Inside The Industry - ARTICLE - JULY 2020
June Sales Show Some Recovery
After being close to zero in May UK new car sales in June were “only” 35% down on last year. Many parts of the media reported this in a negative way but I believe when you look behind the figures they are more encouraging than at first glance. Firstly showrooms didn’t re-open until early June and then in England only. Wales and Northern Ireland opened mid month and Scotland had to wait until very late in June. Secondly the rental companies bought almost nothing. In normal times they represent around 10% of new car sales, probably more in June as they build up their fleets for the summer holiday peak. Secondly June being the end of the quarter normally brings a very high volume of pre registrations at the end of the month, this June there were almost none. The manufacturers decided the limited supply of new vehicles available and slow production rates at the factories didn’t justify the heavy discounting involved, and cash strapped dealers had little enthusiasm for investing big sums of money in unsold new cars.
Having said that many of the June registrations were of cars originally intended to be delivered in March but which weren’t available for delivery before lockdown. So the glass is only half full, or half empty depending on your point of view. For the first half of the year after a poor March and an almost non existent April and May sales are 49% down, so just about half of last year at this point. That’s a massive 615643 sales down. The pain is shared pretty evenly spread between the manufacturers with almost all being down by between 40% and 60%. The only bright spot is MG, actually up by 23% on the first half of last year and now taking over 1% of the market. Dealers I know who only took the MG franchise because the manufacturer paid them to do so are now pleasantly surprised by the results. As many manufacturers particularly Ford reduce their dealer networks that give MG an opportunity to pick up good dealers with solid customer bases. Wooden spoon goes to Subaru, 78% down so far this year with only 300 cars registered, and that includes dealer and manufacturer staff cars and demonstrators.
Van Sales Stronger
Sales of new vans were 25% down in June as opposed to cars at 35%. For the first 6 months vans are 45% down so nearly as bad as cars . Again there was virtually no pre registration activity. One large dealer group had planned to pre register 2000 commercials at the end of March which obviously didn’t happen. It was expected these units would be pre registered at the end of June, in fact after discussions with the manufacturer only 100 vans were registered. Van demand is strong and subject to availability of stock I would expect commercial vehicle sales figures to be close to normal levels pretty soon, subject also to the dreaded second wave of course.
Used Vehicle Market Stronger Than New
The used vehicle market has been surprisingly strong in June, so much so that stock shortage is a real problem. Customers frightened of using public transport have given the cheaper end of the market a significant boost, and total used car transactions are thought to have been actually higher than in 2019. Not many industries can say their sales volumes in June 2020 were up on last year! One industry analyst reported sales of cars from 6 to 9 years old were 12.6% up and 9 to 12 years old 8.6% up, with the total market almost 4% higher.
Of course the low new car sales right through the March to June period means the new car dealers have received far fewer part exchanges so have held on to what they have, leaving the independents fighting over what little is available. The rental companies have released stock to the market only slowly and attempted to balance their stock to the rental customer demand by simply not buying new vehicles. The numbers are very surprising. One large remarketing company we use normally have around 12500 vehicles on their website, today it’s just over 7000. A medium sized rental company we source from usually has about 250 vehicles for sale, this morning they have 17! It’s estimated that dealers now have 125,000 less cars in stock than they had in March and inevitably prices are rising as a result.
And the used van market has been the same but more of the same. Prices haven’t increased they’ve shot up, some say by as much as 30% which is a staggering figure. One trader I was talking to the other day had bid on a 3 year old Transit Connect on electronic auction which he needed for a customer. Guide price was £7000 + VAT, it went for £10000 + VAT which was way over the guide retail price. Yesterday we sent a list of 8 vans we urgently need to about 12 rental companies and other wholesalers. We were offered one van and that wasn’t in the specified colour. Whilst there has undoubtedly been abuse of the Government loan schemes obviously many small businesses are using the funds to expand which means one or more additional vans. And again the rental companies who are very busy in particular with parcel delivery customers aren’t selling many vans. Once the promised massive infrastructure kick in that will give the market another boost – you don’t build anything without vans.
Industry Shocked As Government Refuses To Launch Scrappage Scheme
As I said last month a new Scrappage Scheme was very widely expected to be launched as part of the Chancellor’s announcements on July 8th. Both manufacturers and dealers had spent a lot of time planning the offers they would put in place to get most benefit from scrappage. No such luck. Britain is now the only one of Europe’s five biggest economies not to have such a scheme in place. Germany have doubled the grant for customers buying a new hybrid or electric car, in France buyer get over £6000 and Italy and Spain have similar schemes. The industry was also hoping for a reduction in VAT on new cars but no luck there either.
Quite why Scrappage hasn’t happened here I can’t understand. As I’ve said before it doesn’t actually cost the Government anything provided the customers who benefit wouldn’t have bought a new car anyway. If the customer receives a £2000 grant and buys a £12000 car the VAT paid is, would you believe, £2000 so the whole thing is cash neutral for the Government, which makes it difficult to see why the opportunity to help the industry while replacing older high emission cars with cleaner new ones has been missed?
Billionaire Sir Jim Ratcliffe Announces Land Rover Defender Rival
While the new Land Rover Defender launch early this year has been an outstanding sales success many died in the wool Landie enthusiasts were disappointed by it and didn’t see it as a “proper” replacement. Now Sir Jim has announced what he terms a “utilitarian off road vehicle”. It’s to be called “Grenadier”, named after his favourite pub in London and bears a strong resemblance to the old Defender. Very up to date under the skin with engines from BMW and transmissions by ZF. Plan is to build 25000 cars a year with production plants in Portugal and South Wales. The Welsh plant was to have been located in Bridgend capitalising on the skilled workforce available because of Ford closing their engine factory there. Now however plans may change as Mercedes have put a factory in North East France up for sale which may make more sense. Whatever my friends who are great supporters of the old Defender are much impressed and may be reaching for their cheque books soon.
Pay As You Go For Optional Extras On Your BMW
BMW are to launch a scheme whereby they will build cars fitted with a host of optional extras none of which will actually operate unless the customer pays a fee to activate them. This will greatly simplify the production process for BMW whilst protecting their revenue. So the cars will be built with things like heated seats, air conditioning and many other extras which the customer can pay a fee for the dealer to activate, or not if they don’t want that feature enough to pay the extra for it. Customers will be able to try the option for a month free of charge then pay for continued use for periods of one to three years. A customer buying a used vehicle can choose to activate features the first owner didn’t pay for.
BMW started building cars in this way this month and already more than 50% of cars are being built in this way with first deliveries to UK customers in September. As you’d expect even if BMW driver pay the extra for the indicators to work they still won’t use them…….
Corona Virus Speeds Move To Electric Cars
The big reduction in traffic during lockdown has given scientists a wealth of data to analyse. Car usage fell to around 35% of normal levels and emissions dropped in line. Now there is pressure to make this lower level of emissions the norm. This will be difficult to achieve with people seeking to avoid public transport and drive instead. Certainly in big cities the drive is to encourage people to walk and cycle. Already roads are being closed to cars, more cycleways are being introduced and pavements are being widened. Electric bikes are selling like the proverbial hot cakes and electric scooters are to be legalised on an experimental basis. The pressures can only speed the growth in electric cars and I’d expect bans on polluting vehicles in cities to happen sooner than they otherwise would. British Gas has just ordered 1000 electric vans from Vauxhall as part of a plan to have all 12000 vans in their fleet electric by 2030 at the latest. We deliver our first two electric Renault vans to customers this month and I believe the first of many. Hydrogen powered trains begin trials in UK tracks in the next few weeks. Th electric car bandwagon was already rolling, its gone up a gear or two now. I still hope all the same pressures will speed the development of hydrogen cars and trucks as well.
All of this makes it even more difficult to understand why we don’t have a Scrappage Scheme designed to incentivise the purchase of hybrid and electric cars and vans.
More Road Police Coming
While road casualties dropped as you’d expect during lockdown, the long term trend is still causing concern. In the late 1960s UK road deaths were around 8000 a year. By 2013 this had dropped to just over 1700 but has failed to drop since being almost 1800. If there’s any money left expect this to be revered in the coming years.