A squeeze on margins in all areas of the motor vehicle industry is making an already competitive sector even more so, a report out this morning says.
The KPMG non-bank financial institutions performance survey says competition in the motor vehicle industry is coming from all places - from new cars, finance, insurance and leasing, down to second-hand vehicles.
The only winner was the consumer, KPMG head of financial services John Kensington said.
Survey participants reported vehicle dealers' overall margins were being eroded by high sales targets set by the manufacturers and the need to cut margins to get the last few sales away.
‘‘Our participants commented that vehicle manufacturers are placing very high expectations on brand retailers and setting high targets before any rebate can be achieved.''
That had several flow-on effects. It had forced dealers to pre-register vehicles and build inventory funded by bank and non-bank vehicle lenders.
But sales margins were depressed when the ‘‘target'' vehicles had to be sold, he said.
Dealers were starting to see low margins become even lower.
The increased need to sell vehicles to get rebates was driving down the price of second-hand vehicles.
It was also making dealerships more reliant on finance and insurance income, as well as service and parts revenue.
‘‘Anecdotally, we've also heard although the number of vehicles registered has increased, a large proportion of this increase has been to the rental market where margins are traditionally low.''
Motor vehicle lenders were also facing increased competition, with new players entering the market and seeking to gain market share with attractive deals, Mr Kensington said.
Two new entrants being talked about frequently were Nissan Financial Services and Branded Financial Services.
On the positive side, the survey reported participants in the motor vehicle financing sector continued to show good improvements in impairment asset expenses.
Three of the six motor vehicle financing companies managed to reduce their impairment charges with a combined $2.95 million reduction across the three companies.
Dunedin's Motor Trade Finance continued to prove attractive to parties wanting to acquire a stake in or buy the company with approaches from Heartland and Turners Finance in the past year, he said
