Pessimism in the car industry has led to a fall in the number of dealers that expect to increase their profits in 2017, according to the MHA ‘Motor Dealer report’.

The number of dealers expecting an increase in profits has fallen to 24%, a 20% drop from last year’s figure, and 76% said that Brexit would have an adverse impact on the sector.

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MHA said that the ‘profitability landscape’ was under pressure from many factors, including consumer confidence, purchasing habits in relation to a potential diesel scrappage scheme, and reductions in retail registrations.

The accounting firm said that the media and Financial Conduct Authority (FCA) attention on alleged mis-selling of personal contract purchase (PCP) had also had an impact.

The report found that pre-registration figures had the main adverse pressure on dealer performance. The respondent stated that they expected to drive their 2017 performance through used car sales.

Despite expecting lower profits, 60% of dealers planned to grow over the next 12 months, slightly down from the 64% that said so in 2016. A majority of the dealers, 62%, expected organic growth and redevelopment to be their main focus.

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MHA said that 7% of dealers expected to exit their business, and 8% intended to acquire, reporting a slowdown in M&A activity.

Online car sales were seen as integral to the car purchasing model in future, with 94% of dealers taking this view. Of those dealers, 63% expected this to happen within five years.

A large percentage, 59%, of the dealers that responded to MHA said they were ‘very happy’ or ‘happy’ with their franchise partners’ strategy for ‘future proofing’ alternative fuel vehicles (AFVs) and autonomous vehicles.

Steve Freeman, head of MHA’s motor sector, said: “I am not surprised to see the survey results confirming the marked change in dealer confidence levels we gave heard from our clients recently.

“The industry is really going through a period of change and I do think that online developments may start moving at a pace now.”