Sewells-MSXI Motor Retail Performance Trends Jan 2018

Sewells-MSXI Motor Retail Performance Trends Jan 2018

Sewells-MSXI Motor Retail Performance Trends 2018

Measurement – Motor Retail Performance Trends

Measurement is central to performance management and getting context for own performance using industry benchmarks is an important element in directing business. To this end we provide a high level overview of the passenger and luxury segments performance trends for 2017 to allow for a comparison to own performance. The declining % ROA trend illustrated in Table A for both the luxury and passenger segments appear to have levelled out from March 2016 and is holding, showing an improvement and is likely to rise during 2018. Positive political developments in December 2017 may well boost confidence and lead to improved levels of spending in the economy.

The % ROA can be represented by the formula M x R x A, this is a performance management model and the combined effect of each lever can either improve or decrease performance. We look to see what contribution each lever made to the overall % ROA trend.

The declining gross margin trends (Table B) shows that dealerships trading profitability is under pressure. Despite the fact that total dealership gross margin is made up of the gross margins from new, used, service and parts departments and that in lean times aftersales operations should sustain dealer operations the overall trend is declining.

Retained measures the profit that remains after the deduction of all expenses from the gross profit generated by the business. The level trend reflected in Table C reflects on South African dealers ability to control expenditure in the face of declining margins.

The trend for activity is reflected in Table D. The level of activity is determined by two factors. The sales generated in a year and the investment in operational assets. Sales have been steady during 2017, contained to some extent by slow economic activity. The amounts investment in operational assets set against the level of sales has declined. This would suggest dealers have reduced trading inventories where they can in the face of lower demand.

One might conclude that efficiencies and productivity improved because dealers have consistently used metrics and measurement to manage operations. This best practice should continue and perhaps in an even more precise manner. Despite prospects of growth in 2018, competition will be more intense than ever and while margins will improve, costs will surge.

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