Automotive Blog

Banking on January 1st - the scourge of industry driven seasonality...

Seasonality

The calendar year seems to have a grip on the throat of the industry with most depending on having a tidy year end and an improved financial result. How much better would it be if - in the Northern hemisphere at least – the financial year end did not fall in December, the forced sales and used car disposals to reduce stocks and improve end year results!

But for the Irish, the results for the year have been set in stone for months – indeed their January sales take a quarter of the annual market, with 90% of the annual total over and done with by the end of July. So January for them has been a bell-weather for the year as a whole. Imagine the effect on not just on sales operations and trading but also on cash flow with heavy new car stocks at year end and loads of trade-ins taken in January. Indeed, this entrenched seasonality affects the whole business, even the workshop where annual servicing and road testing workload is reinforced in the deep mid-winter and becomes far more difficult to sustain as the year progresses. Imagine the effect on productivity of sales and aftersales staff…and all this in a new car market which is running at 45% of the 2007 level!

And then there are the banks which are not exactly falling over themselves to risk covering the exceptional working capital requirements caused by such market distortions in a market which is suffering from an extreme financial crash.

I remember just how difficult August 1st was to manage in the UK, so the single peak and its effects are not completely alien to me, factory shut downs, staff holidays as well as the need to deliver volume at the same time. But at least it was summer time…

Anyway, the good news is that help is at hand - Irish seasonality is to change from 2013 with two number plate changes a year (sounds familiar to a Brit) based on January and July which offers some relief to the besieged Irish networks. However, one swallow does not herald summer. In a time of crisis where there is little fat to sustain the business, anything that can be done by dealers to rebalance their network business levels throughout the year will help them survive and grow. Increased (used) car sales offer an aftersales opportunity as well as increase the chances of repeat sales and the boom years in Ireland created a cushion as the car parc grew which is ripe for aftersales exploitation as annual servicing and repair rises as car age.

Good luck to my Irish friends!                   

P.S. I can’t help thinking that what I have just said applies in any of our markets right now… 

Image: Trevor Morris Photographics

Written by Peter Bailey

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