Hypothetically, how long can MG UK last?

Hypothetically speaking, let's just say that sales of MG6 remain flat, residuals keep falling, and the MG3 goes wrong with a bungled launch and fails to shift in decent numbers... how long would it be before there's practically no dealers left?

They keep adding dealers but the total number seems to be dropping which suggests dealers are quitting a bit more than there are new ones starting, so if the 3 flops are we looking at maybe 18 months before SAIC pack their bags?

It'll last for as long as SAIC want it to.

It's a complicated company structure; most costs seem to be held within SMTC which is kept very busy. SMTC is either billing it's services to the parent company like billy-o or it's seen as earning it's keep. SAIC without the UK technical centre at the moment would seem to be unthinkable.

MG Motor UK has much lower overheads. We don't know if they make a profit but that's not impossible at the moment. You may think the UK operation is a failure but it's doing the same as any other SAIC operation in any other territory - they seem more concerned about a foot in the door rather than performance. The range is set to grow and, when it is at a certain point, I expect it to gain more marketing focus.

That is all totally separate from the issue of the UK being the historic home of MG - every territory they sell in uses that link. It may not mean much to you or I, but it means a lot to them and is key to their brand identity. They could withdraw from the UK totally but that would leave their image meaningless and their brand rootless. It would also mean they lose the services of SMTC.

They are here to stay in the UK.

MG_A wrote:Hypothetically speaking, let's just say that sales of MG6 remain flat, residuals keep falling, and the MG3 goes wrong with a bungled launch and fails to shift in decent numbers... how long would it be before there's practically no dealers left?

They keep adding dealers but the total number seems to be dropping which suggests dealers are quitting a bit more than there are new ones starting,  so if the 3 flops are we looking at maybe 18 months before SAIC pack their bags?

I suspect the pricing of the new MG3 is set as it is mainly to gain dealers, it seems to me to be a very attractive car/price for a dealer to buy into even without the rest of the range being available.  I can understand the MG6 not being the easiest car to sell although I don't think many of the dealers made much effort but the MG3 at that price should be really easy!  With the base model even having steel wheels they will be able to sell it to teenagers plus the retired and with the alloy option everyone in between, plus the insurance group, for a car with over 100 bhp must make it very attractive for the youngsters.  Even the emissions is pretty good given the price/power combination. Only thing left is safety, unless they sell it on the five star CNCAP rating they already have.

However, if sales did stay flat then I don't think it is a problem, they do not need to be profitable in the UK to stay here and they don't need to sell many cars to be profitable.  The design is all done anyway and identical cars will be sold in Oz and New Zealand, markets from which MG UK will profit thus paying most of the overheads.   On top of that the sales in Chile, Peru etc. would be much more difficult without the UK connection, both Chile and Peru have close historical ties with the UK and the current sales in Peru, as a percentage of the countries total car sales, are very close to what they are achieving in China and looking possible to exceed China!

Good points.

MG_A wrote:Good points.

Here's another for you.   Suppose they intend to make a decent profit in three years time; if they sell the cars really cheaply in the next couple of years and make a big loss, they can use that loss to avoid tax when they start making a profit so setting some really attractive prices to get dealers on board now may be paid for by the taxman and not the company...   I'm not too clear on all the rules, but MG Motor UK is in an unusual situation at the moment and there will be ways they can take advantage of it and the taxman is probably keen to help given the potential return to him in later years.  Anything which makes financial sense to the company will have no problem finding funding from the group, MG Motor UK is after all still very small compared to SAIC group - the worlds eighth largest car company.

They can offset their losses, you are right. And, with such a complicated group structure (at least, to those of us in the dark!) there is plenty of scope for reflecting a profit or loss as desired/required. After all, it's what Starbucks and the rest of them do...

Like I say, SMTC is a separate company; it must have income to pay the staff there and to develop the studio and equipment etc so they must bill the rest of the group and receive income that way. It is a Limited Company so must file accounts and so if there is no billing, but instead is a drip-drip-drip of money from China, that funding must be formalised and noted by the auditors or else the firm would be insolvent. And you can't trade insolvently. Same applied to MG UK, they must have a guarantor/money coming in from somewhere and that will be SAIC in some form. It's always best to have SAIC 'pay' them for some sort of service rather than just dump cash on them. MG UKs income comes from land I reckon; subletting to SMTC etc.