Inchcape reviews Australian brands as volumes fall 50%

Inchcape has cut its full-year margin forecast after Australian volumes fell 50% in the September quarter, prompting a review of product range and positioning with its key brand partner. For Australia’s automotive franchise community, the update highlights a sharp change in market conditions and a distributor preparing further adjustments to its local business.

Australian performance weighs on group outlook

The London-listed distributor, which handles Subaru and Foton in Australia, now expects an adjusted operating margin of about 5.5% for 2026, down from its previous forecast of about 6%. Australia is expected to dilute group margins, although the local business remains profitable.

The Australian volume decline came against market growth of 1% in the three months to 30 September. That contrast is important: Inchcape’s result was not simply a reflection of a contracting national market. Its volumes fell substantially while the wider market expanded slightly.

The weakness also stood apart from the company’s performance elsewhere. Group volumes increased 3% during the quarter, compared with market growth of 9%, while reported revenue rose 7% to £2.5 billion.

Volumes grew 10% in the Americas and 21% in Europe and Africa. Asia-Pacific, by contrast, recorded a 37% decline. The Australian downturn therefore formed part of a weaker regional result, despite growth across other parts of the group.

According to Reuters, Inchcape shares fell 11.7% in early trading on 22 October following the update.

Product competitiveness comes under review

Inchcape attributed the Australian decline to fuel-related disruption driving a rapid shift towards new energy vehicles, alongside weakening competitiveness at its key original equipment manufacturer partner.

Management told analysts that electric vehicle penetration had risen from about 8% at the start of the year to around 24%. These figures were presented as part of the company’s explanation of the changing Australian market.

Inchcape did not name the brand partner whose competitiveness it questioned. However, Subaru is its main Australian franchise. Separately, VFACTS figures showed Subaru’s September sales falling 42.6% to 2,009 vehicles.

The distinction between those figures matters. Subaru’s reported sales decline covers September alone, whereas Inchcape’s 50% Australian volume decline covers the full quarter. They should not be treated as interchangeable measures.

Group chief executive Duncan Tait said: “Australia remains a challenge. Our key brand has underperformed, with deteriorating competitiveness in a rapidly evolving market. We are taking further decisive action there, alongside our existing restructuring activity.”

The planned action includes reviewing product range and positioning with the brand partner. Chief financial officer Adrian Lewis told analysts that the work would likely involve changes to product configuration, powertrains and positioning, and would take time.

Deepal handover adds another portfolio change

Alongside the product review, Inchcape identified its exit from Deepal distribution as part of its portfolio optimisation programme. Changan will take over the brand during a transition running to 31 March 2027.

That timetable makes the Deepal handover a separate, defined change within Inchcape’s Australian activities. The product review with its key partner, by comparison, was described in terms of work still to be undertaken rather than a completed range adjustment.

Lewis said Inchcape had agreed to exit 15 distribution contracts so far this year. That figure relates to the company’s wider portfolio activity, not solely to Australia.

The update was not uniformly negative across the Australian business. Lewis described Foton as “doing very well”, while confirming that Australia remained profitable despite moving from a contributor to group margins to a drag on them.

What the update means for franchise planning

Inchcape retained its forecast of about 10% growth in adjusted earnings per share for 2026, together with its medium-term target of more than 10% annual earnings-per-share growth to 2030. The reduced margin outlook therefore sits alongside unchanged earnings growth expectations.

For the Australian franchise community, the immediate points to monitor are the outcome of the product review and progress towards the Deepal handover deadline. Neither the quarterly volume figures nor the group margin forecast establishes the financial position of individual franchise businesses.

Practical takeaway: Automotive franchise operators should distinguish distributor-level results from their own trading performance and seek confirmed details of any product, powertrain or distribution changes before adjusting business plans.