Margin left dealers – Newspaper Kommersant No. 162 (7363) dated 09/05/2022

As Kommersant found out, car dealers in the Russian Federation began to earn two to four times less on transactions for the sale of cars compared to the beginning of the crisis. The shortage of new cars on the market led to a reduction in trade-ins and a drop in the supply of used cars. Now dealers buy used cars mainly from the street or when exchanging an old car for a used one – the share of such transactions in the total volume is actively growing.

March was the most profitable month for Russian car dealers in 2022, with sales in the premium (from RUB 6 million) and budget (up to RUB 500,000) segments the highest margin among used cars — 28% and 27%, respectively. These data are provided in a study by Maxposter, a developer of IT solutions for managing sales of used cars (part of Avito), based on an analysis of 10 million ads on three autoclassifieds and 230,000 transactions. The trend was confirmed by dealers surveyed by Kommersant: in Avtospetstsentr, February-March was named the most marginal period, in Avilon and Fresh Auto – March, in Avtodom – March-April.

“March has become the most profitable month for auto retail in terms of marginality both in the segment of new cars and in mileage,” agrees Fresh Auto CEO Denis Migal. “Today, this figure has decreased by about 4.1 times, although demand for new cars increased slightly compared to July due to an increase in the supply of Chinese and domestic brands.” “In March, customers were eager to make a deal as soon as possible. Then traffic and demand gradually stabilized and are now at a moderate level,” explains Nikolai Baskakov, director of Avilon Used Cars.

Sales margins have halved compared to the beginning of the crisis, says Alexey Zhirnov, sales director for used cars at Avtodoma Altufyevo. Vladimir Zhelobov, director of the used car department at Avtospetstsentr, talks about a two-three-fold reduction in margins compared to the beginning of the crisis.

Dealer revenue for both new and used vehicles was highest in February, the study says. This correlates with sales volumes – then the market for new cars reached its maximum for the year. According to Avtostat (using data from electronic PTS), in February the market amounted to 99.1 thousand cars, and the Association of European Businesses (using data from automakers, including LCV and excluding BMW and Mercedes-Benz) estimated the market at 114, 3 thousand cars. In March, they estimated the market volume at 78.9 thousand and 55.1 thousand, respectively, and then – about 30 thousand monthly.

On the used car market, the peak month was March, when 424 thousand cars were sold, calculated in Avtostat, while in February – 377.1 thousand. about 320-350 thousand cars.

Recall that most foreign automakers, except for Chinese ones, have suspended the supply and production of new cars in the Russian Federation since March. Since June, as warehouses have been depleted, the main source of replenishment of the assortment for dealers has been buying from the street, they say in Maxposter. The share of trade-in transactions for used cars (trade-up) also increased significantly – by 50% from May to July.

Avtostat calculated that in the first half of the year, the share of dealers in the used car market fell by 2.9 percentage points compared to 2021, to 10%, due to a decrease in the supply of such cars through trade-in.

For a long time, trade-in transactions for new cars remained the main source of receipt of used car dealers’ warehouses, Alexey Zhirnov confirms: a used car (newer or, conversely, cheaper with a surcharge) and a ransom from the street. The share of the exchange of used cars under the trade-in system in Avtodom is about 30-40%, in the whole market it reaches 50%, he adds.

In Fresh Auto, the share of trade-in in the used car segment reached 45% in August, while it was 35% a year earlier. Nikolay Baskakov notes that the share of such transactions was approximately 15% earlier, and now it is 22% and will grow to 25% in the future. Vladimir Zhelobov from Avtospetstsentr notes that there are fewer new cars on sale, so expensive used cars in good condition are in great demand.

Olga Nikitina