August 2014 Dealer Profitability
Deloitte Motor Industry Services | 30 September 2014
August saw dealer profitability fall to its lowest level in the calendar year with a net profit as a percentage of sales (NP%S) result of 1.2% for the total industry. This brought down the 2014 YTD position to 1.9% which is 0.1 percentage points lower than the dealer profitability position at this time last year.
State by State
New South Wales/Australian Capital Territory
The average NSW/ACT dealer returned 1.3% NP%S for the month of August – being the only state to outperform their result for the same month last year. The uplift on last year can be attributed to an improvement in total dealership gross margin as total dealership expenses (when measured as a percentage of gross profit) remained consistent in both years for August. Of the departments, the new vehicle department experienced the greatest improvement in departmental gross margin increasing from 6.7% in August 2013 to 6.9% in August 2014. Gross per new vehicle sold for the average NSW/ACT dealer was $2,323 which is a $138 increase on August 2013 – a time where competition from the high market volumes put downward pressure on grosses across the industry.
The average QLD dealer saw a NP%S of 1.3% – the lowest level profitability has been in the year so far for the state. August saw the average QLD dealer earn less per unit in the new vehicle department with their figure of $2,208 gross per new vehicle sold being $126 below the industry average. Despite this softness in the front end, QLD remains as the third most profitable state for the month with the average dealer being strong in service operations earning 80% margin on retail work (the highest amongst the states).
South Australia/Northern Territory
With a NP%S of 1.7%, SA/NT was the most profitable state group for the August month and the only state group to improve its NP%S on the prior month. The average SA/NT dealer outperforms the rest of the country when considering new car gross margins, with a figure of 8.3% compared to the industry average of 6.7%. The average SA/NT dealer earned $2,857 per new vehicle sold in August – a figure that was $523 higher than the industry average. This ultimately flowed through to the departmental profit level where the average dealer in SA/NT retained 24% of their gross profit after taking away new car department selling expenses (not including overheads).
The August month and YTD NP%S for the VIC/TAS state group was 0.7% and 1.7% respectively. Front end profitability continues to be a challenge for the average dealer in the state group with smaller grosses and softer F&I performance impacting the bottom line. In these trading conditions, VIC/TAS dealers have managed their costs effectively with their total dealership expenses (expressed in terms of people) at $10,782 per employee compared to the industry average figure of $12,315.
WA experienced the largest decline in profitability month-on-month with the average dealer in the state returning NP%S of 1.1% in August. This fall in profitability comes with reduced front end margins in August, with both new and used vehicle grosses falling by $199 and $92 per unit respectively when compared to July. A similar story was seen in the service department for the average WA dealer, and this increased the impact of costs on the profitability of the dealership overall. Nevertheless, WA dealers continue to be the most profitable dealers for the 2014 year so far, with their calendar YTD NP%S at 2.3%.
All segments declined month-on-month in terms of dealer profitability.
- Dealer profitability for the average dealer in the volume segment was 1.3% in August, experiencing the smallest decline on prior month.
- The prestige segment returned 1.4% this month which was the highest result of the segments. It remains the most profitable segment with YTD NP%S at 2.0%, however this is down 0.1 percentage points on the July YTD figure.
- The largest decline (of 0.8 percentage points) was experienced by the Luxury segment, with the August NP%S result of 1.1% being the lowest of all months so far this year. However, the Luxury segment was the only segment who returned a better result than August last year.
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