Evaluation of impact of government program for final car market on car dealers

Hans-Günther Barth

Doctoral thesis

Abstract:

The object ive of the dissertation is to evaluate the impact of the German 2009 AVR on the financial posit ion of the German car dealership expressed as ROI and its main components EBIT and balance sheet total. Further specific strategies in this industry are indent ified and related recommendat ion made. A sample of dealerships of the major car brands by numbers of new registrat ions per year (VW, GM, Ford-Mazda) with an absorbt ion of 58% of the AVR volume and a 25% to 30% increase in new registrat ions from 2008 to 2009 are compared to BMW dealers, the car brands distributed by those coming to a portion of just 2% of the AVR and new registrations drop by 10% in that time span. In accordance to expectation in the VW, GM, Ford-Mazda group (benefiter) ROI is improved substant ially and significant ly (level 0.05). Against expectat ion in the group of BMW dealers ROI also is improved as an average, but not significant ly and to a much lower degree than in the benefit ing group. In both of these groups improvement of financial posit ion is based on higher EBIT and simultaneous lower average balance sheet total. Due to turnovers boosted by subsidized sales, economy of scale effect is the driver for increased EBIT in the benefit ing group whereas in the non-benefit ing group EBIT improvement is based on improved gross profit rate. In the group of the benefiters correct ion of selling policy is to be observed by refraining from turnover oriented, low profitable business with commercial buyers. Balance sheet total and related volume of financing credit was reduced significant ly and substant ially in both groups. Together with decreased effect ive interest rates, saving in interest expense contributed more to the observed increase of EBT, a crucial item for the dealerships in the sample as being closely held enterprises, than German 2009 AVR. Various strategic measures and strategies are in place in the sample, none of them clearly advantageous in terms of financial posit ion measured by ROI. From a comparison between brands it can be concluded that consumers brand loyalty is economically exploitable by car dealers, thus mult i branding is the most recommendable strategy for German car dealership industry.

Abstract:

The object ive of the dissertation is to evaluate the impact of the German 2009 AVR on the financial position of the German car dealership expressed as ROI and its main components EBIT and balance sheet total. Further specific strategies in this industry are indent ified and related recommendat ion made. A sample of dealerships of the major car brands by numbers of new registrat ions per year (VW, GM, Ford-Mazda) with an absorbt ion of 58% of the AVR volume and  25% to 30% increase in new registrat ions from 2008 to 2009 are compared to BMW dealers, the car brands distributed by those coming to a portion of just 2% of the AVR and new registrat ions drop by 10% in that time span. In accordance to expectation in the VW, GM, Ford-Mazda group (benefiter) ROI is improved substant ially and significant ly (level 0.05). Against expectat ion in the group of BMW dealers ROI also is improved as an average, but not significant ly and to much lower degree than in the benefit ing group. In both of these groups improvement of financial posit ion is based on higher EBIT and simultaneous lower average balance sheet total. Due to turnovers boosted by subsidized sales, economy of scale effect is the driver for increased EBIT in the benefit ing group whereas in the non-benefit ing group EBIT improvement is based on improved gross profit rate. In the group of the benefiters correction of selling policy is to be observed by refraining from turnover oriented, low profitable business with commercial buyers. Balance sheet total and related volume of financing credit was reduced significantly and substant ially in both groups. Together with decreased effective interest rates, saving in interest expense contributed more to the observed increase of EBT, crucial item for the dealerships in the sample as being closely held enterprises, than German 2009 AVR. Various strategic measures and strategies are in place in the sample, none of them clearly advantageous in terms of financial position measured by ROI. From a comparison between brands it can be concluded that consumers brand loyalty is economically exploitable by car dealers, thus multi branding is the most recommendable strategy for German car dealership industry.

Keywords

financial position, car dealership industry, Accelerated vehicle replacement

Keywords

accelerated vehicle replacement, car dealership industry, strategy

Language used: English

Date on which the thesis was submitted / produced: 10. 12. 2015

Thesis defence

• Supervisor: doc. Ing. Pavel Syrovátka, Ph.D.

Mendel University in Brno

Faculty of Business and Economics

Doctoral programme / field:
Economics and Management / Business management and economics