Volkswagen Group UK overhaul of dealer networks – UPDATE

Volkswagen Group UK has confirmed that it is pushing ahead with plans to remap its UK dealer networks with cuts to the number of dealer outlets and fewer investors.

The remap of the networks – described by one dealer as ‘brutal’ – impacts the brands it has in the UK, including Audi, Volkswagen Passenger Cars, Volkswagen Commercial Vehicles, SEAT, Cupra and Škoda. The process has been ongoing for some time and is part of a five-year plan.

It is understood the OEM, which accounts for almost a quarter of annual UK car sales,  is looking to have all brands represented an individual group in large market areas. Motor Trader was told the overhaul is taking place in three waves, with the first round of terminations haven already taken case.

Its aim is to make saving costs and gain synergies. The plan is being driven by electrification, reduced new car sales and reduced forecast revenues from aftersales.

Investors were told about the move in meeting with individual brands with participants asked to leave their mobile phones outside the briefings.

In Northern Ireland is was reported by Irish News  that it would be reduced to two investors and that the plan called for a reduction of investors to 25.

Stee Young, managing director of ICDP, a consultancy that specialises in dealer issues, said the plan carried a fair degree of risk.

“I presume that the plan for NI will be two investors, not two dealerships.  However, implementation of the plan will effectively require the current investors (other than the two who continue) to sell their businesses to the preferred investors.

“That sort of closed sale process obviously depresses values, and the terminated investor could – as the story suggests – decide to continue with other brands, switch to used or redevelop the site for other purposes.

“That’s just a smaller version of what will also happen on the mainland if they come down from 132 currently to the suggested 25 target.  The different evolution of the VW, Audi, Seat and Skoda networks also means that in many cases the overlap in investors will not be great, particularly for the latter two.

“Does it make sense?  Basically yes, but the risk is that they throw the baby out with the bathwater, losing some strong and committed investors – and potentially their customer base.  The transition will be absolutely critical – this is a case where ‘perfect is the enemy of the good.'”

In a holding statement a spokesperson for Volkswagen Group UK, representing the brands said: “Volkswagen Group UK, and indeed the whole motor industry is moving through a period of unprecedented change, prompted by electrification, online sales and new customer expectations.

“As part of these changes, our network is also evolving, and will ultimately comprise fewer sales locations, operated by a reduced number of investors.

“From a customer point of view, we are confident that by enabling a focused and financially viable network, our dealerships we will be able to offer the highest levels of customer service, and we will work closely with any new or expanded investor partners at the dealership to ensure this is their primary concern.”

“I kind of get what they are trying to achieve, ” one dealer told Motor Trader. “But it’s brutal.”