When I lived in China, I always watched the economic information from Guangdong province for clues as to where the overall economy was heading. Guangdong, in southern China adjacent to Hong Kong, is a trade powerhouse. If its economic growth slowed chances were good that China’s overall economic growth would also begin to slow.
I kind of think of California’s new car and truck registration figures, compiled by the California New Car Dealers Association, in the same way. As a harbinger of things to come in the overall market, that is. In 2016, registrations in California rose 1.6 percent compared to 2015 to 2,086,966 units. So, basically flat. The CNCDA forecasts a slight drop in registrations in 2017 compared to 2016, to 2.07 million units.
That’s certainly not a catastrophic slow down, but then no one really expected one. Nonetheless, dealers in California will have to work a bit harder to sell new vehicles this year. I’ll be keeping an eye on the used car sales. Will they take up the slack?
On to this week’s issue, which also makes me think of my days in China. When I first lived in China, in the mid 1980’s, foreign investment was just starting to trickle in. Then, during my second stint from 1991-93, China had established a handful of Special Economic Zones to attract foreign investment and it was starting to pour in. Companies had dreams of selling to hundreds of millions of Chinese consumers. By the time I moved there for the third time, in 1996 (well, I moved to Hong Kong then.), China seemed like a golden business opportunity to many companies.
Alas, it turned out not to be so for some investors. I heard many stories of joint ventures gone bad, often because the Chinese partner turned out to be inappropriate. Had the foreign partner applied the same level of due diligence to that Chinese partner – both financially and culturally – that it likely would have to a partner in the U.S., the failure might have been avoided.
This week, Dan Schneider from The Rawls Group discusses the importance of cultural due diligence when considering a dealership acquisition. If its culture is not compatible with your management style, a new acquisition can flounder.
Also this week, we have a piece from Compli that looks at some areas that dealers might be investigated in for lack of compliance, and some weak points for dealers in terms of compliance.
And of course we have our weekly Transaction News.