Interview – Daksh Gupta Group chief executive officer, Marshall Motor Holdings
Leading by example during an ‘unprecedented’ crisis
Daksh Gupta is CEO of Marshall Motor Holdings, a retail group with 119 dealerships, around 4300 employees and a turnover of £2.3 billion last year. As well as thriving financially under his leadership, the company has earned numerous awards for its employee, equality and charity initiatives.
The coronavirus pandemic has thrust Gupta into the spotlight, not only for the manner in which he and his team have handled the crisis, but also for the leadership he has shown during it, as part of an initiative to represent industry views to government and as a clear voice in the media on related topics.
How bad have the past few months been for business?
“The data tells the story: it is an unexpected and unprecedented collapse to have new car registrations down by 97% and used car volumes down by between 80 and 85%.
“Looking at the retail industry as a whole, in 2019 the average dealer group made a 0.8% return on sales – so, for every £100m of sales, there was £800,000 of profit. The issue is that these businesses are highly operationally geared; to achieve that, you typically have a cost base of around 10%, or £10m in my example. In very simple terms, one month’s cost base is equivalent to one year’s profit – and we’ve now had to carry a lot of costs for a couple of months, with next to no income.”
What is your chief concern right now?
“Cash is everyone’s main concern. We are in a good position; we have a strong balance sheet, and there are very few dealers who can say that unless they have strong parent companies, such as Sytner with Penske.
“But even then it is precarious, because as we unwind the business and get back to work, debt will go up and working capital will increase. And then there’s the lost business to factor in; we estimate that closing in March cost us around £12m in profit. That really hurts, because we were flying. The market was down 31% for the month, year on year, but we were significantly better than that despite the early closures.”
‘The crisis will accelerate what was coming: a consolidation and rationalisation of the dealer network’
Have you sold any cars during lockdown?
“From lockdown in March to mid-May, we sold around 130 new cars, 1000 used cars and around 1300 fleet cars – not many compared with what we normally sell.
“The used-to-new ratio is interesting, though. Eight to one is incredible; we were delighted with a ratio of 1.7:1 last year and have a long-term ambition to hit two. It will be interesting to watch how that trend develops.”
Will a scrappage scheme help?
“I believe we will need some kind of stimulus in the market. The issue will be what form it takes; an environmental focus seems correct, but focusing solely on electric vehicles, which are relatively expensive, supply limited and in many cases not profitable, doesn’t help. Adding hybrids solves that, but I hope there is also an opportunity to include the latest Euro 6 engines, even diesels; this is a chance to reeducate people on the strides that have been made.”
How quickly would you like to see such a scheme?
“It has to be a quick decision. Data from the last scrappage scheme indicated that 91% of people who bought a car would not have done so without the incentive. It’s a profitable exercise for the Government, too, let’s not forget. Our average selling price for a car in our 2019 accounts was £23,700; that means £4000-£4500 of VAT on every car we sell. In addition, older, higher polluting cars come off the road and are replaced with modern, lower-emitting cars.”
Will the way we finance cars change?
“One of my mantras is to do the right thing by customers, and I actually think PCP and PCH work well as they are. What we need to do is work with customers to ensure they understand the best way to buy for them, and that they understand the advantages – such as care-free ownership – and the potential pitfalls.
“Some people are talking about seven-year terms, like they have in the US, becoming a thing. I must admit I’m not a fan. It lowers the monthly cost, but I believe it is too long to hold a customer in a vehicle.”
What will the long-term impact of this crisis be on the industry?
“It will accelerate what was coming: a consolidation and a rationalisation of the dealer network. I always believed there would be a 20-25% reduction in the number of dealers by 2025-2026. I now think that will happen in the next 18 months. Big groups will also get bigger.
“In terms of direct sales by manufacturers, I watch with interest. It’s been talked about for 20 years. But it has been fascinating – from some angles – to see how the market has frozen these past few months. Without dealers, manufacturers haven’t been able to deliver cars – or those that have managed it have forsaken all aspects of brand experience by taking it direct.
“A car is expensive; providing the right service for a brand is hard, from the valet to the invoicing, the administration, the part-exchange handling. These are not easy things to execute. I actually think this crisis has brought some of the positives of the dealer model into much sharper view.”
You say dealers will close and consolidate. Will all OEMs survive?
“No. There will be a reduction – absolutely no question. The European market is just too competitive to sustain the current levels. Today, there are 37 OEMs in the UK; I wouldn’t be surprised if there were 30 in eight years’ time. Some will leave, some will form partnerships and tie-ups. And some will survive but under new ownership. You can never predict for sure, but I’d expect there to be a few Chinese firms hovering, ready to buy brands that they know can give them a foothold here.”
What kind of recovery are you predicting?
“I don’t think it’ll be a ‘V’ or ‘W’, more of a ‘U’, but with a very low curve at the bottom. It is going to be very difficult for a period of time. People, companies and the country are taking on very significant debt.
“Thank God for the furlough scheme; if you look at the US, there have been something like 37 million job losses. That’s heart-breaking. But now we have to see how long we can keep it going in the right way as people can return to work.”
What toll has running the business taken on you personally?
“Well, last night I went to bed at 3.30am and today I was up at about 7.30am – and that’s a bit of a lie-in for me. But I do thrive on it, and I’m lucky for that.
“The variable is that I’m not just running our company; I’ve got shareholders who want to know what’s happening and I’ve got banks who need constant dialogue. And then there’s the industry aspect, which I am determined to put all my energy into, because it’s important not just for my employees but also the industry as a whole to be well represented to government.
“When I was in my 20s, I used to look up to guys like Sir Peter Vardy – leaders who would stand up and be counted on to do the right thing for the industry, not just their own interests. More of my peers need to do more if they can; collectively we are stronger, on this and a range of issues. We have to do the right things now and always or people won’t forgive us in the future. It’s an over-simplification, but directly there are 4300 people working for Marshall and I will happily do all I can for them.”
How will you personally approach the coming challenges?
“Mindset is the big one. Always be positive, have a great attitude. And then hard work, because it always pays off in some form. I’ve progressed by being positive, inquisitive and hard working – and I think it’s an attitude that will stand anyone in good stead.”