Are car dealers the weakest link in the chain?
At the moment, car dealers are only permitted to perform urgent repairs. For all other things, showrooms and workshops are closed. In a sector where the margins are already fragile, this can cause big problems.
As in many other countries, Belgian car sales have come to a complete halt due to the corona crisis. All dealerships have to remain closed. Only for urgent repairs, exceptions can be made. Many dealers organize a limited guard duty for emergency cases, at least until the 6th of April.
The last straw
Is this the last straw that breaks the camel’s back? The sector of car dealers is struggling with low profitability for years now. Sector federation Traxio has reviewed the books of 1 800 companies in 2018 and calculated that the average net margin of profitability was 1,02%. A decrease for the second year in a row.
Everything is coming together in a perfect storm: fierce competition, fewer maintenance needs, higher investment needs in electrification. “Our margins are very small,” says Rudi Jennes, owner of a bunch of VW dealerships in the Brabant province. “We will need help from all sides, from the governments as well as manufacturers and importers, to keep our head above water.”
Today, nobody knows how long the corona crisis will still last. Recently, the German rating agency Scope Ratings assumed that the European car market would shrink with more than 20%. A lot of manufacturers will also come under pressure.
One can be assured that they are lobbying like hell to postpone the stringent CO2 emission rules foreseen to enter in force at the end of this year. This would give them slightly more breathing space, but this crisis will hit hard.
In this struggle to survive, the European car industry will have to be careful not to be eaten by others (the Chinese, for example) and will have to focus on the essentials. It makes the fate of their dealers even more hazardous.