There was a lot the automotive industry could still do to sustain itself in the current difficult economic environment, McCarthy CEO Brand Pretorius asserted on Wednesday, saying that there was no need for the industry to feel hopeless and helpless.

Speaking at the Retail Motor Industry conference, held in conjunction with the Automechanika South Africa exhibition in Johannesburg, he highlighted a number of measures that the industry should consider in the current environment.

A significant dealer network rationalisation was needed to ensure the competitiveness of dealerships, while constructive partnerships and more favourable business terms had to be agreed on between the original equipment manufacturers (OEMs), importers and local dealers.

Margin restoration on new vehicles, used vehicles, parts and services were needed, while dealers also had to increase their supplementary income from finance and insurance.

More efficient processes and operating systems, aggressive cost-cutting measures, an improvement in staff productivity, reaching maximum levels of customer retention and higher levels of after-sales contributions would all assist dealerships to survive the difficult times.

Meanwhile, consultant and scenario planner Clem Sunter suggested that cutting vehicle prices was a solution dealerships had to consider.

Sunter explained that, at some stage the cost of interest on stock, had to outweigh the cost of offering discounts on new vehicles.

However, Pretorius said that it was not possible to just discount vehicles, as the overhead costs for dealerships were very high, as they had in the past few years invested in capacity for forecasted growth through to 2011.

In addition, new vehicle throughput had dropped by 50% from the 2006 levels, said Pretorius.

Sunter also urged the automotive industry to take into consideration whether they should retrench workers or rather cut their salaries. Sunter said that it would be advisable to rather cut salaries, as when the economic conditions improved, the industry would need these skilled employees.

Meanwhile, Pretorius noted that the automotive industry in South Africa had, in some segments, most notably the used cars, parts and services sectors, started showing some recovery.