Dealers are turning to value-added products and services to help improve their profitability but there is still plenty of room for improvement, says Seriti Solution’s Anri Carney.
According to Seriti, the average dealer profit per unit (APU) reached its highest level in 2020 in September, the last full month of reporting. Not only was the APU higher than in any previous month this year, but at R12 191 it was 11.42% higher than in September 2019.
Seriti reports that the APU was made up of Dealer Incentive Commission (DIC) at 59%, fees (15%) and value-added products (26%). Interestingly, the DIC per R1 000 was R30.64 on average, compared with R29.14 for the same month in 2019.
“Dealer profitability should of course be read in conjunction with the general decline in the market,” says Anri. “The return to profitability does not cancel out the negative impact of almost no sales in April and May this year and the overall decline in the new-vehicle market.”
Naamsa reported in September that despite some promising signs of growth, the market remains 33.4%, or 132 878 units, behind the same period in 2019. In line with this, Seriti Solutions found the dealer second gross profit for the first nine months of the year to be down by 11.73%, when compared with the same time last year.
Anri says that the lion’s share of a dealer’s second gross profit (91.66%) came from dealer placed financed vehicles, while vehicles purchased with pre-arranged finance represented 2.82% of dealer profit. The rest is made up of second gross on cash purchases (5.52%).
The dealer analysis further shows that the average value-added products and services (VAPS) per unit have increased from 2019 at 2.08 VAPs per vehicle, an increase of 0.10 compared to last year. An average of 2.71 VAPS per transaction on dealer placed financed vehicles, 0.89 on Pre-Arranged and 0.83 on Cash transactions.
“From this topline analysis of the number of VAPS per vehicle, it becomes very clear that dealers have a lot of room to grow their second gross on pre-arranged finance and cash deals,” says Anri.
“From our interaction with dealers, it is clear that the most profitable dealers are not only relying on traditional finance-linked VAPS, but also selling products that speak to a customer’s fears or concerns. With COVID-19 still a very clear risk, profitable dealers are selling products such as income protector insurance, extended service plans and other related products to customers who are enticed by the low interest rate, but unsure about what the future holds.”
Following the introduction of the C5 Luxury X and Elegance X trims earlier this year, OMODA & JAECOO South Africa are now enhancing the Style and Street derivatives with a series of upgrades.
Toyota South Africa Motors (TSAM) is introducing Hilux Custom Builds, a fully integrated conversion programme that adds professionally engineered, purpose-built solutions directly to the Toyota product offering.
BYD, China’s leading electric vehicle manufacturer, is preparing for a major international push, aiming to sell as many as 1.6 million cars outside its home market next year.
Advertisement
Advertisement
If you are not taking care of your customer, your competitor will.
Bob Hooey
Toyota South Africa Motors (TSAM) is introducing Hilux Custom Builds, a fully integrated conversion programme that adds professionally engineered, purpose-built solutions directly to the Toyota product offering.
The global filtration manufacturer MANN+HUMMEL has announced a donation of R100 000 to the non-profit organisation Food and Trees for Africa (FTFA) to fund its projects that tackle key environmental issues, including food security, urban greening, and environmental sustainability.
Volkswagen Group has delayed signing off on its multi-billion-euro investment programme, according to reports from German daily Bild.
