Vehicle dealerships are not dead, but alive and well, says Osman Arbee, the CEO of JSE-listed automotive group, Motus.
But Arbee says the way dealerships make money now is not how they made money 20 years ago.
“You get the economies of scale, you use one plot with seven dealerships, and you've got workshop and parts economies, people economies, parking lot and security economies, everything,” says Arbee, who was speaking at the grand opening of Motus’s new Menlyn Megadealership in Pretoria on Friday.
“Some of you are wondering, are these guys mad for putting a R150 million dealership on this property here? It’s R150m for seven dealerships, not for one. That is what makes properties like these valuable.
“And yet 18 years ago for Cargo Motors, we invested R100 million for one dealership,” he says.
Arbee admitted people did their homework on their vehicle purchases on websites via their computers but “at the end of the day want to touch, feel and see the car” and that is why they visit dealerships.
“That is the reason for people like us investing in dealerships like this. We have to change with changing times and circumstances and make it more attractive for people and get economies of scale,” he says.
The Motus Menlyn Multi-Franchise dealership will include individual retail locations for Nissan, Renault, Hyundai and Kia as well as Motus Select and Auto Pedigree on one site.
Corné Venter, CEO of Motus Retail and Rental South Africa, says a new brand to South Africa that has been secured by Motus will be the seventh brand represented at the dealership.
The dealership covers 19 300 m2, it has space for more than 220 vehicles and will employ 130 people.
It is anticipated that once global stock levels normalise, the dealership will retail 180 new and 80 used vehicles a month from the facility across all brands.
Although the dealership houses six different brands, the building was designed and built to a fairly uniform design and could easily house a variety of brands as and when market needs change.
The facility incorporates several features, which will ensure that it uses minimal resources in terms of water and electricity.
An extensive solar installation provides the dealership with clean energy and while not completely off the grid, it has the capacity to meet 80% of the energy requirements.
A comprehensive rainwater collection and filtration system allows for 80% of the water utilised by facilities, such as the car wash, to be reused, which drastically reduces water consumption.
Motus now has about 250 vehicle dealerships in South Africa plus 63 Auto Pedigree used vehicle outlets compared to the about 48 dealerships owned by Barloworld Motors and about 80 by the McCarthy group.
Venter says this is the first multi-franchise dealership of this scale developed by Motus but it already has another about seven multi-franchise outlets, with another “about six to seven to come”.
He admitted the macroeconomic outlook in South Africa is not looking great, which means there will be some downward pressure on new vehicle sales.
But Venter says South Africa has a tax base of between 6-million to 7-million people, the average vehicle finance contract term is between 42 and 47 months and the industry is currently selling about 500 000 new vehicles per annum.
“There is no reason in that replacement cycle not to change those vehicles. The one constraint we do have currently, is stock supply.
“There is quite a bit of pressure coming out of source Europe. But we are finding it a little bit easier getting stock out of the East, particularly India.
“If you look at the brands that have had some market share success and some product availability, they are predominantly from that market.
“I think the consumer will be constrained from an economic perspective and you will see a buying down trend, but people still have to change their cars.
“Given the current new vehicle sales volumes, we see that generating significant sales in the short to medium term,” he says.
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