We have been tracking that circa 10% segment share although I appreciate that over 20 competitors have moved into that space, I fully respect that but certainly I expect to maintain a leading position in the segment
“But our focus is really shifting away from volume to value We have great residual value with the new Qashqai, and we are going to monitor the channels we sell it in and making sure we are very careful in protecting those residual values and cost of ownership for our customers. I am not going to be chasing market share for the sake of it. 50% of the target market ae going to be conquest sales, and we are very optimistic about its future.”