Investor blogs and podcasts

Johanna Ali has headed Kesko’s car trade division since April this year, having previously been in charge of the division’s Audi business. Ali sat down for an interview to discuss the business model and competitive advantages for Kesko’s car trade as well as the changing landscape, growth opportunities and the division’s plans for the future.

A balanced product and service portfolio across the car trade value chain

When asked about Kesko’s competitive advantages in car trade, Johanna Ali explains that K-Auto has a balanced business portfolio that covers different sections of the value chain:

• The import and sales of new cars

• Used car sales, and

• Services, which consist of maintenance and damage repairs, sales of accessories, and Kesko’s own K-Lataus network for EV charging.

Kesko’s presence is strong across all three areas. Johanna Ali points out that one advantage of the three-pronged model is the balance it brings in adapting to market conditions, as some of the businesses are less susceptible to economic fluctuations than others. For example, new car sales in Finland have been low for the past few years, while the service business has held up better – buying a new car is usually a bigger financial commitment than servicing an existing one.

The used car market has also shown more resilience, and Kesko has managed to gain market share in that area  in recent years, thanks to a purposeful and strategic push. “Operating under K Group’s well-established, trusted brand lends us another competitive advantage in the used car business, which is heavily based on trust,” says Ali.  

Profit-forward, with high operational efficiency, skilled staff and fast digital development

Ali stresses that although market share development is one important indicator for success, K-Auto prioritises profitability over market share. Indeed, all three car trade business areas are profit-making, and the profitability of Kesko’s car trade overall is among the best in industry.

When asked how Kesko has managed such good profitability levels, Ali cites a combination of factors, including the skilled staff that handles customer interactions. The division’s operational efficiency has also risen in recent years thanks to an extensive transformation programme, in which all functions, operating practices and corporate culture where examined. “The programme led to a multitude of changes across the organisation – some big, some small, some even painful, but all aimed at enabling growth and profitability,” says Ali.

"We believe that the winning concept in car trade going forward will be the seamless combination of physical locations and digital services. We will be present in both, and meet the customer where they choose."

Another factor contributing to profitability is digitalisation, in which the division has invested heavily. The investment has resulted in better tools internally as well as better service for customers. According to Johanna Ali, car trade is an area where the customer journey can truly combine physical and online seamlessly, explaining that customers may compare car options online, come for a test drive at the dealership, and then make the final purchase online again, for example using the chat function. K-Auto’s approach is to offer alternatives and let the customer choose how they wish to engage.

Focus on organic growth – biggest growth potential in used cars

Going forward, Ali says that the division’s main objective is to grow profitably in all three business areas. Although there is a strong trend towards consolidation in Finnish car trade, according to Ali, K-Auto’s strategy for the next few years focuses primarily on organic growth. Should good acquisition opportunities arise, they will of course be considered, but acquisitions are not necessary for achieving strategic objectives.  

Although Ali says that she obviously hopes that new car sales in Finland will pick up again, she does not expect this to happen quickly. The biggest growth potential for Kesko currently lies in used cars, where K-Auto has managed to outperform the market lately. Used cars for Kesko are a fairly recent focus area, and therefore there is more to gain there.

The decades long collaboration with the world’s biggest car manufacturer Volkswagen Group and Porsche will continue to lend Kesko a competitive advantage also going forward. Ali says she sees more benefits than risks for K-Auto in committing to one manufacturer, especially when the partner offers such strong car brands and high-quality products.  

K-Auto will continue to invest in both digital development and its physical dealership network, for example by expanding and improving the facilities in the Greater Helsinki area, as recently announced.

“We believe that the winning concept in car trade going forward will be the seamless combination of physical locations and digital services. We will be present in both, and meet the customer where they choose,” says Johanna Ali.     

A video version of the interview is available in Finnish here.

Print

Share