October 2014 Dealer Profitability

Total Industry

Dealer profitability as measured by net profit as a percentage of sales (NP%S) was 1.8% for the average Australian dealer in October 2014.

This result was below the calendar YTD NP%S level of 1.9% and also 0.3 percentage points down on the result of last month which benefited from quarterly new car incentive payments.

However, the October 2014 result was 0.3 percentage points above the October 2013 result last year furthering signs that the second half of 2014 will be more profitable than the second half of 2013.

State-by-State

New South Wales/Australian Capital Territory

The average NSW/ACT dealer NP%S was 1.8% in October which was 0.7 percentage points above the October 2013 result. This can be attributed to an improvement in gross margins across new and used vehicles and service. A particular strength exhibited by NSW/ACT this month was its performance in used vehicles with the average dealer earning $2,627 in gross per used vehicle retailed –$401 above the national average.

Queensland

With an NP%S of 1.9%, QLD was the most profitable state for the October month. This position was a result of the continued strong performance in finance & insurance (F&I). With a new finance penetration rate of 36% and generating $2,767 in new finance income per contract written, the average QLD dealer performed above the level of the national average.

South Australia/Northern Territory

Dealer profitability for the average SA/NT dealer was 1.7% in October with the state group continuing to be strong performers in new vehicles. The average dealer generated $2,884 gross per new vehicle sold (inclusive of aftermarket, holdback and incentives) which was $488 more than the average dealer across the country. This resulted in strong profitability at the department level with the average SA/NT dealer retaining 23% of the department’s gross profit once selling expenses (not including overheads) was taken away.

Victoria/Tasmania

VIC/TAS was one of two state groups where dealer profitability for the average dealer improved month-on-month with NP%S for October at 1.6%. VIC/TAS dealers outperformed the national average in parts operations this month, with gross margin for the department at the volume/prestige benchmark level of 24.0%. This was reflective of the contribution of ‘higher margin’ workshop parts sales to the total department sales mix. Workshop sales represented 31% of the total sales mix for the average VIC/TAS sales mix, compared to 25% of the national average.

Western Australia

NP%S for the average WA dealer was 1.5% in October which was a 0.5 percentage point improvement on the September result. Gross margins for the state were down in October with total dealership gross margin at 13.6% compared to the YTD figure of 15.1%. While the October figure is still above the national average, dealer profitability for the state continues to be impacted as the average dealer has a reduced gross profit pool from which to cover fixed expenses.

Segments

The luxury segment was the most profitable segment for the second month in a row, with a NP%S result of 2.1% in October. This also made it the only segment to have a NP%S result above its calendar YTD position.

The prestige segment was the next most profitable segment in October with a NP%S result of 1.8%, followed by the volume segment with a result of 1.6%. Both segments results in October were a 0.2 percentage point fall on the prior month.

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