Tesco Cars - bad timing or a step too far?

By Steve Carman, director, VRA

There has been a mixed reaction to the closure of Tesco Cars at the beginning of April, just 12 months after starting trading, ranging from “the reputation of Tesco management for sure-footedness has taken another knock” from motor industry outsiders, to “I told you so” from those closer to the industry.

A lack of used car supply was blamed for the business closing, but was Tesco, the world’s third largest retailer, just unlucky or did its Tesco Cars business model not stack up?

It has been well documented that sales of new cars fell three years ago and so the used market is starting to see reduced stock coming into the market.

Some predictions from large asset owners is that there will be a 20% fall in cars coming back off corporate contracts.

This has not helped Tesco.

In the current economy, demand for new cars is still tough, and dealers are also focusing more attention on used cars as they fight to stay profitable.

Some of these dealer groups have been selling used cars to their local customers for 100 years, so why would consumers turn to a supermarket to buy their next car?

Tesco may have underestimated its customers by expecting them to purchase their car – the second highest cost asset after the family home – based on their success in selling financial and insurance products.

The AA and RAC have had more success in selling motor-related products to members, but if they sold bread and milk the outcome might just be the same.

The timing of Tesco Cars was both unlucky and badly judged whichever way you look at it.

It was clear the supermarket struggled to gain confidence with used car vendors suggesting a step too far for the Tesco brand, just as it was for Virgin when it tried its hand at selling cars.

However, you do not build and grow a business for 30 consecutive years like Tesco has done without taking risks and it should be admired for having a go.

You do wonder if any major consumer brand outside the motor industry is ever going to succeed where all the others have failed.