A dealer sentiment survey, by Cox Automotive UK, has reported 54% of dealers expect conditions to toughen in 2020.

Almost a third of dealers (29%) said they expect margins to remain the same year-on-year, suggesting continued pressure on trading and margins.

However, 61% of those surveyed believe business confidence will improve in 2020.

Cox Automotive UK said those surveyed represent the views of independents, franchises and industry commentators.

Philip Nothard, customer insight and strategy director at Cox Automotive UK, said: “With so many political and economic influences outside of the dealers’ control, it is no wonder 2019 proved to be a year of fluctuation in both the new and used markets.

“Supply constraints drove strong used prices and market conversion rates, but the increase in costs, reduction in efficiencies and challenge of falling consumer confidence saw margins come under increasing pressure.

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“Over the coming year, we expect to see further merger and acquisition activity, as well as investment in technology and data insights to allow dealers to take greater control of their process efficiencies and potential for profitability.

“However, despite bounce backs following the recent election and political decision-making, the road ahead remains uncertain. It is no surprise that most of the dealers in our survey are wary about what 2020 has in store,” he added.

Nothard singled out three areas which he expects to impact upon franchised retailers in 2020. The push to significantly increase electric vehicle (EV) volumes in light of corporate average fuel economy (CAFE) regulations in the US, the outcome of the UK’s Financial Conduct Authority (FCA) consultation into DiC (difference in charges) and the network strategy from OEMs, leading to further consolidation and shrinkage in the market.

Nothard said: “As manufacturers seek to minimise the impact of CAFE regulations, among other environmental legislation … we can expect to see further pressure on retailers to deliver a step-change in EV sales.

“SMMT data shows significant growth in this area (from a relatively low base point), but retailers and manufacturers will need to go up another level to meet the stringent incoming targets and reduce the potential for fines.”

The FCA consultation into discretionary commission closed 15 January 2020, with results expected in the Spring.

Nothard said: “Whatever the specific outcome, it is clear some dealers will need to rethink their finance model. Transparency in commission disclosure, the reduction in types of acceptable commission and the banning of commission linked to interest rates will all have an impact.

“In reality, however, many dealerships will have already made changes. FCA intervention of this level has been on the horizon since 2016. For many, the impact will come in levelling out the playing field around finance, pushing dealers to shift their emphasis from pricing back to customer service when it comes to differentiating the purchase experience,” he concludes.

 Cox Automotive describes itself as a service business providing solutions to clients at every stage of the vehicle lifecycle.