For the past 25 years, there have been regular scares in the motor trade concerning the threat of incursion by one of the massive retailers capable, at least in theory, of combining financial clout and money lending capacity with real estate and a liking for the F&I profits associated with car sales. Tesco has been treated as the leading potential contender, if only because of its pre-eminence among UK retailers.

The revised Block Exemption Regulation of 2002 brought some to imagine that a Tesco could just turn up and meet a chosen vehicle manufacturer’s stated objective franchise criteria and then flex its muscle in a way that even the biggest franchised dealer groups have never done. That never happened, and for good reason. The somewhat liberalised multi-franchising provisions of the 2002 BER never made the economics of dealership management strikingly different, or strikingly attractive to general retailers.

The closest motor retailing in the UK got to the big retail chains was with Sainsbury’s Drive programme, which depended on traditional motor trade intermediaries, and Virgin Cars, which depended, fatally as it turned out, on a less traditional motor retailer.

It’s not just these antecedents that make the launch of Tesco Cars, with its largely online presence as a direct retailer of de-fleeted lease and rental stock, less exciting than it might have been 20 or even 10 years ago. Tesco has, we understand, bought a significant minority stake in an existing online business, Carsites. But before it did so, the car supermarket had already begun to come of age, with several strong brands emerging from within the motor trade, and several online routes to an enormous array of used cars which can be retailed effectively by businesses large and small, specialized and generalist. Tesco can no longer bring so much to the party that’s entirely new.

It’s relatively easy enough to get some incremental revenues by lending your name to outsourced operations such as Tesco Tyres, Tesco Car Insurance and Tesco Breakdown Cover; much less so for a general retailer or supermarket to integrate such specialised operations vertically.

A plug: This reflection was prompted by Trend Tracker beginning work on the next, 2011 update of our The Future of the UK Used Car Market report.

Toby Procter

Trend Tracker Limited

0870 421 4350

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