Turners sticking with used cars

Turners Automotive Group has considered entering the new-vehicle market but it believes the used industry remains a “better bet” for the company.

Aaron Saunders, chief financial officer, addressed the possibility of teaming up with specific marques during the online presentation of Turners’ annual results on May 23.

He was asked in a question-and-answer session if the business would consider linking up with one of the new-vehicle brands emerging from China.

“I think most of the Chinese brands you see here are very well represented already in New Zealand,” replied Saunders, pictured.

“We have certainly looked at the new-car space and been close a couple of times. It has reinforced to us how much we like the used car business in that we control our brand presence and marketing.

“The new vehicle space is heavily prescribed by OEMs. We like the flexibility the used car business gives us. 

“We also like the fact that most New Zealanders buy a used car, not a new car, and feel there’s a big organic opportunity for us in used rather than new, which would require us to buy into an existing business.

“We see a pretty solid runway ahead of us in terms of our used-car expansion opportunities and that gives us four to five years of solid growth in the medium term.”

Todd Hunter, chief executive officer, added that having looked at new-car opportunities, the returns from the used-vehicle market “feel like a safer bet for us”.

Earlier in the webinar, he explained how Turners was seeing its sales increase as the overall used-car sector declines.

He noted government regulations have had a material impact on supply, resulting in fewer used imports coming into New Zealand, and demand continued to shift into the lower price point segments as a result of the current economic environment.

“We’re seeing smaller dealers reliant on used imports as their main supply channel leaving the market as it’s got harder to operate,” he added.

“Our expectation is those numbers will continue to drop by probably another 10 per cent over the next 12 to 24 months.

“Local sourcing [of stock] allows our business to direct purchasing to high-demand vehicle categories faster.”

Hunter said some of the previous risks for the business have narrowed because of the work it has done to manage and mitigate their effects.

The areas of the supply chain, recruitment and retention of people, and regulatory risks are now categorised by Turners as low when it comes to impacting the business’ performance and results.

“Recession moves from high risk to medium risk as the business shows it will perform well in this kind of environment,” he continued.

“Rapid increase in interest and inflation rates is a high risk… and the biggest challenge moving forward.”