2017 Q1 Dealer Profitability
Balram Dabhade | 31 August 2017
The dealer profitability as measured by net profit as a percentage of sales (NP%S) for the first quarter of 2017 was recorded at 1.6%, which is 0.4% lower than the first quarter of 2016. While the overall dealership revenue grew by 10% YoY the department selling gross has eroded by 12% putting pressure on the profitability. The gross contribution from selling new and used cars has contracted by 3% as compared to Q1 2016.
New South Wales/Australian Capital Territory
The average NSW/ACT dealer NP%S was 1.6% for the period Jan – Mar 2017 which is 0.5% down from the same period in 2016. The selling expenses for the state group of NSW/ACT went up by 6.4% while the gross remained unchanged, this eroded the total dealership selling gross by 21%. This erosion of selling gross resulted in the NP%S going back by 0.5% for the first quarter of 2017.
The state of Queensland has highest dealer NP%S after SA/NT for the first quarter of 2017. The NP%S for Queensland was 2.1%, with overall dealership revenue increasing by 12%.
The total dealership gross increased by 13% but the selling gross just moved by 1% as to achieve the increase in sales the department expenses also had to increase by 11%.
South Australia/Northern Territory
The state group of SA/NT had profitability of 2.3%, the highest for the period Jan – Mar 2017. This state group saw an increase in dealer revenue by 14% but the department selling gross was eroded by an increase in department expenses. This was also the only state which has seen a decline in the total dealership expenses by 3%, signalling that the dealers seem to optimise their business models by taking advantage of the regional economy.
The state group of Vic/Tas had the highest increase in total dealership revenue, it increased by 25% and the state group had a healthy gross increase of 20%. But the department expenses also grew the highest, by 27%, the total dealership expenses grew by 24%. As a result the NP%S was recorded at 0.9%, the lowest amongst all states in Australia and 0.3% lower than the same period last year.
The state of Western Australia had an interesting first quarter of 2017. It was the only state which managed to arrest the loss of NP%S and had a NP%S of 1.7% which was slightly lower by 0.1% as compared to first quarter of 2016. This state seemed to have adapted to lower revenue by lowering operational costs and lower overhead costs. This can be ascertained by the overall revenue reducing by 7% but the state dealers responded by lowering operational costs by 21% and fixed expenses by 12%.
The volume segment has the highest profitability of 2.0% followed by the prestige segment with a profitability of 1.8%. The Luxury segment had the lowest profitability of 1.2%.
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