BCA INTERVIEW: Residual bounce-back?
27 March 2009
"The market is as strong as it has been for some time, but I don't know about the future. It's not a recovery yet - we would need months of positive action before saying that," Jon Olsen, BCA
Jon Olsen, chief executive of auction company BCA, speaks to Tristan Young about the ongoing recession and why he's tentatively predicting an RV recovery
Low volumes of new car registrations this year will see residual values bounce back in three years' time, if the economy isn't still in recession, according to BCA chief executive Jon Olsen.
Speaking exclusively to BusinessCar, Olsen said: "It's very hard to tell, but if the new car market is down at 1.7 million or so this year, then in three years' time there will be higher residual values - if demand is still there."
While BCA's conversion rate, the percentage of cars sold versus those that didn't sell at auction, was at a record high of 92% in January, Olsen stopped short of saying the market was already in recovery.
"The market is as strong as it has been for some time, but I don't know about the future. It's not a recovery yet - we would need months of positive action before saying that."
Although the start to the year has been good for BCA's conversion rate, Olsen expects 2009's auction volumes to be down fractionally on 2008.
"It comes down to new car sales - if there are fewer new cars sold then there are fewer trade-ins."
He also said that "most lease companies will have a high level of extensions" this year.
BCA is planning to focus on helping its customers through the recession with its core services, commented Olsen.
"We just need to be more efficient; it's a mind-set. Things are tough in the world and we've got to make sure we're sensitive to the needs of the customer's demands.
"If the market's good, everyone's feeling rosy, so they're not quite as sharp on the basics. They're looking at growth opportunities and new markets.
"However, now it's hard so the focus is more on the business you've got. It's the same for our customers, so we help them come out in reasonable shape."
However, while BCA is going to concentrate on the basics, Olsen also hinted the auction firm may grow through acquisition.
"We bought UFD, a logistics firm, last year and now have the capacity to do non-auction logistics. We also bought it to get consistency on our inspect-and-collect service.
"We had 200 drivers and now have 300. Our service is at the premium end of the market and it's growing."
It's aimed at lease companies, and it's good at monitoring costs.
"We will continue to look at further opportunities, but there's nothing in the pipeline at the moment. Organic growth will be tough this year, so we will look at other businesses."