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Fleet Operations & Compliance

Skywell importer closure shows risk of buying from new entrants, FleetCheck warns

Peter Golding, CEO at FleetCheck, said that the disruptive nature of the automotive industry means that more brands may follow.

3 min read
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Fleet software provider FleetCheck has warned that the closure of Innovation Automotive, the UK distributor of Skywell, shows the risk of purchasing vehicles from new entrants.

Innovation Automotive recently closed down, with David Clark, general manager at Skywell, saying that it was “unable to meet the UK market’s required investment levels.”

The brand is currently searching for a new distributor and intends to resume sales.

Peter Golding, CEO at FleetCheck, said that the disruptive nature of the automotive industry means that more brands may follow.

He warned that Chinese brands were most likely to be affected, due to the competitive nature of the Chinese automotive industry, but that more established brands could also be at risk.

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Golding said: “The risk can arise at different levels – there is complete manufacturer failure of the kind seen at Fisker a couple of years ago as well as the Skywell-style insolvency of importers.

“It seems inevitable more of each type will follow. We are going through a moment of massive global automotive disruption and quite widespread fallout will be inescapable.

“The FT and others have been reporting for some time that China is likely to see a wave of major insolvencies and it is probably here where fleets need to tread the most carefully.

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“This is a market awash with relatively recently launched car and van makers and a highly aggressive domestic market, leading to poor balance sheets and resulting export drives.

“However, the increased levels of competition being caused by new entrants is also having an inevitable impact on some of Europe’s longest established brands.

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“While no-one is suggesting a collapse is around the corner, some of these businesses are arguably more vulnerable than at any time in living memory.”

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He warned that disruption to parts supply and main dealer aftersales support was the most significant risk to fleets from a manufacturer or distributor exit.

Skywell is aiming to secure its UK parts stock and transfer warranty administration to a third party, to support existing vehicles.

DFSK, an electric van manufacturer that was also distributed by Innovation Automotive, currently has no warranty cover as a third party is yet to register interest in taking over administration.

Golding said: “When we’ve seen this happen historically in the motor industry, such as MG Rover and Saab, the process has been relatively slow and well-managed, so parts supply continued for many years afterwards and technicians with the right expertise could quite easily be found.

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“The difference now with new entrants such as Skywell is that the moment is likely to be sudden and chaotic. According to reports, there is some parts inventory in the country but it is unclear whether it is sufficient to support ongoing operations.

“This is a low-level extreme example with a manufacturer that has sold very few cars. However, it is certainly possible that a new entrant which appears much more credible exits the market in a similarly unplanned fashion.

“Fleets could easily find themselves operating vehicles which end up permanently off-road because even everyday parts can’t be sourced.”

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