A BMW assembly plant. BMW SA said dealership "consolidation is the name of the game".Photo: Bloomberg
JOHANNESBURG - BMW South Africa has embarked on a process to consolidate its vehicle dealership network, largely in an attempt to reduce high inventory costs.

Tim Abbott, the managing director of BMW SA, confirmed the company commenced with such a process, but stressed it was not aimed at reducing the number of distribution points.

“We had 54 dealers and today we are at 52. Two have closed,” he said.

Abbott said the two dealerships closures were related to rebalancing their dealer network, because of the decline in BMW SA’s domestic new vehicle sales last year to below 20000 units last year from about 25000 in 2016.

He said consolidation was “the name of the game”, adding KwaZulu-Natal, for instance, had seven separate dealership owners when he arrived in South Africa to take up the position of managing director of the company and today there were two.

Abbott said this meant a lot of back-of-house logistics and accounting could be reduced.

He said the model going forward was “hub and spoke”, with the major operation in Durban and the South Coast, Pietermaritzburg, Newcastle and Pinetown the “spokes”.

“The car industry is very highly geared and it takes a lot of cash. We therefore have to reduce inventory costs and you can do that by consolidating owners. “We had more than 40 owners and it will be down to 22, so we have almost halved ownership. The truth of the matter is that if you look at one of our competitors, they are now going for a direct sales model,” he said.

Abbott said BMW SA still had independent dealers, adding some of its most successful dealership groups were privately owned groups rather than multinationals like Bidvest. Examples of this were its two dealership groups in KwaZulu-Natal, the Supertech Group and SMG.

However, Abbott said they had to have a blend between privately owned and multinational company owned dealerships. He said all the big dealer group had a rental arm, which was extremely important in the industry in terms of mobility.

Abbott said in certain areas BMW SA could have only a single owner, because the business model worked, but if another adjoining dealership became available for sale for whatever reason, they would not introduce a new partner, but probably merge that dealership with existing dealership partner.

He said although there had been a slight decline in the number of BMW dealerships countrywide, BMW SA had increased its Mini, M Series representation and BMW i electric vehicle sub brand.

“That has obviously brought (additional) employment to the dealerships,” Abbott said.

BMW SA’s plant in Rosslyn in Pretoria will from April commence with the production of the BMW X3 following the investment of more than R6billion in the plant after producing the BMW 3-Series for many year.

The BMW X3 produced in the Rosslyn plant will be exported largely to Europe, with Germany, the UK, France and Spain the big export markets.