Inside The Industry - ARTICLE - JULY 2021

Half Time Report 

To the end of June UK new car registrations are 39% up on last year at almost 910000 units. However that is still well down on a “normal” year. Figures were very well down last year with all showrooms closed for around 3 months in Lockdown 1. Although the same applied this year both dealers and customers had worked out how to operate using things like click and collect, remote delivery and so on. Pure electric cars accounted for 8.1% of sales but hybrids were just over 33% of total sales. Fleet and business sales were up by much more than private deals. In June the top selling cars in the UK was the Tesla Model 3, that’s a first. Year to date top was Vauxhall Corsa with Ford Fiesta 2nd and VW Golf 3rd. 

For the manufacturers fortunes differ, more I think as a result of the number of cars they can make that the number they can sell, or perhaps how many microchips they can source. 

In a market 39% up Audi were 69% up, Citroen 45%, Hyundai 77%, Kia 56%, Mazda 56%, MG 76%, Peugeot 62%, Subaru 165% (from a very low base last year) VW 45% and Volvo 53%. Losers with below average increase were Alfa Romeo down 22%, Dacia down 7%, Fiat up 16%, Ford up 25%, Honda up 10%, Jaguar up 12%, Mini up 24%, Nissan up 22%, Renault up 3% and SEAT up 29%. 

VW pushed Ford off top slot taking 9.4% of the market against Ford at 8.2%. Close behind were Audi on 7.5% and BMW 7.2%. How things change!  

If the 39% year on year increase in car sales looks impressive vans were up a staggering 76% - and that would have been a lot more if more new vans had been available. Top selling van was the Ford Transit Custom with nearly 27000 sales whereas top car was the Vauxhall Corsa with 24400 so the Custom remains the best selling new vehicle in the UK. So far this year Ford have sold almost 75000 new cars in the UK and over 63000 new vans and their van shortage is worse than the car situation. I’d expect as van supply catches up Ford will soon be selling more new vans than cars. 

European Sales Recover More Strongly 

In May European new car sales were 73% up on May 2020 although still 25% on May 2019 before Covid struck. VW Group led with a total across all their brands adding up to over 28% of all sales. VW’s strength in electric cars is a big factor with pure electric now taking 16% of all sales. Top selling electric car was the Tesla Model 3. Hybrids sold slightly but only slightly more than pure electrics, top selling hybrid was the Ford Kuga PHEV. Certainly Europe is moving to alternative fuel cars faster than the UK at present. 

Two Bits Of Good News For UK Factories. 

After discussions and negotiations that seemed to go on for ever Vauxhall parent company Stellantis has at last announced that the Ellesmere Port factory near Liverpool will remain open for the foreseeable future. For many years the home of the Vauxhall Astra a £100M investment will see the plant reconfigured to make pure electric vans for all Stellantis brands Vauxhall, Citroen and Peugeot. 800 jobs have bees saved with thousands more in the supply chain. Quite how much of the £100M came in the form of Government assistance is not known but the rumour is “significant”. 

Then Nissan trumped Stellantis by announcing a £1 Billion plan to guarantee the future of their Sunderland factory. This includes the construction a Gigafactory which when fully operational will produce enough batteries for 100,000 Nissan EVs each year. Nissan will also add to its current Leaf production with the next generation EV also to be manufactured in Sunderland. This will create over 900 new jobs and another 4600 in the supply chain. The Gigafactory will bring 750 more new jobs and secure 300 existing ones. Again the Government (as in us!) have made a big but undisclosed contribution. 

Used Vehicle Sales Stay Strong, Supply Still Tight 

Used car demand has received another shot in the arm as people start returning to their workplaces but are unwilling to use public transport. Autotrader reported that the average asking price of cars advertised on their site rose by over 11% in June. It’s estimated that 1.7 Million used car transactions were “lost” last year due to showroom closures. Whilst many people didn’t use their cars very much during lockdowns this is now changing dramatically. This time last year only 27% of motorists used their car every day, now its 44%. A further 25% used their car at least 3 times a week last year, now its almost 35%. So strong demand coupled with restricted supply means prices continue to rise. Everyone is wondering just how long this can last, dealers are worried about being caught with expensive stock when the market turns as it must sooner or later. However only dramatically improved new car supply will release a significantly increased number of used cars onto the market, so we’re back to microchips. 

Vans remain an even bigger problem. VW recently quoted us November delivery for a new van. November NEXT YEAR that is! The fact is they don’t know, nobody does. We no longer quote customers a delivery date on new vans, instead we quote a “delivery forecast” and make it plain this is not a date that forms part of the sales contract.  

EU Sets Out EV Target As UK Plans To “Decarbonise” All Transport 

THE EU has announced they will ban the sale of new petrol and diesel cars by 2035. As part of this legislation is to be introduced to require member states to install public charging points no more than 60kms apart on major roads by 2025. 

The UK Government which has already announced a ban on the sale of petrol and diesel cars by 2030, 5 years earlier, has now proposed that the ban be extended to all vehicles with a gross weight of 3.5-26 tonnes by 2035 and by 2040 for vehicles with a gross weight of over 26 tonnes. 2040 is 18 years away, there are currently no zero emission vehicles over 26 tonnes gross and precious few over 3.5 tonnes. 

One suggestion is that motorways will be fitted with overhead wires to charge battery powered trucks as they drive. Quite what happens when the truck leaves the motorway hasn’t been explained, but there is an admission that hydrogen may be the only way to meet the truck targets. Volvo Trucks Chief Engineer has also said as much recently. Currently UK transport of all types produce 122 million tonnes of emissions a year (2019 figure) of this cars produce 55%, trucks 16%, the balance being trains, ships and aviation.  

Stellantis To Adopt Agency Sales Model from 2023 

Stellantis have become the latest manufacturer to announce their switch to agency sales. This is where the manufacturer sets the vehicle price which is non negotiable and the dealer receives a commission for handling the enquiry, providing information and test drives and handing the vehicle over. Stellantis have decide that from January 2023 this model will apply to Alfa Romeo, and DS car brands and all commercial vehicles being Citroen, Fiat, Peugeot and Vauxhall. 

In addition Stelantis have given more information on how they see the future of their dealer network. In May all their dealers were warned that they would be served with a 2 year notice of termination. Last week the dealers were all told that their dealer points would be put into three categories. Category A have a secure franchise going forward, B are under discussion, C will definitely be terminated. Currently there are 943 UK dealers representing the various brands. Details of how many are in which category are highly confidential. However their Vauxhall dealers (who saw their numbers reduced significantly in 2018) believe that around two thirds of them are in Category A, which means around one third are at risk. 

Dealers are understandably angry. One went on the record: “This isn’t a consultation” he said. “Consultation is when there is an element of discussion, some give and take. There is none of that here, Stellantis are simply laying the law down and a significant number of permanent terminations are inevitable”.  

 How Much Money Do Dealers Really Make On A Car Sale? 

A recent What Car survey showed that 28% of car buyers think Dealers make a margin of between 10% and 20% of the sale price when selling a new car, and for used cars 36% choose this figure as dealer margin. 6% of buyers think dealers make more than 50% of the sale price as profit. Only 15% of buyers think the dealer makes less than 5% margin. It’s thought that customers have these perceptions because of the expensive premises dealers have. Fact is these “gin palaces” are forced on the dealer by manufacturers.

 Truth is that dealers on average make around 5% on a new car, perhaps twice that % margin on used. This is of course gross margin, dealers then have all sorts of costs to meet. Sales staff, admin staff, advertising, demonstrators, training, stock funding costs, preparation and valeting, and of course the rent, rates, utilities, insurance and other bills for those expensive premises. So dealers on average make a gross profit of around £1000 a car. Volume franchises in normal years make about 2% net profit on turnover, prestige maybe up to 5%. This of course includes the profit on parts (gross margin about 25%) and workshop labour (gross margin can be as high as 80%).  

 Dieselgate Rumbles On 

Will this one ever end? BMW and VW have now been fined just over £750 Million by the European Commission after they formed a cartel with Mercedes to limit the potential of emissions reducing technology. Over a 5 year period the three manufacturers conducted regular technical talks on the application of Nitrogen Dioxide reducing AdBlue systems in their vehicles. Mercedes confessed their sins to the Commission so as whistle blowers were not fined. However all three are now at risk of legal action form customers.    

Bugatti & Rimac Merger Announced At Last. 

This one has been rumbling on for months but its now official that French supercar maker Bugatti and Croatian EV specialist Rimac are to merge. The new company will be 45% owned by Porsche, and 55% by the newly formed Rimac Group which is 37% owned by founder Mate Rimac with Porsche having 24% and Hyundai 12%, plus other investors. Rimac’s powertrain, battery, and components development division will be separated out and continue to work with other manufacturers on a consultancy basis. This deal is significant for Bugatti who will gain access to Rimac’s high output electric powertrain technology to replace the now old W16 petrol unit.  

Jaguar Dealers Unhappy 

This is no surprise. After the new Chief Executive called the Jaguar Brand “damaged” and said he saw their saloons and estate cars as doomed to be most customers’ second choice behind German rivals. Who wants to own a product from a company who’s boss doesn’t believe in the product and says as much? All Jaguar dealers are now occupying premises newly built or rebuilt in the last few years at vast cost. One cost over £10 Million! Of course they share these expensive premises with the strong and profitable Land rover franchise but will that be enough to keep the dealers happy when they are likely to see LR profits reduced by significant and perhaps increasing Jaguar losses? 

There will be no major new models from Jaguar for 4 years. Maybe a few attempts to freshen the current range but nothing most people will notice. Jaguar no longer have a flagship big saloon and the car that should sell far more than it does and would give a halo effect to the whole brand the F Type sports car goes sadly ignored by Jaguar and therefore by customers. Jaguar will spend the next 4 years trying to work out how to move a sensible number of cars at as little marketing cost as possible whilst providing reasonable volume and margins for the dealers. Not easy! 

Does Your Car Fit Your Garage 

If you have a fairly new car and a fairly new house probably not! Cars are around a third bigger than they were 50 years ago. Just look at the original 1959 Mini and the modern version. Same applies to Porsche 911 and many others. The five best selling cars in the mid 1960 had an average width of 1.5 metres and length of 3.9 metres. Now average measurements are 1.8m x 4.3m. New build houses are built with smaller garages than used to be the case to save costs particularly of expensive land. Domestic garages are often now used for storage or converted into home offices.  

Which leaves the problem of where to park the car or cars that were intended to go in the garage. Frequently the answer is on the road which puts pressure on residential streets. 

Paul Gilligan

07785 293222