June 2014 Dealer Profitability
Deloitte Motor Industry Services | 31 July 2014
- With the 118,309 vehicles sold in Australia for June 2014 being just 449 units short of last year's record month, it is not surprising to see the average dealer achieving profitability of 3.3% the month. All state groups saw a significant lift in profitability over May, although interestingly, it was the VIC/TAS grouping that saw the most profitable month (3.64%) just ahead of QLD (3.55%) and the high-performing WA grouping (3.44%).
- However, one strong month was not enough to turn around the whole year. Vehicle volumes in Australia at the end of June remain 2.4% down on the same time in 2013. In the face of declining volumes, average dealer profitability is holding up and the YTD position of 2.1% NP%S remains in line with the June YTD result for 2013.
State by state
- All state groups enjoyed improved profitability in June when compared with May. Further, the average dealer in all states - except WA - had a more profitable June in 2014 than they did in 2013.
New South Wales/Australian Capital Territory
NSW/ACT dealers experienced a 1.5 percentage point increase in profitability this month to 3.0% - the most profitable month since June 2013. Despite the strong result for June month, the NSW/ACT dealers continue to have the lowest YTD profitability (1.9%) among the state groups. In a month with such strong new car sales, it is not a surprise to find that most of the profit improvement in June came from the New Vehicle department - new vehicle turnover for June was 27% higher than May and new vehicle selling gross (as a % of gross) for the average NSW / ACT dealer in June was 22% compared to 14% in May.
At 3.55% NP%S, QLD dealers again had the second highest level profitability across state groups for June month. This is an increase of 1.8 percentage points on May 2014 profitability and leaves the YTD position at 2.3%. The impact of high new car volumes was quite obvious for QLD dealers with new car turnover increasing by 33% over May month and gross profit increasing by 41%.
South Australia/Northern Territory
In June, the average SA/NT dealer saw a NP%S of 3.2%, up from 2.1% in May, and also 0.3 percentage points better than June 2013. The average SA/NT dealer has had a strong year, with the YTD NP%S of 2.3% on a par with the YTD results for QLD and just behind the average WA dealer. Unlike other states, where the increase in new car turnover in June month was generally accompanied by increases in turnover across the other departments of the dealership, the average dealer in the SA / NT grouping actually saw a slight decline in the throughput of their fixed operations in June month.
Going back a month, the VIC/TAS dealers enjoyed the biggest increase in profitability of any state between April and May (an uplift of 0.8 percentage points). The VIC/TAS dealers repeated this in June when they again saw the biggest month-on-month improvement in profitability of any state group (1.9 percentage points). This improvement is not only due to increases in new vehicle volumes, but at the same time, improvements in new vehicle gross profit. Since April 2014, the average new vehicle gross for VIC/TAS dealers has moved from c. $2,100 per unit to c. $2,600 per unit - an increase of almost 25%.
The average WA dealer also benefited from the strong vehicle volumes to see an average NP%S of 3.4% for the month of June. Although this was very slightly behind the profitability seen in QLD & VIC/TAS, the average WA dealer is still seeing the highest level of profitability for the YTD (2.4%). Continuing the theme around the country, the uplift in profitability for June month came from the new car department, with the average dealer generating almost four times the new vehicle selling gross ($) than they did in May or April.
- There was an increase in profitability for all segments this month with the largest increase experienced by the volume segment at +1.7 percentage points. For the YTD, the prestige segment is now the most profitable (2.1% NP%S), just ahead of both the Volume & Luxury segments which are at 2.0% NP%S YTD.
- Even though industry volumes declined year on year, all segments saw profitability that was broadly in line with the June 2013 results - the prestige segment was marginally stronger (+0.1 of a percentage point), while the volume and luxury segments were both in line with June 2013. One of the key factors that allowed the average dealer to maintain the same level of profitability in June 2014, was the improvement in new vehicle gross profit. All segments have seen new vehicle gross profit recover by between c. $500 per unit and $700 per unit from the extremely low levels seen in mid-2013.
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