Why are most used car dealers shabby

No relaxation. Glut in the car market.

Since the diesel scandal, the automobile's status as the Germans' favorite child has been shaky. But that's not all: The COVID-19 pandemic is having enormous damage to customers' purchasing power. Hundreds of thousands of new cars and a number of used cars have their wheels flat in the courtyards of automobile dealerships. The Central Association of the German Motor Vehicle Industry (ZDK) puts the value of new cars alone at around 14.8 billion euros.

The demand of the mouthpiece of the German car dealers is clear. "We need a quick decision by politicians for a purchase bonus, which must in any case include new vehicles and young used vehicles with environmentally friendly combustion engines of the latest emission standards," says ZDK Vice President Thomas Peckruhn and adds alarmingly: Trade. ”The automobile dealers' association underlines this alarm mood with solid figures: The number of idle days for used vehicles rose by 17.2 percent in April compared to the same month last year to an average of 109 days. According to calculations by the Deutsche Automobil Treuhand (DAT), the automobile trade incurs costs of 28 euros per day and vehicle.

But the federal government's stimulus package, worth an impressive 130 billion euros, will not bring any serious relaxation to car dealers or manufacturers. A scrapping bonus like the one ten years ago in the financial crisis could not be pushed through politically this time. Contrary to what many expected, there was a doubling of the purchase premium for plug-in hybrids and electric cars up to 60,000 euros and a three percent reduction in value added tax until the end of the year. Good for the individual, but anything but relaxation for the car dealers, because the courtyards are full of vehicles. Most customers, however, do not want an electric car, but a diesel or combustion engine - and these do not benefit from the economic stimulus package.

For the CDU MEP Dennis Radtke, the automobile manufacturers are now called upon to correct their course vis-à-vis car dealers and suppliers. In dealing with these two partners, "risks have been shifted for years and market power has been exploited in a way that I consider shoddy," complains Radtke. Allegedly, some dealers say that the manufacturers' sales targets are not being corrected even though the market has collapsed. A discount war would add fuel to the fire. "In view of the already narrow margins in retail and the fact that companies are short of breath due to the crisis, initiating discount battles would be commercially irresponsible right now and would have a bad end for many companies," said Peckruhn.

If you ask car dealers, you come across a wall of secrecy and this stronghold mentality runs through all brands and sizes of the car trade. "Basically we don't make any statements," they say in unison. The unusually reserved nature of the dealerships shows how deep the uncertainty is. Nobody wants to bite the hand that feeds them. Even if the pieces get smaller and smaller and the hits get harder and harder. The dangers lurk everywhere. “However, take-back obligations from fleet transactions can become really threatening if they occur at an inconvenient time and in larger quantities. Only a conversation with the fleet customer will help, for example to stretch the returns over a longer period of time, ”says Arthur Kipferler from the Berylls strategy consultancy.

At VW they try everything to prevent this impending sheet metal tsunami and first sweep in front of their own door. As the "Automobilwoche" reports, the Lower Saxony carmaker has increased the holding period of its around 30,000 company cars from eight to 15 months. However, this regulation only applies to models that are not so popular with motorists. The situation is different with electrified used cars, which are in great demand. These include E-Up, E-Golf and the hybrid Golf GTE and Passat GTE. “In our opinion, the measure is more reassuring than worrying because the pressure will be taken off the market. In addition, the temporally adjusted supply management means that the resale - in accordance with the macroeconomic forecasts - can take place under significantly more favorable economic conditions. Overall, the measure is therefore easy to understand and makes sense based on residual value considerations, ”explains Maarten Baljet, Managing Director of BF Analytics.

Apparently not all dealers are suffocating under the sheet metal avalanche. Some car salesmen suffer from an undersupply. “According to our observations, the glut is not a general phenomenon - we know dealers who are more likely to be afraid of a drought and an insufficient supply of important models. After all, customer interest and incoming orders cannot generate sales without new vehicle deliveries, ”says Arthur Kipferler, pointing out the downside of the coin, which is becoming a problem for some car dealerships due to the production stop in the plants. Affected by the shortage of supplies are also those dealers who switched to online sales early on and thus kept business going. The ambiguous picture continues with used vehicles, as some customers shy away from using public transport due to the COVID-19 pandemic and now want to get a car even though they did not previously have one. "Surveys show that many drivers who are currently without a car are considering buying a vehicle again or even for the first time," explains Arthur Kipferler.

TEXT Wolfgang Gomoll; press release