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Dealers maintain profitability

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South Africa’s motor franchise dealers are employing innovative strategies to keep their businesses profitable in a falling market, according to Sewells MSXI CEO Warren Olsen.

He says tenacity has characterised the dealer network following the economic downturn which saw the new vehicle market slump by more than 10% in the first half of the year.

“Monthly analysis has revealed that benchmark dealers – the top 30% – are maintaining gross profits, with margins up 0,69% in the first half of 2016 compared to those for 2015. Slightly improved margins on new and used vehicle sales are the main contributors.

“The median group – representing about 50% of dealers – are in a similar position with year-to-date gross profit for the first six months of the year up very slightly by 0,83%,” Olsen says.

He adds that there has been positive growth in the important overall return on operational assets (ROOA), with benchmark dealers showing an increase of 12% and the median grouping up by 6%.

“We are very happy with the way in which dealers are faring in these tough economic times,” says Olsen “The results show how well they are managing the combination of new and used vehicle sales, parts and service sales as well as income from finance and insurance to keep their businesses on a solid footing.”

The analysis of data by Sewells MSXI, the local subsidiary of the global consulting and outsourcing firm that concentrates on the retail motor industry, also brings out some interesting facts about the way in which new vehicle sales have fared in the various sectors of the local market from 2013 to the first half of 2016.

For instance, the largest growth has been in the large bus segment (36%), with heavy trucks up by 7%. All other sectors – passenger cars, LCVs, medium commercials and extra-heavy trucks – show declines in sales volumes.

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