Calls for assistance from industry leaders has fallen on deaf ears as COVID-19 continues to wreak havoc on the car dealership industry.

With many dealerships struggling to remain open as government forced social distancing laws drive customers away, the Australian Automotive Dealer Association (AADA) is leading the charge in lobbying for dealers to be given access to state and federal government stimulus and relief packages.

While most assistance packages require a certain decline in turnover to be met before a business is eligible, dealerships operate on high turnover but razor thin margins of less than 1 per cent, taking them out of the running for assistance in many cases.

Statistics from Deloitte show that dealers made an average return on sales of 0.9 per cent in 2019, with 36 per cent of dealers making no profit for the year, showing that despite a high turnover, dealers are just as vulnerable as other businesses during an economic downturn.

With speculation mounting that closures, mergers and buyouts are on the horizon if nothing is done to stop the bleeding, AADA, the Federal Chamber of Automotive Industries and the National Automotive Leasing and Salary Packaging Association wrote to politicians at various levels back in March, asking them to consider making changes to bring relief to the industry.

Employing 55,000 workers, including 4,446 apprentices, the representatives of the $55 billion car dealership industry believe that given the unique situation presented by COVID-19, some consideration should be given as to whether dealerships should abide by these criteria.

“Excluding our businesses from access to programs intended to protect apprentices could have consequences for the thousands of apprentices dealers employ,” said the letter.

“We fear that the effect of pandemic mitigation measures will further erode sales in the automotive industry which has already suffered 23 months of contraction and is thus in a deep and sustained recession.”

Calls for assistance come as a submission to state and federal politicians by the Victorian Automobile Chamber of Commerce (VACC) depicts how difficult it is for its members to receive access to funding.

According to the submission, approximately 70 per cent of VADA members failed to qualify for the Morrison government’s cashflow assistance package or subsidy for apprentices.

With a turnover threshold of $50 million to qualify for the federal funding, research from the submission shows the average aggregated turnover of group dealerships was $128 million, while dealerships employed 39 staff members on average, compared to the maximum of 20 allowed to meet the apprentice subsidy criteria.

Despite these seemingly high numbers, a focus group developed by the VACC of 70 dealerships found that each dealership lost more than 11 service bookings per day on average, while average car sales per dealer had dropped from 20 per day on 16 March to six per day on 15 April.

Despite these worrying figures, it is expected that this downward trend will continue for some time yet, pushing car dealers and industry leaders to lobby even harder until their voices are heard.

The Financial Review | Australia’s $55b car dealers teeter as sales plummet

27 April 2020