Finglas now proudly boasts a €10 million motoring temple to Porsche, nestled in the shadow of the M50's Junction 5.
It’s an improbable location for a prestige car brand whose models normally carry six-figure price tags. It’s also an improbable investment, given the massive uncertainty surrounding the motor trade and the wider economy.
It's just one of a trio of new gleaming glass palaces on the site, comprising a total investment of €35 million by the Joe Duffy Group. An enormous two-storey BMW garage sits to its left, while a similarly vast Volkswagen outlet is to its right.
These are the flagships of Ireland's largest motor retail group. But more than that, they are symbolic of 14 years of endeavour by Glaswegian Gavin Hydes, who expanded and invested while others in the motor trade struggled to survive. During that time he has become the most powerful dealer in the Irish motor trade.
Hydes arrived in Ireland in 2005 to become managing director of Joe Duffy Motors, a well-known north Dublin BMW dealership. Today he has the controlling stake in the Joe Duffy Group, which boasts 21 franchises for 17 brands in 20 locations and employs more than 450 staff. And he's not finished yet. "We have a 2020 strategy. We're not far off it, but the plan was 22 businesses, 700 employees and €500 million turnover. If the new car market had been where it should have been over the last four years, we'd have achieved our targets," says Hydes.
“Our turnover since 2015 has not really moved and that’s because new car sales have weakened. We had thought we would be selling 20,000 cars. Still, we’ve grown in a soft market, and we’ve done well in the bust.”
The accounts support his claim. The latest filings show turnover for 2018 of €294 million, with profits up 2.5 per cent to €8.9 million, its ninth consecutive year of profit growth. This was despite a new car market declining by 4.4 per cent.
So how did Hydes ride out the financial crash and grow his business? “We diversified as part of our strategy. Of our turnover, 45 per cent is from new car sales, 41 per cent used cars. Everything we do is about sustaining the business even when the new car market starts to drop. Of course new cars are the lowest of our gross margins. We sell labour and parts and service contracts, these are driving our income. So if one element goes, we can balance it out.
“The reality is the new car market is full of volatility so our business needs to be steady. This diversified strategy means we can grow when others around us can’t. We’ve got a cross-section of brands, with each on different stages of the model cycles. Also one of the byproducts of the ageing car fleet in Ireland is that these cars need servicing and maintenance. And the technology on new cars means there is a bigger requirement for owners to take them back to technicians with the right training, expertise and equipment.”
Disruption and data
The constant search for diversification is throwing up new opportunities for Hydes and his team. On Friday in Cork a subsidiary will open the first of a new disruptive chain of car retailers, aimed at replacing the traditional haggling model with a format more akin to a supermarket.
No haggling over price, no pressure to buy. As reported in The Irish Times several weeks ago, the new ZuCar outlets will also buy your used car without any need for you to buy one of theirs. Alongside these purchases, the outlets will source its stock from the 4,000 trade-ins currently landing in Joe Duffy Group dealerships.
It may seem radically different from the operation of its current retail network, but the ZuCar model is built on the same foundation that Hydes ascribes to the group’s success to date: “measuring the bejaysus” out of the data.
“We are incredibly metric-driven, and that’s what differentiates us from our rivals. The smaller operations can’t afford to have the level of automated data mining that we use. It’s the same for service as well as sales.
“We want people to know when things go wrong so you can identify the problem, train the person if that’s what needed. And if they can’t look after our customers properly and we can’t change the person’s working way, we change the person. But, of course, we’d rather not do that.
“This is an industry that can rely at times on bonhomie, not quality of execution. But for us, if you can’t measure the execution then you can’t get the results you want.”
Yet the success to date doesn’t override concerns about the current state of the car market.
The fear across the motor trade is that it is facing a re-run of the dark days of 2008. That year the government changed from a motor tax regime based on engine size to one based on emissions. It created huge price advantages for diesels, but dramatically hit the value of petrol models; then favoured by Irish motorists. Dealers with forecourts full of used petrol cars had to take massive financial hits. All this coincided with the financial crash.
Now the government is considering another overhaul of the tax regime. Against a backdrop of Brexit and growing global economic uncertainty, you can see why dealers are nervous.
Hydes reckons Brexit’s impact has already hit the motor trade. “We have had another year of declining market – the fourth year on the bounce. There is nobody predicting next year will be any better. Our industry has had the hit from Brexit. The bit you can’t equate right now is the impact Brexit will have on the wider economy, which of course will have an impact on our industry.”
Some suggest that a hard Brexit may have an upside for the motor trade, imposing WTO tariffs on car imports. However Hydes doesn't see it as a strong limitation on imports, unless the Government adds stringent conditions to imports. "We've always had imports from outside the EU – we've had cars imported from Japan for years, for example. Now if there is a hard Brexit, you'd expect sterling to be even weaker than it is now. So if it moves 10 per cent from where it is now, well the WTO tariff would be 10 per cent, so you're back to square one. We've had imports based on an 83p-85p exchange rate. So if it goes to 98p, the WTO doesn't really matter."
Weak sterling
He says the link between the value of sterling and the Irish car market is easy to track. “Sterling weakens and the new car market weakens. Sterling is now around 90p to the euro. Who knows what it will do next. If it gets to parity we face a new car market that could be as low as 70,000-90,000.”
And that matters not just for the motor trade, but for the State’s coffers as well.
“Car retailers – and me in particular – we are big tax collectors. Every time we sell a car I’m collecting between €10,500 and €11,000 worth of tax. The average for dealers is about €10,000 but we are collecting more because we have more premium brands in our mix. Now, when someone brings an imported car into the country, the average VRT [vehicle registration tax] they are paying is about €3,000. So the difference for the exchequer when they lose new car sales is about €7,000 to €8,000 a car.
“Our natural market should be about 170,000 new cars, so we’re losing about 50,000-60,000 new cars a year to used imports, which is costing the tax take.
“The bit we’re struggling with at the moment is that they are talking about increasing VRT again at the same time we have a very weak sterling. And we have a lot of wider economic uncertainty and volatility. If they increase the tax on new cars at the same time sterling is weak, it is clear the number of imports will increase. If the imports increase, that will mean the arrival of more older, dirtier diesels, because these buyers are doing so based on cost not on environmental concerns.”
As for the Government’s Climate Action Plan, which sets a target of nearly one million electric vehicles by 2030, when an outright ban on the sale of new non-electric models will be introduced, Hydes says its not possible to reach these targets.
“There have been various reports written – and some of them are aspirational political reports – but if you speak to the financial folk who deal with the numbers, they will tell you that you are never going to get to those numbers in that period of time. The product, the infrastructure, and the cost of the new electric cars are not going to make it feasible.”
Despite the multiple uncertainties surrounding the motor trade, Hydes says if the new car market makes a significant recovery, his group will continue to grow, particularly in terms of its wider national representation. “We have two new businesses opening in Co Louth, a new business in Athlone that’s only 12 months on the go, we have these three businesses at this site in Dublin which effectively double the capacity of what we had for each of these brands. We have an expanding used car business, and we have the new separate business, ZuCar.”
Quick decisions
Asked if he would consider becoming a national importer for a brand, he pauses for a moment before saying, “If we thought it was the right thing for us, it’s something we would consider.” He says they haven’t approached anyone to date.
The creation of this motor trade empire invites the inevitable question: would he sell up? It elicits a one word answer. “No.”
What about a future stock market listing, similar to the large UK operations?
“No. We have been able to grow because we are nimble, we can make quick decisions. We’ve got a strong balance sheet, we’ve got a plan and we’re on a journey. I’m not in the departure lounge. I’m just 50, and we’re not ready to go.
“Everything is about the long term. You look at our recent investments in Porsche, BMW, Limerick or Athlone, these businesses don’t generate quick returns, they are long-term. They are not built for this current market, they are built for a better market in the future.”
Which brings us back to Porsche, where Hydes accepts volumes will be relatively low, predicting sales this year of 85 cars depending on delivery, so he needs to court the owners of older cars. “The vehicle car park for Porsche in the Republic is about 1,100 cars and very few new ones sold during the recession. When I took over Porsche, there were three new cars sold that year – prior to that there was 16 new cars sold a year. So the car park is all old cars and if you don’t ingratiate yourself with the older customers, you don’t have a business.”
“When I came over to this market in 2005, the plan was to build the Joe Duffy Group. I looked at brands represented in Ireland and how they were performing and I felt there was an opportunity for Porsche. I said to Porsche that ‘if your current partner isn’t investing or will not, then we will’.”
Now 14 years and €10 million later, that’s what he’s done.
CV
Name: Gavin Hydes
Age: 50
Job: Joe Duffy Group chief executive.
Lives: Portmarnock, Dublin.
Family: Married to Mary, with two children.
Something we might expect: He is a lifelong car enthusiast. While working in Manchester he bought a Porsche 911 from a friend who needed a quick sale as his business was in trouble. He later had to sell his pride and joy to finance his wedding in Cork.
Something that might surprise: While he grew up in Scotland, where his parents ran hotels – and Hydes worked for a time as a hotel manager – his mother's family hail from Virginia, Co Cavan. Right now he holds a UK passport, but qualifies for an Irish one thanks to his maternal grandmother.
