Are the distribution groups ready to abandon the new vehicle for the used one?

The business model of distribution groups has been the subject of concern for years and in 2021 it will be close to breaking down, since sales of new cars to private individuals will reach historic lows and this is the moment that several manufacturers are choosing to seriously consider changing their model. Faced with this, when we have the opportunity to listen to a certain number of group managers, we perceive that they have another iron in the fire: the used car.
A large part of the automotive distribution galaxy was gathered for the Connect event organised by Auto-Infos on 18 and 19 November in La Baule to reflect on the future of the professions concerned.
Listening to the various speakers and, in particular, to the heads of the various groups called upon to express themselves, one could leave the Loire Atlantique wondering how much longer the companies concerned will be identified with the term "automobile distribution". Indeed, this term reminds us that the main function of these companies, from the point of view of the manufacturers as well as from their own point of view, is to sell the goods coming from the manufacturers' factories. Dealers are first and foremost there to "push metal": from the moment when cars were mass-produced in huge factories where the economies of scale obtained made it possible to reduce unit costs, it was necessary to invent a system which made it possible to irrigate the territory to ensure outlets for this production. 
This was already necessary to ensure the sales of Ford T and, after using branches, Henry Ford very quickly perceived that it was necessary to invest in production and appoint agents. He required them to work exclusively for him and invented quotas and back margins. Alfred Sloan, who wanted to offer not one product but a range of products and to renew them, could only imitate him: his networks had to find customers for each product and each vintage, whether the product was at the beginning or at the end of its life, whether it was a commercial success or a failure, whether it was well or poorly priced.
For more than 100 years now, the recipe has been universal: builders delegate the difficult distribution of their products to entrepreneurs who make the real estate investment for them and carry the stocks. Their primary mission is to distribute the manufacturer's production. Financially, they first allow the builders to devote their investments to other things. Functionally, they adjust the pricing and the sales pitches to real customers and real sites, which most often do not really resemble those that the head office has imagined or tested in the test tubes of its marketing laboratories. 
In relation to this primary function, to which the term "car distribution" corresponds, the other activities of distributors, i.e. the sale of PR and used cars, after-sales, the distribution of finance and possibly insurance or leasing, have traditionally been treated as appendages.
From the manufacturer's point of view, they were primarily there to facilitate the sale of new vehicles and/or to meet legal obligations. Some of these activities were quickly integrated into the manufacturers' core business because they were included in their accounts and quickly appeared to offer greater and more stable profitability: this is the case for parts and credit. Others, such as used vehicles and workshops, were not included in the manufacturers' accounts but remained in those of the distributors. For this reason, they were for a long time the object of a relative lack of interest on the part of the manufacturers who largely delegated their management to their distributors. Over the years, as the difficulty of selling new vehicles has increased, the margins corresponding to the primary function have been reduced and it is by carrying out the other trades and in particular after-sales that the distributors have managed to stand on their own feet. 
For years, the whole profession has known that these economic equations are extremely fragile, partly because workshops are less and less able to cover their structural costs, and partly because new car sales to private individuals (which is the only one that dealers alone are able to provide) represent a decreasing share of registrations, which are themselves struggling to maintain their historical levels. The year 2021 exacerbates these trends in Europe in general and in France in particular as registrations are very low (less than 1.4 million over 10 months) and sales to private individuals also represent an exceptionally low share (43% over the first 10 months). Since this is the year in which, in the context of the discussions associated with the renegotiation of the exemption regulation, manufacturers are showing both a very strong desire to fully digitise a growing proportion of their sales and plans to transform their contracts with their networks into agency contracts, the distribution groups and their managers are looking for ways to save themselves.
In this perspective, individually and, above all, collectively, the first attitude consists in questioning the sustainability of the plans of manufacturers with very strong digital ambitions. This question can be summed up as follows: how many customers will manufacturers lose if they do not have the machine to make these thirsty donkeys, the buyers of new cars, drink? 
It should be emphasised once again that the very high profits that the manufacturers will make this year despite the very sharp fall in volumes are largely linked to short-time working, which creates a relative indifference to volumes (and turnover) that is very extraordinary in this industry.
When this financing ceases in Europe, we will no longer be able to simply wait for customers to come and use the digital platforms. The commercial anabolic injection machine, the network, will have to be activated again, and the manufacturers who have unwisely thrown away the syringes will learn this the hard way. In the meantime, they will have done great damage to their networks, factories and supplier base. This is an analysis that can still be heard without doubt. 
The second attitude, which was already largely in place and which is being exacerbated by the current combination of factors, consists of making the professionalisation of the VO the way out. Faced with a decreasing turnover of new vehicles, margins that are already very low and are set to fall even further, and manufacturers who consider that their customers are their own and not those of their distributors, it may well be possible to regain financial margins as well as room for manoeuvre through the used vehicle sector.
Thus, just as we have seen in the parts sector with initiatives such as those of certain distributors who set up their own parts platforms well before PSA devised a similar strategy, distributors have, sometimes for a long time, developed their own brands and their own used vehicle organisation. At a round table in La Baule, Gérald Richard and Paul Kroely, both heads of car distribution groups, testified that, in addition to the used vehicles they manage to distribute under the used vehicle labels of the manufacturers they represent, they have developed their own brands, purchasing organisations and partnerships with financiers who, by playing on the synergies with their dealerships in different towns, manage to generate both margins. 
In fact, if, on the basis of an analysis that is questionable because it is very much influenced by Covid, manufacturers must move towards marginalising their "distributors" in the search for outlets, we must not wait for them to eventually realise their imprudence. It is urgent to reconstitute a professional identity and to challenge their claims to omniscience and omnipotence in a field that is not historically theirs: manufacturers have ambitions in the field of used vehicles and we have the illustration of this with the French, between the projects that Renault has for Flins and what Stellantis is doing with Aramis or Spoticar; their expertise and legitimacy in this field is weak; the distribution groups are clearly ahead of the game here.

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