Tag Archive | "Trade"

SMMT PUSHES FOR POST-LOCKDOWN SCRAPPAGE SCHEME

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SMMT PUSHES FOR POST-LOCKDOWN SCRAPPAGE SCHEME


A leaked letter from the SMMT to Chancellor Rishi Sunak and Business Secretary Alok Sharma has revealed that the SMMT is campaigning for a 1.5bn scrappage scheme to revitalise the British automotive industry in the wake of the pandemic.

First reported by The Guardian, the letter allegedly argued the case for a “market stimulus package”  that can “support the entire market, not just disproportionately favouring specific segments or technologies, recognising the diverse nature of UK automotive manufacturing”.

To this end, any such scheme should encourage the purchase of combustion-engined cars as well as EVs, said the SMMT, with discounts of £2500 hoped to put 600,000 new vehicles on the road.

READ: LKQ PLOTS GROWTH AFTER CORONAVIRUS PANDEMIC

The last scrappage scheme, in 2009, offered new car buyers £2000 in exchange for their old vehicle as part of the industry’s recovery from the recession, with more than 400,000 vehicles sold as a result.

The Guardian quotes the SMMT as arguing that a new scheme “could also support wider government ambitions in terms of climate change and improved air quality”, but that the primary benefit “would be in jump-starting the market, the sector and the economy without further drain on the public purse”.

Further proposed benefits include taking automotive workers off the Government’s job retention scheme and reducing the risk of mass redundancies by driving demand for new vehicles.

The new car industry has suffered a significant and rapid downturn during the pandemic. In April – when most British manufacturers had paused production – just 4321 cars were sold, and recent figures show that just over 20,000 were sold in May.

READ: WHO BENEFITS FROM SCRAPPAGE?

But such a move would be unpopular with the aftermarket. The IAAF argues that most vehicles taken off the road would be ‘very much roadworthy’, meaning a scrappage scheme would “have a significantly negative effect on public mobility and the automotive aftermarket”.

Chief Executive Wendy Williamson said last month: “Motorists are currently under great pressure, and they should not be penalised for keeping hold of vehicles that are in good working condition and can continue to be serviced, repaired and maintained long into the future.

“Not only is this unfair to consumers, but it is putting the aftermarket at great risk, as it will result in a direct decrease in the number of vehicles entering independent garages.”

The IAAF suggests that, rather than implementing a universal, nationwide scheme, the Government should instead target drivers who live or work in low-emission zones, as they will be more likely to swap into a cleaner, newer vehicle.

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CORONAVIRUS AND THE AFTERMARKET

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CORONAVIRUS AND THE AFTERMARKET


Note: This article was written in mid February 2020, when the world was a very different place… – Editor

 

You will have heard all about it: the virus that migrated from species to species in China before spreading around the world. Thousands of column inches have been written, mostly about the human cost and how it has affected the way that people meet and travel, but how will it affect the parts supply chain, and more specifically the aftermarket?

Here’s what we know for sure: factories in China closed as usual for the Chinese New Year celebrations, but didn’t reopen for weeks afterwards. When they eventually did start up again, there were reports of many of them having a fraction of the usual number of staff, due in no small part to many being in isolation, be it voluntarily or at the behest of the state.

Then of course the virus spread, with huge tracts of Asia, including South Korea and Japan, implementing an array of preventative measures to control the outbreak. Closer to home, Italy was accused of under-reporting known cases and parts-producing towns in the country’s ‘motor valley’ have been belatedly shut down.

READ: BREMBO SHUTS ITALIAN SITES AMID CORONAVIRUS CRISIS

SHY RESPONSE

Yet when we asked companies who must surely be exposed to supplier shortages, the answers we got were surprisingly coy. Halfords, for example, wouldn’t answer our list of questions, but did respond with the statement: “We are monitoring the Coronavirus situation carefully. To date, the virus has not had a material impact on stock availability but we are continuing to work closely with our partners across the Far East.”

Similarly, Euro Car Parts answered our request with the simple sentence: “To date, we’ve not experienced any issues with stock availability because of the Coronavirus outbreak. We’re aware of the risk of disruption it still poses, and our supply chain team is working on contingency plans and is in regular dialogue with our suppliers to ensure we’re prepared to mitigate against any potential impact.”

Some other companies simply declined to discuss the issue at all. However, the fact that parts and accessory supply chains have, at the very least, been interrupted is not in dispute.

READ: IAAF BOSS: GOVT. MUST HELP THE AFTERMARKET

TYRE SHORTAGE

Tyres are known to be in short supply at the moment, especially budget products which are typically produced in China or Malaysia. The problem has become such a concern that TyreSafe, a body set up by wholesale distributors and tyre dealers, has issued a release advising motorists to fork out a bit of extra cash for mid-range or premium tyres, and not to buy part-worns, of which the organisation has a low opinion, as it has repeatedly voiced.

Stuart Jackson, Chair of TyreSafe, said: “The vast majority of [budget tyres] are imported into the country from China and across South East Asia where the outbreak of Coronavirus has led to governments closing facilities such as schools and factories to limit the spread. As a consequence, the level of supply the UK has become accustomed to for many products has been reduced.

PHOTOGRAPH BY Feature China / Barcroft Media

“Our advice is to seek a good deal on a mid-priced tyre and carry out regular checks to get the best out of that tyre over its full potential lifespan.”

National Tyre Dealer Association Chair Stefan Hay said that most members had a good stock of mid-range tyres, but added: “There can be no doubt that we could see a potential shortage of budget tyres if quarantine and export restrictions are maintained.

“This will affect all manufacturers with an interest in China and other South East Asian countries. For example, I’m aware that production at two of Pirelli’s three factories in China remains suspended in response to the spread of coronavirus. Pirelli has also reported that its entire expat workforce has left the country along with their families. Goodyear Tire and Rubber Co. ‘temporarily’ closed its headquarters and factory in China and the beginning of February and it is uncertain as to how temporary that is.”

Hay added that restrictions in supply can soon bounce back, citing a shortage of tyres a few years ago due to a trade dispute between the EU and China, which was swiftly resolved.

SHUTDOWN

It isn’t just tyres that are affected. The widest range of factory closures is in southern China, which is the heartland for manufacturing electronics, as well as the site of numerous foundries for making hard parts. Murray Silverman, Director of Streetwize Accessories in Manchester, is candid about the impact that factory shutdowns will have on UK business. “ALL businesses will be affected,” he emphasised. “Some might not realise it yet.”

“All suppliers that we have spoken to have advised at least a three week delay as it stands today,” Silverman told us when we spoke in mid February, adding that the date was ‘moveable daily’ and that at the time of speaking, his company could not even contact many of the factories that had not yet returned to work.

A big question mark hanging over the whole situation concerned just how long these delays might become. “Nobody knows how long these delays could go on for,” said Silverman. “We contacted all our customers to advise them that there will be shortages that will escalate during the summer months or earlier and advise them to order whilst we have stocks available. Some customers have reacted but unfortunately there will be those who will realise too late despite warnings.”

One company reacting to the situation is battery charger manufacturer Ctek. “Our suppliers have restarted their production and supply following Chinese New Year,” company spokesperson Stig Mathisen told us. “We are mindful however, that there is a risk that the outbreak could worsen and will continue to monitor the situation closely, introducing contingency plans if there is a requirement to do so.”

Sourcing products from elsewhere is not an option for many, particularly given that northern Italy, a major European production centre of parts, is arguably in a worse state than China at the time of writing. In any case, for the majority of companies it isn’t simply a case of switching production – new suppliers need to be tested, pricing and quantities have to be agreed and then go through any relevant type approval. “Sourcing product elsewhere is not an option, even if we could find the resource and the pricing was acceptable, it takes time to go through our QC and graphics teams,” explained Murray Silverman, adding that in any case a lot of UK and European-made products would also be in short supply, due to the amount of raw material and components that come from the Far East.

A situation that no-one two months ago could have foreseen is the possibility that UK companies might have to let employees work from home if the number of infections in the UK continues to rise. Quite how this could work for a parts distributor or a service and repair garage is anyone’s guess, but if the outbreak spreads further and there are more fatalities, who knows what might happen in the future?

Inevitably, the world will return to normal, and when this happens a new set of challenges may arise. “Even when factories do return, there are likely to be transport issues from the factory to the port and a lack of vessels to cope,” commented Silverman, adding that: “Another eventuality that may occur is that shipping companies and freight forwarders raise their rates to try to pull back the enormous amount of business they have lost.

“There will be further impact in the future,” he concluded.

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THE COUNTDOWN BEGINS FOR AUTOMECHANIKA ISTANBUL


EVENT PREVIEW ON BEHALF OF AUTOMECHANIKA ISTANBUL

Automechanika Istanbul is preparing to host world leading manufacturers and suppliers allowing trade buyers an exclusive opportunity to network with exhibitors and industry experts from all over the world. Doors to this indispensable business platform open from 6th – 9th April 2017 in TÜYAP Fair, Convention and Congress Center (Beylikdüzü).

istanbul openingBuyers can discover the latest innovations in Parts & Components, Electronics & Systems, Accessories & Customising, Repair & Maintenance, Management & Digital Solutions and Car Wash, Care & Reconditioning.

Managing Director of Messe Frankfurt Istanbul, Tayfun Yardım said “Automechanika Istanbul, the automotive industry’s third largest trade fair after Frankfurt and Shanghai, will meet its visitors with many innovations and features of different activities this year.”

The show offers an extensive programme of lectures covering a wide range of subjects.  Returning in 2017 is the Automechanika Academy whereby top professionals from the automotive industry will discuss the latest topics of the sector. Tomorrow’s Mobility, Alternative Drives, Connected Mobility and much more will be discussed from from 6th to 9th April. in the e-mobiility and seminar area.

The 2016 show boasted an astonishing 38,000 square meters, with over 1,200 international exhibitors from 34 countries presenting their products and innovations to 42,000 visitors. For the 2017 edition, 80% of stand space has already been rebooked, and these exhibitors will showcase their products and services across 13 halls. The 2017 edition is a must-visit for anyone looking to grow their aftermarket and OE business in Turkey, Eastern Europe, Asia and North Africa.

“In recent years, many foreign exhibitors as well as domestic companies have continued to grow with intense interest and demand, and many new participants will be present this year.” said Alexander Kühnel, General Manager of Hannover Fairs.

Register for your visit today: registration-automechanika-istanbul.tr.messefrankfurt.com/Home/OnlineDavetiyeFormu?FID=14&lng=en

For more information: automechanika-istanbul.tr.messefrankfurt.com

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COMLINE RECEIVES QUEENS AWARD FOR ENTERPRISE


Divyesh Kamdar invites CAT to tour Comline Auto Parts’ HQ in Luton

Queen's Award

Comline receives the Rose Bowl and Plaque signed by Her Majesty the Queen

Today marked a red- letter day on the Comline calendar as the firm prepared to receive the prestigious Queen’s Award For Enterprise: International Trade 2016.

It is undeniable that the past four years have notably been the firm’s strongest yet in terms of export and trade opportunities with sales now reaching over 20 countries in Europe and 40 countries worldwide. Since 2012 the company has trebled its oversees earnings and ranked in The Sunday Times HSBC International Track 200 league table as one of the private companies with the fastest- growing international sales over a two year period. The acquisition of Motaquip from PSA in 2014 also helped contribute to the company’s expansion plans and recent appointment. Managing Director, Divyesh Kamdar explained: “Comline continues to enjoy considerable success here in the UK, but our export growth over the past four years has been nothing short of staggering”.

HONOUR
Like the other companies in the issue that have received the Award, the ceremony follows a similar pattern: The firm receiving the Award, plus guests are assembled in the largest space available, the Lord Lieutenant turns up, often accompanied by the local mayor and other council dignitaries and after making a speech and reading a proclamation, a rose bowl is handed to the head of the company along with the right to use the Queen’s mark for the following five years.

This was the case on our visit, with Her Majesty’s Lord Left Lieutenant of Bedfordshire Helen Nellis handing the bowl to Divyesh Kamdar. “What a moment this is for everyone associated with Comline” said Kamdar. “We are incredibly proud to be a British company, and I can think of no greater honour than receiving such an important accolade directly from HM The Queen”.

We were interested to have a look around and see what the company had been doing to earn the gong for export. We met Dr Keith Ellis, Director of Braking Product Development,who provided an overview of the in-house technical centre: “This is a facility we put together in the last 18 months because we needed some technical capability actually on site” he told us, while showing some of the equipment. Ellis also mentioned that the team perform rigorous testing on their manufactured products making sure they are of high quality before being boxed up and distributed to workshops.

After exiting the test centre, we took a tour of the 175,000 sq ft. facility containing long aisles of Comline’s wares. Divyesh elaborated: “Our biggest and fastest selling line is filtration which represents 40 per cent of the business, braking 40 per cent and all of our other products represent 20 per cent” Divyesh elaborated: “Filtration is our strongest product group because in that mid-market segment we have 2,500 part numbers. We rank high because there aren’t many other players in this segment”.

Ishan Kamdar, Comline’s Business Development Director, explained that the acquisition of Motaquip proved to be a logistical challenge following the acquisition of that company from Peugeot in December 2014, with the stock
having to be transferred from the French firm over to Luton during the Christmas break, something that turned out to be ‘fun and games’ for the first months of 2015.

Comline HQ in Luton

Comline HQ in Luton

BUSINESS PLANS
Acquiring the Queen’s Award for Enterprise is only the beginning as the firm has many business ventures ahead to continue as one of the larger aftermarket distributors of European, Korean and Japanese parts. “We will be re-launching a couple of product groups, clutch kits as well as a range of new wheel bearing kits at the Automechanika Frankfurt show” said Divyesh, “We will continue our European expansion with France and Germany being our key target areas and increasing the importance of the eastern European countries that we still don’t serve”.

For those of you attending the Frankfurt show can visit the Comline stand in Hall Five to find out about its newest product lines or discuss any business opportunities with its team of professionals. Divyesh concluded: “We’re also planning to go to the Automechanika Moscow show to have a look and see if we can start up any trade opportunities there. As far as the UK’s concerned about Comline, with our raised profile and the fact we provide value, we hope the buying groups will take us more seriously as we go forward”.

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AUTOMECHANIKA B’HAM DIRECTOR INTERVIEW

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AUTOMECHANIKA B’HAM DIRECTOR INTERVIEW


Why Birmingham?

<A> For us it was a no-brainer.. There are a lot of people in the UK who want to attend an aftermarket or supply chain exhibition, but at the moment have to go to Frankfurt. It’s time and money to get over there. What we are offering is the opportunity to get to a show that is only an hour or two (OK, if you live in Cornwall its further, but you can do it in a day) It costs you only your petrol and a limited amount of your time. You could attend the show just for a morning if you were really pushed for time.

I know that Messe Frankfurt did a lot of analysis on this and clearly it is a risk to hold two shows in Europe in the same year, but the analysis showed that this wouldn’t happen. Frankfurt has more exhibitors than ever this year despite the fact that Birmingham is on. Perhaps a few of the smaller companies have made a decision between the two, but next year there is no decision to make as there is no Frankfurt show.

Historically NEC aftermarket shows haven’t worked well. Why will AM B’ham be different?

<A> It’s all about the brand. It has stuck me since we announced this show is that the brand is so well known. This isn’t just the world’s largest automotive trade show – it is the world’s largest trade show brand in any product category. So when people see the Automechanika brand it gives them confidence because we consistently deliver great trade shows around the world. They know that they are coming to something that is a trusted event and will deliver what they are hoping for.

Is it sustainable to run a show of this size in the UK every year?

<A> We know there was demand in the first place to run an annual show. The analysis was done and our partners at SMMT felt there was real demand for an annual show. That said, we will run the show as often as the industry demands it – and over the next few years we will see what the demand is.

 

Did you ask potential visitors what the wanted, and who they wanted to meet at the show ahead of launch?

<A> Research into what the exhibitors and visitors want is key. Because this is a launch event, we have surveyed all of the exhibitors about whom they want to meet at the event and what they want out of them. In the aftermarket, it was very clear who that was so it enabled us to build our marketing plans and build a seminar programme to attract them to the event. However, it was very clear to us that it was the exhibitors [rather than just seminars or other programmes] that draw visitors in the UK to an event.

Was it difficult to draw the floorplan without upsetting some people?

<A> We treated it as a level playing field. It was a case of first come first served. Obviously some of the bigger stands are at the front of the halls, so that was the only thing that we did plan. The great thing about the way the plan is organised is that it will encourage visitors to walk the whole of the three floors and to really browse. While we expect them to plan who they are going to see to an extent, we really want them to browse and talk to the wide array of exhibitors that we have.

I realise the show is not as big as Frankfurt –

<A> Well, not this year! We’ll organise the exhibitors according to product categories, the country they’re from and supply chain and aftermarket.

 

 This is a VM supply chain show as well as an aftermarket show. Do you see one putting the other off?

<A> I don’t see any putting off of people whatsoever. I think it’s great to get the whole industry together. Other Automechanika’s have this offering as well and it’s something the industry has been crying out for.

What steps have you taken to ensure the ‘high rollers’ of the aftermarket buying groups attend?

<A> We’ve seen already that some of the usual suspects in the aftermarket have registered, but yes, we want to make sure we want to make sure they turn out in numbers. In fact we’d love all of the individual branches of the major motor factors to come along, because the opportunity for these branches is to meet the parts manufacturers face to face and be able to touch the products. From that perspective we sometimes don’t get to hear from the horse’s mouth and for the distributors and motor factors they can learn about some of the products and services from the manufacturers directly. In turn this will help them sell the products to their customers.

The exhibitors have said to us that they don’t just want to meet the big buyers – they want to sell to people indirectly.

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CLOCKING STORY GETS INDUSTRY REACTION

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CLOCKING STORY GETS INDUSTRY REACTION


Mileage correctionA newspaper has carried out an investigation into so-called ‘mileage correction’ companies. The Sun paid half a dozen companies around the country to reduce the mileage on vehicles. Each firm had a disclaimer that mileage correction could not be used for profit, but all agreed to change the odometer on an ‘ask no questions, tell no lies’ basis.

The investigation pleased Sue Robinson, Director of the National Franchised Dealers Association “We are encouraged to see that The Sun has carried out an investigation into companies offering odometer adjustment services” she said, adding that an EU proposal to outlaw such companies ‘does not do enough’ to combat the issue.

However, there is a fear that tight regulation will do noting to deter criminals and make work harder for technicians and could be used by VMs as a way for VMs to excuse ‘locking out’ the independent sector.

One commenter on the newspaper’s website observed: “A car’s dashboard reading should never be trusted. A buyer should always ask to see the service history, stamped service book, service, repairs and tyre invoices and all MOT certificates”.

Interestingly, it is franchised dealers that have the most to gain from a ban. It is believed that the fastest growing area for mileage fraud is nearly new vehicles on lease hire schemes, where the keeper can be fined up to 50p per mile over the agreed mileage.

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RENT, LEASE OR BUY?


Adam Bernstein – What is the most efficient way of getting your hands on new kit? The answer might just surprise you

Adam Bernstein

Adam Bernstein is a freelance business writer, specialising in management, marketing and law

No matter the size of business or the sector you operate in, you will, from time to time, need to acquire assets or capital equipment such as vehicles, computers or other machinery just so that you can operate. The question is how you pay for them. Do you use cash to save on paying interest, but deplete your reserves? Or do you rent or lease the equipment but with, of course, the inbuilt charges added on by the supplier?

There are advantages and disadvantages to all three options. Part of the mental mathematics relates to the term of any lease or rental agreement and the expected life of the item being acquired. Too long a term and it’s entirely possible that an asset that needs replacing before the agreement is completed, the result being a dent in your cashflow as you need to finance two pieces of equipment at the same time.

BUYING OUTRIGHT

As with anything, buying outright is generally always the cheapest option, especially if you have cash on one side that can be spared or if you consider ownership important. However, capital expenditure of a significant value when compared to the size of your business will undoubtedly have an effect on your short term cashflow. Simply put, there may well be circumstances where the wiser move is to rent or lease rather than buy outright.

Another consideration is that you may need some form of bank borrowing – an overdraft or loan – to fund the purchase. While bank finance can be hard to obtain, an overdraft should be avoided if for no other reason that it may be withdrawn at short notice with early repayment of loans demanded – this can present a clear hazard to cashflow and even the continued existence of the firm.

By buying, rather than leasing, you may not be able to take advantage of the economies of scale that the lease or rental company can secure. In other words, the unit cost of the device will cost more even though you may pay no interest. But there is another potential pothole. Buying on your own initiative could involve missing out on any product knowledge and experience that a leasing or rental firm may have built up over time. They have no vested interest in what you buy (only in that you buy). The equipment seller, in comparison, would have an interest in what you buy and at what margin they can make.

There’s also the problem of matching the purchase with the timing of income (unless, as we’ve seen, you can buy from reserves) which may put cashflow at risk. Lastly, buying outright means that you will be responsible for the maintenance and repair of the asset. Your own views on risk will determine your attitudes to breakdown or replacement.

HIRE PURCHASE AND LEASE ARRANGEMENTS

As we’ve seen, paying cash for a purchase means depletion of cash which could be used elsewhere. The alternative is paying on installment. But with interest on any hire purchase and lease agreements as part of each payment you will pay more for the asset in the long run.

Also, with leasing you may never own the asset outright (although some lease arrangements, cars being a good example, let you buy the asset at the end of the agreement for an additional final amount). The key benefit of a lease is that you can replace equipment without the expense of buying newer models or having the later problem of disposal.

Hire purchase, on the other hand, allows for you to legally own the asset once all the payments have been made.

One important calculation in the ‘lease, rent or buy’ decision making process is a comparison of the interest rate applied by the finance company, the interest likely to be charged by a lender on a loan or overdraft arrangement, and the interest that can be earned by having cash on deposit. It’s also important to note any other additional fees which may be levied on an agreement as well as the costs of breaking an agreement early.

TYPES OF LEASE

Leases come in a number of variants and you need to consider which is most suited to your circumstances and the item that you are seeking to acquire. For our purposes we’ll consider finance leasing and operating leasing – the two main types.

Finance lease

With a finance lease you are effectively paying to use the item over its useful life – typically three years plus – after which you have the choice of selling or scrapping the item or paying a nominal rent for it. The leasing firm generally will not want it back. This is because the leasing company will recover the full cost of the equipment, plus charges, over the period of the lease through your payments (usually monthly). The benefit to you, the user, is that you do not have to worry about any of the maintenance and insurance issues relating to the item.

Operating lease

Some equipment can have high maintenance costs, become quickly outdated, or is only used occasionally – computers and other IT equipment for example. These items are prime candidates for an acquisition via an operating lease.

Operating leases can offer great benefits if asset is not required for the whole of its useful life. Lower costs follow because at the end of the lease the item will revert to the leasing company for re-lease elsewhere. Again, maintenance and insurance matters relating to the asset will not be your responsibility – these will belong to the leasing company.

Leasing or renting assets has a number of advantages that include improved cashflow because there’s no need to pay up front for an item; a higher level of equipment can be specified because the cost can be spread over time; budgeting is easier as costs and interest are fixed over a given period of time; income and payments can be matched over the lease agreement; the burden for breakdown risks belongs to the leasing company; and equipment can be upgraded for a small fee (whereas owning outright means a sale and purchase process).

But as there advantages of leasing and renting, so there are disadvantages to consider.

The first to note is that agreements usually demand a deposit and/or some payments being made in advance. As you will effectively be borrowing from a firm with a profit motive, renting or leasing will be more expensive than buying outright. Further, by taking on an agreement you will be locked into an  inflexible medium or long-term agreement, which may be difficult, or at least expensive to terminate. and of course, leasing means that you do not own the asset, although you may be able to buy it for a lump sum payment at the end of the term. Lastly, many leasing companies require their customers to be VAT registered.

TAX CONSIDERATIONS

VAT

Rent, Lease or Buy? HMRC has specific rules on how tax reliefs are applied when acquiring business assets and these vary depending on whether you buy them outright, or on the type and length of the lease. This also affects whether VAT will be charged upfront or periodically.

The first thing to note that the cost of renting or leasing an asset is deductible as a business expense so this can reduce your overall tax bill.

If you expect to own the asset at the end of the lease or hire purchase period, you will have to pay VAT on the whole value at the start of the contract. If you are VAT-registered and want to reclaim VAT and sell the asset, you may have to account for VAT on the selling price. You may also have to account for VAT on the value of the asset if you give it away for free.

If you will not become the owner of the asset at the end of the agreement, you will find that VAT will be payable periodically. (For leased vehicles, the right to recover VAT is restricted).

Capital allowances

When you buy plant, machinery and IT equipment, you can apply capital allowances and effectively deduct a proportion of the cost from your taxable profits. For the first £200,000 of capital expenditure in a year the Annual Investment Allowance (AIA) allows a 100% writedown in the first year. Capital allowances can be claimed if you buy outright, through hire purchase or the item is acquired under a long funding lease (generally a lease of at least five years). In essence you can’t claim capital allowances with shorter leases, but because the lease is a trading expense, you can usually deduct the full rental costs from your taxable income.

TO CONCLUDE

There is no right or wrong answer as to whether buying, renting or leasing an item is the best option. The considerations can be personal and will depend on the likely use, lifespan, cashflow and interest and other charges. As the accounting body, the ACCA, notes: “Don’t let the tax tail wag the commercial dog. 100% relief for AIA may look appealing, but you must look at the wider picture, and whether owning the asset is really best for your long term plans.” Good advice from an accountant is essential.

EXAMPLE

A company wants to acquire equipment for £7500. It can buy it outright or lease it over three  years, paying quarterly. The company’s tax rate is 20%. The capital allowance rate is normally 18%, but in year one, the AIA allows 100% write-down for your first £200,000 of capital expenditure per annum. The example shows that outright purchase is still the lower cost but leasing can be less expensive than it appears and will ease cashflow.

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EXPAND YOUR HORIZONS OVER MULTIPLE SITES


Andy Savva: Everybody needs a plan to develop their staff and businesses, but is it wise to consider a franchise or multi-site model?

Andy Savva

Andy Savva has run various large independent garages and has been a troubleshooter for underperforming franchise workshops.

 

Over the years many people have asked me about the business models of the independent garages I’ve owned. Specifically, the business I get asked about the most is Brunswick Garage, which was conceived, marketed and branded as a main dealer alternative. The question that I was asked most often is: ‘why don’t you consider franchising the model?’

Well, it sounds good, expand the empire, grow the brand and of course hopefully get a better financial return. However, I believe it’s one of the most difficult industries to turn into a franchise. About three years ago a workshop in Coventry opened in a blaze of glory with the stated aim that there would soon be one similar in 25 major towns across the nation.

The originator of this idea was not from within industry but from the world of white-collar recruitment. I remember when the second site was opened I was asked my opinion and I was then as I am now very clear now that it’s practically impossible for it to succeed. To date I think I’ve been proved right as the business in question called in the administrators not long after a third site was opened.

There are too many processes, procedures, and interactions between customers and staff members that you can’t just franchise. We are dealing with emotions and behaviour that just can’t be accounted for. What works in one area of England may not necessarily work in another, there are so many variables and barriers to consider, customer and vehicle demographics, land and property costs differ up and down the country.

Having said that, there is no reason why your ambition should be to only run a single garage. There are a lot of examples of aftermarket business owners who do have garages over multiple sites, often in different towns. Of course there is a crucial difference between being an owner-operator of multiple businesses and developing a model for others to emulate.

However, no matter what your goals are as a business owner, it’s important to review the pros and cons of growing your business in order to hone your vision and assess potential stumbling blocks before they arise. Believe me, owning a multi-unit business is hard work. Below I have tried to highlight some of the key points to consider if you want to expand into multi-site independent garage operator.

MULTI-SITE PROS

  • Economies of scale: When purchasing parts of equipment, you should be in a position to achieve better prices.
  • Marketing activities can be combined: Wider message at a lower cost – increasing brand awareness.
  • Pool of talent: Staff can work between locations depending on need.
  • Reduced management: One manager could be spread over two or three sites.
  • Equipment sharing: There is the possibility of sharing specialist tools and diagnostic equipment – depending what services you offer at different locations.
  • Make money: More profit achieved with multiple sites.
  • Plan retirement: A successful multi-site can attract a larger corporate buyer if an exit strategy is the final objective.
  • Family institution: If family are involved could be easier to expand – families tend to form a grounded and loyal foundation. In built support system. It could bring long-term stability and trust. Having said that…

MULTI-SITE CONS

  • Dysfunctional families: Family businesses can create a lot of challenges too. Difficulties arise when it comes to succession planning, sibling relationships, promotion and leadership. This can result in dysfunctional behaviour affecting business decisions.
  • Increased capital investment: Opening a garage isn’t cheap.
  • Location is critical: Is it easy for customers to get to, and near transport links so they can leave the vehicle with you?
  • Local knowledge: What works in one area may not work in another. It is important to research and understand the customer type and vehicle demographics in that specific location.
  • Common policies: Multi-sites are difficult to manage if you don’t have rigid processes and procedures in place that are clear to all staff members.
  • Pay grade: It can be difficult to manage staffing levels and correct management structure with the right pay incentives.
  • Reputation spread: Poor customer service from one site can affect another site.
  • Cost control: Managing costs across several locations not easy. Controls need implemented. Cost can spiral out of control if other sites are not successful.
  • Personal touch: With attention divided amongst other locations there could be a distance created between stakeholders and staff.
  • Increasing difficult to attract competent, skilled staff – inherent with our industry.
  • Finding staff: It can be hard enough to get the right people for one site, let alone multiple locations.

Whichever way you may decide to take your garage – there are pitfalls and benefits in all camps – single site, multi-site and franchise. Ultimately it will come down to the desires and ambitions that you set yourself.

You can find out about Andy’s consultancy services by contacting savvaautomotive.com

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NEXUS DISCUSSES UK AFTERMARKET


Around 200 aftermarket suppliers met buyersNexusUK at the Nexus Business Forum held in Montreux, Switzerland in February.

The Nexus organisation was founded a couple of years ago by 14 European car part distributors, including the UK’s Parts Alliance. Describing itself as a ‘value focussed alliance of aftermarket leaders’ it has already achieved a total consolidated turnover of €7.25 billion in 2015 and has plans to extend this to €9 billon by the end of the next accounting period.

With sums of money this large floating about, it is perhaps no wonder that suppliers were only to keen to get a plane to the magnificent Montreux Palace hotel to engage in complex ‘speed-dating’-style sessions with the buyers. The event left plenty of time for less pressured networking and discussions as well.

In addition to the business meetings a plenary session was held to discuss the nature of the aftermarket including threats and opportunities that would likely happen over the coming months.

The event was well attended by many well-known aftermarket faces. We spotted Peter Sephton and Stan West of The Parts Alliance and GSF respectively, while on the supply side we met Laurence Bleasdale of TMD Friction, Nigel Cole from Denso and Andreas Habeck from Hella among many others.

We were particularly interested to note that an Iranian company, Alborz Yadak Trading, were among the companies competing for the attention of the buying groups. Iran has had a large manufacturing base for decades, but has been unable to trade with Western companies for years due to sanctions. Now diplomatic relations are open again, it will be interesting to see how products from the country are received into the aftermarket over the coming years.

There was also a panel discussion on the threats and opportunities that the connected car can bring.

Gael Escribe, Chief Exec at Nexus described how the reach of the organisation was to cover parts trading over the whole world. “Our vision is for one aftermarket and for Nexus to be a leader and not just a challenger” he said, reminding the audience that since foundation the organisation had achieved 59 supplier contracts and that places such as China that have traditionally been thought of as simply places where parts are made are now starting to consume components from around the world for their domestic parc.

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SAS AUTOPARTS ACQUIRED BY PARTS ALLIANCE

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SAS AUTOPARTS ACQUIRED BY PARTS ALLIANCE


Peter Sephton

Parts Alliance Group CEO Peter Sephton

Business group The Parts Alliance has swelled its ranks with the acqusition of SAS Autoparts. Terms of the deal were not disclosed.

SAS was founded in 1960 and has branches in Harrogate, Otley, Skipton, Bradford, Castleford and Northallerton.

The Parts Alliance’s Chief Executive Peter Sephton said he was excited to be welcoming new colleagues from SAS to the HgCapital-backed group

‘’SAS Autoparts is a great business with outstanding customer and staff loyalty providing local service in the Yorkshire area and adds to our national strength’’ he said.

HgCapital continues to support The Parts Alliance with the acquisition of SAS, which will be a wholly owned business within The Parts Alliance Group but will continue to trade locally under its own brand name and will continue under Managing Director David Brooks and his current management team.

Peter Sephton added: “This is a great acquisition which strengthens our presence in the north while encouraging a common vision and culture, but retaining local brands, entrepreneurial spirit and customer focus.”

David Brooks said: “We are looking forward to working with Peter Sephton and the rest of the management team and developing and growing SAS into an even better business.”

 

 

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