Nice to see an interesting discussion in the FT about the evolution of the used car market.
The major challenge for the industry right now is simply sourcing adequate levels of stock to maintain volumes. Yes, margins are strong due to pricing dynamics, but if you cannot source enough vehicles you cannot truly benefit from the strong prices.
Dealers need to think outside the box in order to source vehicles. Partnerships with leasing firms, financing houses and companies with significant fleets will be a key piece of the puzzle.
As an advisor I wonder how M&A will be used to help plug this gap. Cazoo for example has previously used M&A to acquire scale, expand capabilities and source used stock (for example the acquisition of Imperial Car Supermarkets which provided c.2,500 vehicles and a range of existing supply relationships/ partnerships).
I expect (and hope) to see more deals in the auto arena with this dynamic having an important role to play...
Up to half of used vehicles are sold by franchise dealers tied to manufacturers, often with costly showrooms. Bent on market share, the carmakers flood distributors with new vehicles that must be sold as soon as possible. The resultant discounting trickles down to used cars eating into margins.
unknownx500
