January 2015 Dealer Profitability

Total Industry

Dealer profitability as measured by net profit as a percentage of sales (NP%S) was 2.6% for the average Australian dealer in January 2015. It was a good start to the 2015 year with a better result than January 2014’s 2.3%. This stronger start can be partly attributed to a 25% jump in selling gross per new vehicle sold from $345 in January 2014 to $430 in January 2015. 

Even though the trend of finance income becoming a bigger proportion of income for each vehicle sale slowed during 2014, the January 2015 result in finance income per retail sale compared to the January 2014 result highlights the significant shift over the last 12 months. From $922 in January 2015, compared to $872 in January 2014, this was an increase of 5.7%.

State-by-State

New South Wales/Australian Capital Territory

The average NSW/ACT dealer’s NP%S was 2.4% in January an increase on the 2.1% result in January 2014.

The increase in NP%S can be attributed to an increasing contribution from the front end of the business - 53% in January 2015 compared to 50% in January 2014. However, the strong finish to the 2014 year for gross per new vehicle sold could be the result of vehicle incentive payments at the end of the year/quarter. In December gross per new vehicle sold was $2,644 and $2,182 in January 2015 – but this still an increase of $100 compared to January 2014’s result of $2,083.

Queensland

QLD was the most profitable state in the January month (as was the case in December 2014) with an NP%S of 3.3% for the average dealer – also up from its 2.7% result in January 2014.

QLD continues to set the pace for finance and insurance income per vehicle retailed - $1,440 in QLD vs a National average of $1,095 for January 2015 – a 31% differential. Gross as a percentage of sales in the service department was 13.6% in January 2015 compared to a national figure of 13%, but service as a contribution to gross profit is 31.8% in QLD compared to 33% nationally – indicative of falling service sales in QLD.

South Australia/Northern Territory

SA/NT started the year with a result of 2.5% for the average dealer in January 2015.

SA/NT had the largest relative service size of all the states for January 2015 - $2,201 per new vehicle retailed. This was significantly above the national average of $1,497 and a 10% improvement on January 2014’s result of $2,055. However, the State’s continued strong performance is not entirely derived from service. Gross per new vehicle sold was $2,874, $600 above the national average and $200 above last year’s result.

Victoria/Tasmania

The average dealer in VIC/TAS started 2015 well, achieving a NP%S of 2.3% in January, the only state to improve on its December 2014 result – 1.7%, and the first time since October 2014 VIC/TAS outperformed WA.

VIC/TAS were the top performing states for parts departmental profitability with a selling gross of 66% compared to the national average of 61%. This was achieved through effective expense control – primarily reduced salaries. Indeed, a big contribution to VIC/TAS’s strong start came through effective total dealership expense management – a result of 110% of total expense as a proportion of gross profit, noticeably less than the 114% for the industry.

Western Australia

NP%S for the average WA dealer was 2.25% in January and 2.7% in December 2014 highlighting the continual economic trend shown in the state over a recent period.

In contrast to VIC/TAS, WA has the highest total expenses as a proportion of gross profit – 121%. This is most evident in the new car department, where the state generates an additional $169 gross profit per vehicle compared to the national average, however this is eroded to only $104 after selling expenses.

Segments

The Prestige segment was the most profitable starter to the 2015 year with an average NP%S of 2.33%, followed by the Volume segment at 2.21% and Luxury segment at 2.19%.

Across the states, the segments were not as close, in SA/NT the Volume Segment returned the highest NP%S, whereas QLD, VIC/TAS was topped by the Prestige Segment, and WA and NSW/ACT was topped by the Luxury Segment.

Click the chart below for more details.

Dealership data contained in this document has been obtained from the eProfitFocus database. Over 800 dealers across Australia have contributed towards this data. 

© 2015 Deloitte Motor Industry Services Pty Ltd

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