Inside the Industry March 2024

2023/24 Charity Challenge 

I make no apologies by putting this one at the top again. After my appeal last month for charity donations only 8 people responded with a gift. They were on average very generous so the total including Gift Aid Tax Reclaims stands at just over £400. Have to say bitterly disappointing against my target of £2177. I know several thousand people read this every month and many are kind enough to contact me to say how much they enjoy it, which I find very gratifying. Surely it has some value if you find the 30,000 words a year I churn out enjoyable, interesting, and informative? The charity is one of the most deserving out there and close to my heart. 

So I’m going to set the bar really low and this obviously excludes the 8 who have been kind enough to dig deep already. Just Giving Page details are below. Please send £1. Yes £1. Of course you can send more if you’d like, you can send the prices of a coffee in Starbucks, a pint in Wetherspoons or a gallon of petrol. But £1 will do fine and be very welcomed. 

https://www.justgiving.com/page/paul-gilligan-1708960436839?utm_medium=fundraising&utm_content=page%2Fpaul-gilligan-1708960436839&utm_source=email&utm_campaign=pfp-email 

2024/25 Charity Challenge 

Faithful Mountain Dog (Enzo for those who don’t know) and I set out from Brescia on March 1st to retrace the route of the 1955 Mille Miglia. So far we’re just ahead of schedule, 160 miles completed we’ve passed through Padua and Verona and getting close to Ferrara. After that Ravenna and a blast down the Adriatic Coast where Sir Stirling and Jenks would have been pulling close to 180mph. Our pace will be more sedate but again we’ll get there in the end!  

Cazoo Stop Selling Cars

 Perhaps no surprise as discussed a few months ago they have been rapidly running out of cash. Last week Cazoo announced they would stop selling cars more or less immediately. All stock is being sold off with vultures in the shape of used car supermarkets circling looking for bargains. Preparation centres and vehicle transporters are also on the market. Next plan for Cazoo is to become an “Online Marketplace” competing with Auto Trader for a start. They believe the strength of their brand will give them a great advantage but acknowledge that they are unlikely to overtake Auto Trader “Anytime soon, if ever”. So leaving shareholders nursing very big losses and staff now jobless behind Cazoo move on to the next challenge. 

The Chief Executive is leaving immediately to “Pursue other opportunities”. 

This Is Why Electric Cars Lose So Much Value So Quickly  

Recently I was approached by a customer who had a friend considering buying a 3-4 year old Jaguar I Pace electric car. With sensible miles he was finding them at around £25,000 so thought that good value for a car that had cost almost 3 times as much when new. They asked for my thoughts particularly about battery life and replacement cost. 

First thing I discovered was that Jaguar warranty the battery pack for 8 years or 1000,000 miles whichever comes first. If the battery pack tests as having dropped below 70% efficiency in that period you get a new pack paid for by Jaguar. If it doesn’t after the car’s 8th birthday you’re on your own.  

Next step was to find out how much a new battery pack costs. £37,000! I was so shocked I didn’t ask if that was plus or including VAT. 

So you buy the 4 year old car for £25000. Then you pray that sometime before it’s 8 years old the battery efficiency drops below 70% so you’ll get a new pack free from Jaguar and you’re set for another 8 years. However if it obstinately remains at 70% or more you’re left with a car that sometime in the next few years will need a £37k battery pack so at that point it becomes worthless. If you pass the 8 year point on original batteries you effectively have an unsaleable car and have to keep it until the range drops to the point it's useless, then you scrap it. 

And by the way that doesn’t just apply to the Jaguar I Pace. It applies in principle to all electric cars. Warranties will vary which will move the goalposts one way or another but the basic truths remain the same.

 

Jaguar Become An SUV Only Company – For a While     

In June of this year Jaguar will stop production of the XE & XF Saloons and Estates and the F Type Sports Car. In fact I think F Type stops at end April. So for the rest of this year Jaguar will produce only SUVs, I-Pace Electric, E-Pace and F-Pace. Customers can still order a new XE or XF but not to individual specifications. The factory are building to set specifications to use up existing parts stocks and avoid ordering other components which have to be ordered in quantities.  

The Jaguar will move on to the launch late this year for deliveries starting sometime in 2025 of the all electric 600 bhp 4 seat Grand Tourer to compete with the Porsche Taycan, prices rumoured to start at around £120,000. In 2025 a large again all electric SUV to compete with Bentley Bentyga and Aston Martin DBX (and Range Rover of course built by the LR part of JLR). The comes a large again all electric saloon. These are the three cars that will carry Jaguar on from 2025/26. Or not as the case may be?

 

Lots Happening At Bentley 

Bentley have been pretty quiet of late but that’s proved to be the calm before the storm. First they reported financial results well below the previous year. They made 11% less cars than in 2022, total sales revenues fell by 13% and operating profits were down 17%. Chief Executive Adrian Hallmark (see below) said demand had suffered because of uncertainties due to wars and conflicts around the world, and that there were very high costs involved in the development of electric cars with Bentley committed to making electrics only by 2030 (see below).  

That was on March 19th. Well this has always been a fast moving industry. The very next day March 20th Bentley announced that because of increased interest in hybrids they would make these for a few years after 2030. Also the launch of their first pure electric car would be put back for a year to 2026. 

Then a couple of days later on March 22nd it was announced that said Chief Executive was leaving with immediate effect. After a period of “Gardening Leave” he will takeover as Chief Executive at Aston Martin. AM Boss Lawrence Stroll has never been unwilling to open his cheque book to attract the best (e.g. Fernando Alonso) and it seems once again he’s got his man.

 

Move To Agency Sales Model Stalls 

Many observers myself included have long held the view that the Agency Sales Model where the manufacturer sets the price and the dealer merely receives a commission for handling the customer was all OK in a short supply market but would struggle once there were more cars than customers. This seems to be proving to be true. Mercedes who were first to switch to Agency just over a year ago still claim it’s working well, but their dealers who are selling less cars and at much lower margins don’t agree strictly off the record. JLR had stated they would change over soon, this decision has now been scrapped and they retain the franchise model.  

Audi were scheduled to change to Agency at the end of April, this has now been “postponed until further notice ” although the new Q6E-Tron electric will be sold on agency terms only. Stellantis (Citroen, Fiat, Peugeot, Vauxhall) have put their change back to at least the end of 2026. A long time away.  

 

The head of one of the largest industry consultancies put it bluntly:  

“There’s now more cars than customers. In this market you need dealers to deal. Manufacturers don’t have either the talent or the experience”.

 

How Are Sales Going? 

You can never learn much from February new sales because they are always lower than average as customers wait for the new registration plate in March. However it is valid to compare to last February. Against last year sales in the month were up a healthy 14%. Within that though fleet sales were 25% up and small business sales up 15% with retail down by almost 3%. Small business sales have been well down so that may be seen as encouraging but please remember that that is where pre registration sales are reported and these are becoming significant again. Retail is where manufacturers and dealers make their money so the continued weakness there is a big concern. What happens in March will be the big test.  

Manufacturers who don’t achieve an electric car share of sales of 22% face big fines. In February the overall share was up to 17.7% against 16.5% last February so hardly rocketing. Almost all new electric cars are bought by fleets because of the tax advantages that company car drivers enjoy. The industry had lobbied hard for some actions in the Budget to encourage retail buyers to go electric but nothing was forthcoming. Discounts on electric cars to the retail market are rising significantly. We’ve recently been able to supply some brand new Nissan Leafs (Leaves?) with a retail price of £31300 for £18750 which is a deal in anyone’s language! Dacia (part of Renault) have just introduced a new electric car with prices starting at £15,000 making it around £12,000 cheaper than any other electric car on the UK market. The Chinese are sure to respond! 

What will happen in March? The only thing I would guarantee at this point is lots of pre registrations. Lots and lots. 

The used car market sems pretty stable. Values certainly aren’t going up but they are only dropping slightly in most sectors. The lack of new car retail sales leads to a shortage of retail part exchanges which are the ones everyone wants, so the simple laws of supply and demand meant these are making good money.

 

Middle East Takeover Of McLaren Completed 

It’s been common knowledge that McLaren have struggled financially over recent years. Various actions have been taken to raise new funds including the sale and leaseback of their headquarters building, issue of new shares and so on. Their basic problem on the road car side is that their costs of production and product development are about the same as Ferrari’s but they sell a lot less cars and at lower prices. 

Mumtalakat the sovereign wealth fund of Bahrain has now taken full control. This fund has been a major shareholder and funder for some years and is now the 100% owner of both the car company and the motorsport side. They have said they are open to selling a minority stake to assist the company to develop electric cars, BMW and Hyundai are just two manufacturers that are rumoured to have had talks.

 

Touchscreen Controls 

In recent years manufacturers have moved many of the controls you need to drive a car from the traditional stalks and buttons to the central touchscreen. Climate control, radio, wipers, lights and so on are now controlled by touchscreen. Tesla even have the turn indicators operated by buttons on the steering wheel which you have to use even if you’re turning the wheel at the same time. Why? Mainly because it’s cheaper, simple as that. Problem is it means to carry out these necessary actions the driver has to take their eyes off the road. 

Now the influential car safety rating organisation Euro NCAP have said that in order to qualify for the highest 5 star rating from 2026 cars must have buttons or stalks to control key functions. These include indicators, wipers, hazard warning lights and horn. Although these are not legal requirements a 5 star NCAP rating is highly prized by manufacturers and important to customers. So hopefully we’ll see some sanity return.

 

Automatic Only Drivers Pay More For Insurance

Or should that read “even more” having just renewed the insurance on one of our cars? Many young drivers are now learning and passing their tests purely in automatics because manual cars seem to be a dying breed. However these drivers then get a licence that only permits them to drive autos. In 2007 70,000 driving tests were taken in automatic cars, in 2022 it was 324,000. All electrics are auto of course. I remember a few years ago reporting when the share of new car sales taken by automatics passed 50% for the first time. Now it’s over 70%.    

 However insurers take a dim view of young drivers with an automatic only licence. On average they pay around 35% more. Reasons are given as those driving a manual are more attentive and more in control, a significant number of accidents are caused by drivers pressing the wrong pedal in an automatic car, and the fact that autos are generally more expensive.

        Paul Gilligan

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

07785 293222