Automotive Blog

Keeping the lines rolling and the automotive juggernaut on the road

Used Car Supermarkets

An integral but often neglected part of keeping the automotive supply chain moving is the used car.  In some markets, the used car has developed into a fine art creating niches for larger independent players to exploit beyond the boundaries staked out by a growing number of new brand franchised dealers and dealer groups as well as local used car traders.

Some of these independent used car operators have been around for some time slowly growing in their importance to 'wash out' and cash replenishment in the franchised vehicle supply chain.

Keeping the lines going has seen a growth in non retail 'selling' of new cars through various channels whether it be so-called fleet and leasing, PCPs in addition to a growth in 'self registrations', demonstrators, courtesy cars all providing a ready market in 'nearly new' cars. On top of this there is the 'normal' used car market for older used cars, inflated by government and brand-sponsored scrappage schemes.

These different elements have provided a platform for large independent used car marketers to develop their businesses. Research is underway at ICDP to take another look at used car superstores which is planned for publication in the New Year.

This blog is intended to give a 'mise en bouche' to industry observers in this area. It seems to me that there are some different business models have emerged in this big time used car market sector.

  • Some used car superstores, such as Motorpoint in the UK and Cardoen in Belgium have specialised in nearly new vehicle sales through their own networks of superstores in their markets - accepting that the UK market is effectively discrete as a result of its right hand drive configuration and the one in Belgium is more porous across borders with export as well as domestic sale being a feature of Cardoen's business. Whilst the scale of these two businesses is very different, the basic principle is similar with zero mileage/nearly new cars sourced direct from brands and their networks and sold in volume at low prices with low margins. Motorpoint is likely to take its turnover to around €600m in the year ending March 2015 selling circa 50,000 used cars (watch this space for an update once their accounts are published) at an average unit sales value of €15,000. Motorpoint's gross margin is circa 5%. Cardoen is reported to have sold 9,000 units with a turnover of €95m.
  • Some other large used car traders specialise in older used cars with lower sales. In 2014 the UK, Car Giant sold over 50,000 used cars with a turnover similar to Motorpoint from a single site close to central London. Its average unit sales value is approximately €10500 with a gross margin of 11.5%. This older car sector is not without its risks, witness the failure of CarCraft in the UK which saw a dramatic decline in turnover in its final year and sold 17,500 units through its 11 sites. In central Europe, AAA Auto is a good  example of a trader in older used cars with its turnover in 2014 at €440m selling just under 65,000 used units at an average unit selling price of under €6000 through its network of 35 sites spread across the Czech Republic, Hungary, Slovakia and Russia. Its gross margins are healthy at almost 16% (though this includes F & I and other services sold, and the net vehicle gross margin being 8%. One of AAA's USPs is the sourcing of older used cars in the more mature markets of Western Europe (Benelux, France, Germany, Italy).  This type of trading no doubt relieves the pressure on the major used car markets and dealer freeing up cash for investment in further new and used car transactions whilst at the same time providing entry level vehicles in the developing used car markets in Central Europe. AAA claims to export 200 cars a month to Germany and Russian speaking markets.

As I said earlier, ICDP has been taking a close look at used car superstores in Europe and will be reporting on this in our webinar on 9th February 2016 - the agenda will be available soon.

Written by Peter Bailey

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