Inside The Industry - ARTICLE - JANUARY 2021

Final Scores For 2020 Revealed 

Well everyone knew 2020 was never going to be a good year for UK car sales. With the Covid Virus dominating the year vehicle factories were closed for 3 months, showrooms for longer. Travel by whatever means has been discouraged. Unemployment soared, the hospitality industry was shut down for much of the year making it impossible for people to travel for holidays and leisure. So although the media made much of it I think it’s actually a pretty good performance for new car UK sales to be “only” 29% down on 2019. Retail sales were 26% down, fleets 31% (mainly rental sales, rental companies were badly hit by lack of business and holiday travel) and small business sales by a whopping 43%. Small business is the category that pre registered cars go into, and as there was no stock due to factory closures there was no need to pre register. 

So if you take the lack of rental company sales (they normally represent around 10% of the market) and pre registrations (maybe almost 5%) means the TRUE fall in sales is perhaps around 15-20%. Now given everything that has gone on I think that is an amazing achievement. Of course you won’t read that in the tabloid press but I’m happy to say this is the truth of the matter. 

Van sales were down 20%, but three points here. First is shortage of supply faced strong demand. Factory closures meant no new vans but rental companies have been desperate for new vans mainly to supply courier companies working flat out on home deliveries, and the construction industry which being defined as “essential” remains very busy. And the courier companies that buy their own vans rather than rent are also queueing for new vans. Pre registration normally takes a bigger share of total “sales” in vans than cars, but again there were very few. Taking all this into account I firmly believe that with free supply and normal pre registration activity UK van registrations would have been HIGHER in 2020 than 2019. Again not what the tabloids will tell you. 

Winner & Losers. 

Given UK car registrations fell by 29% anyone who did better that that can be called a winner and vice versa. Well the biggest winners was electric cars up 186%, Mild PHEVs up 184%, other PHEVs up 91%. PHEV = Plug In Hybrid Vehicle by the way. Biggest overall loser was diesel cars down 55% (although used demand for diesels stays strong). 

Amongst the manufacturers by far the best performer was MG up 41%. MG offered great value for money and the cheapest electric car on the market. Also they expanded their dealer network. With others like Ford and Vauxhall cutting their networks and Mitsubishi dealers looking for new opportunities MG will expand their dealer body increase further this year. Only “Other Imports” showed another increase being 78% up, almost all Tesla as I said last month. In fact the Tesla Model 3 was the best selling car in the UK in December! 

Everyone else was down on 2019. Bentley did best “only” 16% down, Audi, Skoda and Nissan did very well at all being 22% down, and Land Rover helped by the new Defender 24% down. Those who really suffered were ones like Alfa Romeo 38% down, Citroen 45%, Fiat & Ford 35%, Honda 37%, Mazda 43%, Mitsubishi 44%, Subaru 68, Suzuki 43% and Vauxhall 40%.  

Ford as ever did really well in the van market with the Transit Custom being best seller and the 3rd best selling vehicle in the UK behind only Ford Fiesta and Vauxhall Corsa and ahead of the VW Golf. Had free supply been available the Custom would have done even better.  

What Next? 

As ever I’m writing mid month, 13th and 14th. We’re now in Lockdown 3 and every indication is that rules will be tightened soon. Currently dealers are working well with “Click and Collect” but this is already banned in Northern Ireland, has been banned today in Scotland and may well soon be banned in England. This means dealers will be very largely closed as far as vehicle sales are concerned until further notice. This is SERIOUS, but not of course remotely as serious as the pandemic. January is normally a peak month for used car sales. It also begins the lead up to March new car sales March being the biggest month of the year with the introduction of the first new registration plate of the year. Now it seems a lot of this will be put on hold for a while.  

I deliberately say “on hold”. Ever the optimist (you wouldn’t do 50 years in this industry unless you were STUPIDLY optimistic) I believe the vaccination programme will take us back to something like normality sooner or later, hopefully sooner. When that gradually happens there will it seems be a lot of pent up demand. When we entered Lockdown 1 almost a year ago a survey said 3.5% of in market buyers were looking to buy a car within 4 weeks and 8% in 4-12 weeks. Currently 20% are intending to buy within 4 weeks and another 25% in 4-12 weeks. People have got used to “life goes on”. 

So the first quarter of the year will be rough for the industry, but not to be too selfish not remotely as rough as for many others in other industries, particularly hospitality, and most of all nothing like what is going on in our wonderful NHS. We need to keep a proper sense of proportion, selling cars isn’t really at all important in the grand scheme of things. However I will rabbit on a bit more:

 Used Electrics

 While as reported above sales of new electric cars are booming and sales of new diesel cars are plunging. In the used market its almost the opposite. In the new market company car drivers are embracing EVs mainly because (i) they don’t pay the much higher new price and (ii) they save a lot on the Benefit of Kind Tax they pay for receiving a company car. Used car buyers who pay for the car and the fuel themselves take a very different view. As new diesel sales fall the supply to the used market inevitably falls. So by the solid rules of supply and demand used diesel values will inevitably rise. 

Tesla Expand Dealer Network 

Last year Tesla increased the number of UK dealer points they operate (they own them all) from 19 to 25 and are planning at least one or two more for this year. As I said last month we can’t get entirely accurate figures for Tesla sales but 25000 last year is a pretty accurate guess, which means just about 100 per dealer point. So Tesla sell almost as many as Citroen and Honda for instance both of whom have around 100 dealers, and more than the likes of Mazda, Suzuki and Porsche who again have many more dealers.  

PSA/FCA Merger Gains Shareholder Approval 

PSA comprises Citroen, Peugeot, Opel and Vauxhall. FCA is Fiat Chrysler Automobiles which covers Fiat, Lancia, Maserati and of course Chrysle, Dodge etc. These two have now come together with the combined entity to be named Stellantis (don’t ask me why!). The new company will have the ability to sell more than 8.7 million vehicles worldwide which will make it the fourth largest manufacturer in the World. The merger is forecast to produce cost savings of £3.2 Billion a year with no planned pant closures. Well there might not be any planned currently but I’d say it will be difficult to save that amount of money without? Certainly the Vauxhall plant at Ellesmere Port near Liverpool remains at risk. It is also rumoured that there is likely to be “franchise consolidation” with a smaller number of bigger dealers handling two or more of the group’s brands. Chief executive will be PSA boss Carlos Tavares who has certainly done an admirable job of turning round Vauxhall/Opel since PSA took it over, making it profitable within 18 months when under GM it has lost money for 20 straight years 

Makes you wonder where the next big merger will come from? My money’s still on VW Group and Ford of Europe. 

Peter Vardy Group Exit Vauxhall Franchise 

Older readers will remember a dealer group named Reg Vardy which Peter Senior. Leter Sir Peter Vardy) developed from one small garage in the North East to a national chain before selling out. Then his son (also Peter) started again with one Vauxhall dealership in Motherwell and expanded throughout Scotland with now six Vauxhall dealerships and many others including Jaguar Land Rover, BMW/Mini and Porsche. Now Vardy’s have announced they are to relinquish all six Vauxhall dealerships and transform those sites into used car supermarkets which will major on online as well as physical sales. All the sites will continue as Vauxhall Parts & Service locations. 

Peter Vardy Jnr is a very well respected operator (and no doubt continues to benefit from sound fatherly advice), so this move may well concern some manufacturers, Vauxhall in particular of course. While like others they are shrinking their dealer network they will need to replace 3 or 4 of the 6 and with Vardy retaining the profitable after sales work that may not be easy. More to the point though if a company like Vardys feel the right thing is to walk away from volume new car business to used cars and retain only the prestige franchises how many other may look at similar moves?

 What’s The Future Of Japanese Manufacturers In Europe? 

It seems that Mitsubishi are exiting Europe including the UK faster than was at first thought. In the UK at least all new cars must be registered by end September because that is when the contract between the UK Importer and the manufacturer ends. The last thing the importer wants is to hit end September with lots of unsold stock which then has to be pre registered and sold at big discounts. Therefore their plan was to have as normal a first quarter as possible then cut back dramatically on the number of new vehicles they bring in. Lockdown 3 has of course taken away any hope of a “normal” first quarter. 

European emissions and other technical regulations in Europe are the most stringent in the World, and European customer look for very sophisticated small cars. So Japanese manufacturers face very big extra development costs for relatively small resulting sales. Subaru are barely clinging on with just over 13000 sales in Europe up to the end of September last year and less than 1000 in the UK in full year 2020. When you consider that includes dealer demonstrators and the importer’s staff cars etc actual sales spread over 40-50 dealers must work out at around 15-20 per dealer per year! That simply can’t carry on. Honda sold less than 28000 cars in the UK last year and only just over 40000 in the whole of Europe to end September. Even Nissan aren’t looking strong. For many years they competed with Toyota to be the top Japanese manufacturer in Europe but last year sold less than half of what Toyota achieved. Nissan now represents a 2.5% market share in Europe when Toyota due to the success of their hybrid models scored 5.4%. 

A particular problem is the massive fines the EU will impose on manufacturers if they don’t meet testing emissions targets. To do that manufacturers must have a range of pure electrics, not just hybrids. And to put it bluntly Mazda, Subaru, and Suzuki simply don’t have that now or on the horizon. Europe is a sideshow to most Japanese manufacturers. For example only 14% of Suzuki sales are in Europe. 

So what happens? There will be as there already is an element of technology sharing to enable the smaller manufacturers to compete. Which means apart from Nissan sharing with Toyota. Toyota already own a 5% stake in Suzuki and Mazda and 20% of Subaru and is working with all three on a shared electric platform. Even then the smaller ones may eventually give up on Europe. Subaru almost certainly, Suzuki probably, Mazda maybe? 

Another Alternative Fuel Arrives 

When you read this you may need to check your calendar to ensure it definitely isn’t April 1st. While the debate rages between Petrol, Diesel, Hybrid, Electric and Hydrogen another green fuel has arrived to be considered. With Government funding development has started on a new “Mini Train” that will be powered by what is being politely termed “Human Waste”. A biomethane tank mounted centrally under the floor generates gas from the “fuel” which is then converted to electricity. The 20m long one carriage train can carry 62 seated passengers plus 58 standing. The train is much lighter than existing diesel powered units (about 50% less) so will cause much less track damage. Despite the fuel those behind the project insist no smell or toxic emissions are produced. It is hoped that this train could enable some of the lines closed in the 1960s to be re-opened. Small branch lines rely on diesel power because electrification is far too expensive but diesel is polluting. Top speed is 50mph and it will do 2000 miles on a full tank so ideal for commuter lines also. I understand there are currently no plans to use this technology in cars…….. 

Bigger Trains Take On Trucks 

In another train linked move to reduce pollution longer freight trains are being introduced to transfer freight from trucks. Maximum length in the UK was about 600m this is being increased to 775m. As well as taking trucks off the road there will be less trains running so less pollution from the locomotives. I remember some years ago when driving through the Canadian Rockies the freight trains there are about 2 miles long so we have a long way to go.  

Apple Car Rumours Circulate Again 

For several years now there have been rumours that Apple are developing and electric self driving car. Apparently design and development work is well advanced and discussions are taking place between Apple and Hyundai with the Korean manufacturer likely to be responsible for the production of yhe cars. Apple have obviously observed how difficult it was for Tesla to actually make the cars once they’d designed them and their routs of giving that job to people who are already good at making cars in big volume to high quality standards and at low cost makes very sound sense. 

Buddy Can You Spare A Dime? 

In January of last year I accepted a challenge to walk 2020 miles in 2020 which I thought was a good way to celebrate the year in which I turned 70. It was a close thing but I completed it 9 hours ahead of schedule on New Year’s Eve! I decided to try to use this to raise funds for my chosen charity the Eden Valley Hospice. Some of you have had advance notice and have already donated, many thanks. Please be assured I don’t expect any double donations!

You can donate to my JustGiving page by clicking here: https://www.justgiving.com/fundraising/paul-gilligan2?utm_source=Sharethis&utm_medium=fundraising&utm_content=paul-gilligan2&utm_campaign=pfp-email&utm_term=c4f715763f954ab1aba730ac2ea67b06.

Donating through JustGiving is simple, fast and totally secure. Once you donate, they'll send your money directly to Eden Valley Hospice, so it's the most efficient way to give - saving time and cutting costs for the charity. This year I’m trying to do a “virtual” walk along Route 66 from Chicago to Los Angeles, 2280 miles. There is of course an App for it! Just over 80 miles done so far.

Thank you,

 Paul Gilligan

pg@gilliganvc.co.uk www.gilliganvc.co.uk

07785 293222