Inside The Industry - ARTICLE - February 2022
2021 Charity Challenge
I make no apology for putting this item first. I can easily understand
that many of you lose the will to live before you get to the end of my monthly
witterings, and I don’t want anyone to miss this bit. I’m being greedy, not for
myself but for the Eden Valley Hospice!
You may remember that at the start of 2020 a “friend” challenged me to walk 2020 miles in the year and I made it just, finishing on New Year’s Eve. I decided that maybe the effort was worth a charitable appeal and thanks to the generosity of many people I was able to raise £1650 for the Eden Valley Hospice. For 2021 I decided to “virtually” walk Route 66 from Chicago to Los Angeles, slightly further at 2280 miles. All was going well until late October when I suffered a severe attack of Sciatica. If you haven’t ever had similar you’re lucky, it’s very painful and made me virtually immobile for several weeks. I was told full recovery would take 12 weeks, but with intensive physio twice a week (also very painful!) I managed to get back to almost normal by late November. However all chance of completing the walk by end December was gone. I decided that football goals in injury time were OK so I’d award myself another month having missed just about that long.
Then in January I tested positive for Covid so was restricted to the garden for a week. In spite of this I reached the end on Sunday January 30th.
So once again I’m appealing to your generosity and would appreciate any donations however small. https://www.justgiving.com/fundraising/paul-gilligan4
For 2022 I’m walking from Lands End to John O’Groats which is 875 miles. Obviously not far enough so I’m taking the Eastern route which is 1084 miles. Still not far enough, so when I get to the end I’ll simply turn around and walk back to Lands End. I look forward to my 72nd birthday in May. I’ll be walking around Lake Geneva after a weekend at the Monte Carlo Historique GP if all goes to plan. Wish me luck!
Surprising January New Car Sales.
As I’ve said many times it’s all about who can supply cars and vans just now. Even then when the January sales figures came in they were shall I say a surprise. Totals were 27% up on last January, but of course showrooms were all closed then, so no surprise. All the growth was in private sales (up 64%) with fleet sales marginally down as manufacturers avoid that market. Diesels were well down, hybrid and electric well up, all very predictable.
The surprises? Top selling manufacturer – KIA! Top selling car – KIA SPORTAGE! Kia took just over 10% of the market with Audi second and VW 3rd. Long time market leader Ford limped home 5th with 6.5% of sales. And Kia’s associated company Hyundai scored almost 5% so between them they took 15% share of sales. If I’d suggested that 10 or even 5 years ago nobody would have believed it. JLR had another awful month, Jaguar recorded only 659 sales against 914 last year, Land Rover 2827 against 3628. Both around 20% down in a market up 27%. As well as Kia & Hyundai Fiat, Honda, Mazda, MG and Renault all performed well ahead of average. All must have very effective microchip purchasing departments!
The van market was DOWN by 27%, certainly nothing to do with lack of demand, just very restricted supply. Ford remained the clear leader but were still down by 15% on last year. Renault were down 80% and Nissan 90% as both struggled to launch new models for which many components were simply unavailable. Star was Chinese owned Maxus which has grown out of what was Leyland Daf Vans. Their vans which were pretty awful are now much improved, great value and available. Last January they sold only 17 new vans in the UK, this January almost 400 so they outsold Fiat, Renault, Iveco, Isuzu, Nissan, and MAN. Expect them to be in the thousands per month soon.
The industry forecast for new car sales for 2022 is now 1.9M against 1.65M last year, with 2023 forecast to grow further to just over 2.1M. Still a far cry from 2.7M in 2016!
Used Car Sales Rise
An amazing 7.5m used car transaction took place in the UK last year. Despite severe supply shortages that was over 11% up on 2020. New car buyers unable or unwilling to wait months for one to arrive switched to the used market. Consequently used car prices rocketed by almost 30%. Over 20% of new cars under 12 months old advertised on Autotrader are priced ABOVE the retail price of the equivalent new car! Manufacturers are trying to support their dealers by channelling cars and vans returned them at the end of finance agreements only to their own dealers.
As I’ve said before rental companies are finding manufacturers refusing to supply them. One large one I know went to Ford a few weeks ago with an order for 5000 vans. They were offered 250! However a small rental company was told by VW they could have as many vans as they wanted, but for each one they bought they had to return a used VW van under two years old to a VW dealer. Otherwise they couldn’t have any.
Light At The end Of The Microchip Tunnel?
Well maybe just maybe. And not for a while yet. Talking to a senior Ford friend the other day he told me that by Quarter 3 of this year July-September they expect dealers to be allowed to order all models under any sales code which means fleet orders including rental customers will be accepted. Of course they don’t say when they might deliver these orders but accepting orders rather than cancelling them (which they have been doing bigtime) is an enormous step forward and indicated Ford have some confidence in the component shortages being solves in the next 12 months perhaps?
Car Traffic Remains Below Pre Covid Levels
With many people still working from home at least part of the time it’s no surprise that car traffic levels remain around 15% down. And it’s expected they won’t rise above 90% of previous volumes for a very long time, if ever. Whilst this is a relief for many because less traffic means less traffic jams it will have a significant effect on many arts of the industry. 10% less traffic means 10% less tyres and brake pads, 10% less accidents hopefully which is good news for everyone except body shops. Even 10% less fuel although I don’t expect this will produce too much sympathy for the oil companies or supermarkets! And 10% less servicing for those on mileage based rather than time based service intervals.
In spite of this insurance premiums are rising. One of the big factors behind this is the increase in the value of used cars. If your car was worth £10000 when written off 12 months ago it is now worth on average around £13000 and that’s what the insurer has to pay you. Raw material costs have pushed parts prices up also. So while none of us like insurance premium increases they seem at least justifiable?
Road Pricing Gets Nearer
MPs have at last woken up to the fact that the growth is the number of hybrid and electric cars being sold is resulting in a big, soon to be gigantic, loss of tax income. Because of course those of us still running petrol or diesel cars make a significant (and ever more significant) donation to HM Treasury every time we buy fuel. And we pay Road Fund Licence. The two together currently raise around £35 Billion a year, 4% of all UK tax income, and unless something is done this will gradually reduce to virtually zero over the next 25-30 years. Only £7 Billion of this tax is spent on roads so if no action is taken things like schools and hospitals are under threat. This problem has been warned about for years now but the Parliamentary Transport Committee has eventually alerted the Government and demanded that a road pricing system based on telematics be agreed by the end of this year and introduced as soon as possible thereafter.
Coming your way soon I think?
Fall out Between Manufacturers And Major Dealer Group
The relationship between manufacturers and their franchised dealerships has often been a difficult one. Dealers want the cars and vans to be cheaper, manufacturers want to charge more for them. Manufacturers want dealers to spend more on expensive showrooms, dealers don’t want to. And so it goes on. Both are trying to protect their own profits.
I have some experience here. In the early 1990s I sat on the Ford Dealer Council representing dealers in the NW of England. Once every 3 months we met with Ford Directors from the Chairman & MD down to discuss issues of the day. To describe these meeting as “robust” is the same as defining the meetings in Rome between Christians and Lions as “Sporting”.
In the 1980s the then Ford MD given that most of the dealerships were at that time family business used to love to refer to the relationship between Ford and it’s dealers as “The Ford Family”. Dealer comments that there was far too much incest in this particular family were made quietly.
In the last week there appears to have been a major fall out between Arnold Clark, the UK’s largest privately owned dealer group, and at least two of its manufacturers partners. What is now public is that AC and Toyota have spilt. AC had 6 Toyota franchises in the west of Scotland. The agreements have now been terminated and the areas taken over by Vertu Motors PLC. Bigger news is that AC are rumoured to be splitting from Ford and that Trust Ford (owned by Ford Motor Co) will be taking over all the 16 Ford franchises AC currently have in Scotland and Northern England.
I must stress that the Ford bit is currently rumour, both parties refuse to confirm, but I have good sources. Under European laws (still applying to UK) if a dealer loses the Sales Franchise they are entitled to keep the Service Franchise providing they meet and continue to meet the required manufacturer standards. So if AC lose the Ford sales franchise in say Aberdeen they will keep their premises and the service franchise. Certainly that is what they have done with Toyota. This means the new dealer (we presume this will be Trust Ford) will have to build a new dealership costing maybe £2-£3M and share the lucrative service business with AC going forward.
Why have AC given up on Toyota and (maybe) Ford? Or perhaps the manufacturers have given up on AC? You would have to ask them. But my guess is that the constant demand from manufacturers for ever higher standards and the oncoming introduction of the agency model where customers deal more and more directly with the manufacturer makes the investments required less attractive. Or alternatively AC haven’t always kept to the rules and the manufacturers have decided to make an example of them.
Arnold Clark are one of the most successful and profitable dealer groups in the UK. If they see this is the best way forward other dealers must be thinking?
Rolls Royce Developing Hydrogen Powered Engines
Rolls are now best known for producing jet engines for civilian and military planes. However they have for many years had a division that designs and produces diesel engines for trains, ships, heavy duty mining vehicles and power generators. Now new engines are to be developed for these requirements which will run on hydrogen. Then it’s only a small further step for Rolls Royce hydrogen powered engines to be developed for trucks and buses.
Tesla In Trouble Over Braking Systems
Whilst now enormously successful Tesla have always had a reputation for launching new products or developments before they are truly ready. Now in the US owners are lodging claims that their cars are braking sharply at high speeds responding to imaginary hazards. This is being called “phantom braking”. Over 100 complaints have been made in 3 months and Tesla have recalled a software update which is believed to be the cause of the problem. You can be too clever perhaps?
In contrast perhaps Volvo have long had a reputation for how seriously they take the safety of their cars. As long ago as the 1960s they made seat belts a standard fitting when some others didn’t even offer them. They led the way with airbags. Even given all this I found this story a shock, but in a good way.
A friends wife was taking her children to school on her Volvo XC90. Sadly she met a Porsche 911 which was being driven to its limits and beyond and was on the wrong side of the road on a blind cornet. A pretty severe head on collision inevitably occurred. Almost immediately a voice came over the Volvo’s speakers: “ Hello Amy this is Volvo Assist. We know you’ve had a pretty bad accident, we know where you are and we’ve alerted the police and ambulance services to attend urgently”. The another voice: “ Hello Amy, I’m the duty doctor at Volvo Assist. Can we please discuss your injuries?”
Amy described her only concern, severe pain in her right arm. The Volvo doctor was able to diagnose the likely problem over the phone and brief the paramedics when they arrived saving vital minutes. The Volvo was a write off. No prizes for guessing what they’re replacing it with!