Savills welcomes the new Automotive Team who joined in January this year. The team have been operating in the automotive sector for over 30 years and provide all things property to the sector with a particular focus on car dealerships, covering agency, professional work, valuation and strategic advice.
Despite consumer spending being hampered by the cost of living crisis, the team have been kept busy by their clients over the last year as car mobility and usage remains a necessity for the general population. New car supply volume has been vastly improving on previous years with the Society of Motor Manufacturers and Traders (SMMT) anticipating total new car registrations will grow 11.2% in 2023.
Battery Electric Vehicles (BEVs) demand has somewhat plateaued following sharp rises in previous months, nonetheless “plug-ins” accounted for almost a quarter of all deliveries in February this year with half a million BEVs Plug in Hybrid Electric Vehicles (PHEVs) forecasted to be in circulation on Britain’s road by the end of 2023 (SMMT). The establishment of nationwide charging infrastructure will play a key role in the shift towards zero emission mobility – a field in which the automotive team also operate.
The market is also entering a transitional phase in the dealer and OEM (Original Equipment Manufacturer) vehicle sales process. An option for OEMs is to introduce an ‘agency model’ whereby the dealer no longer inherits the profit margin risk of purchasing the vehicle product from the OEM, rather the customer places the order directly with the OEM and the dealer is the conduit for delivery of the product to the consumer. This will have a significant impact on dealership property. The dealer will display fewer new cars, reducing showroom space, which could lead to opportunities such as multi-franchising under one roof. Ultimately this will consolidate the dealer’s property holdings, presenting an opportunity to reposition their property and potentially unlock alternative use value on surplus space. We have seen a number of dealers’ balance sheets benefit from dealership sales for alternative uses such as care homes, data centres, convenience stores, self-storage and residential. Despite the potential consolidation which may come as a result of this model, the dealer will continue to maintain the relationship with the customer, benefiting from the traditionally profitable aftersales portion of revenue. The dealer remains the focal point of the sale and distribution process of the vehicle.
The majority of customers remain loyal to physical salesman evidenced by healthy franchised dealer balance sheets and over half all used cars being sold by franchised dealers (Car Dealer Magazine). “Online-only” sales model pioneers Cazoo, on the other hand, posted a £704M loss in 2022 as well as axing 15 out of 22 of the business’s customer handover centres.
Market consolidation remains a prominent theme with a number of acquisitions towards the end of 2022. Additionally, the OEMs continue the process of rationalisation of their dealer networks - most notably super-group Stellantis announced widespread closures and a drawback of representation across its network unlocking a number of opportunities for brands and dealers looking to expand. Toyota, KIA, Nissan and MG have been particularly active in increasing representation following impressive vehicle sales statistics.
The Automotive team are excited to continue their specialist work within this sector adding to the depth of knowledge under the Savills banner.