ASE warns of non-OE parts threat to dealers

Competition for franchised dealers’ parts business is set to intensify as independent suppliers muscle in on the market.

That’s the view of Trevor Jones, founder of dealer profitability specialist ASE, speaking at the ASE/Motor Trader Financial Conference at Whittlebury Hall, Silverstone yesterday.

Jones said independent parts supplier like LKQ, which now owns Euro Car Parts, posed a risk to dealers’ business as they supplied a range of parts from OEM, non genuine and remanufactured sources. ”They are a major threat,” he said.

Jones said the UK has seen its 27th consecutive month of growth with the SMMT forecasting sales of 2.4 million cars for the full year, marking a return to pre-recessionary volumes for UK dealers.

He said that dealers continued to trade profitably. In April the average dealer saw year on year profitability up 36% to £9,000 and return on sales stands at 1.5%.

Jones said there was growing recognition among carmakers of the importance of dealer profitability.

“Manufacturers are coming to the view that dealers need to make profit. The best thing about the last 12 months was there were no insolvencies. We had no claims, so when we talk to the banks, they are not really worried about the sector,” he said.

But Jones said while average return on sales was 1.5%, some dealers were suffering losses.

“My main concern is the spread with some people losing 4%,” he said.

Jones said the UK is the “Treasure Island” in Europe for carmakers who are targeting the market to compensate for falling sales in Mainland Europe.