Car Retailing - UK - August 2006

INTRODUCTION AND ABBREVIATIONS
 DEFINITIONS
 RESEARCH METHODOLOGY
Consumer research
ACORN
 ABBREVIATIONS
PREMIER INSIGHT
EXECUTIVE SUMMARY
A difficult year for new car dealers
Poor prospects for 2006
Lower sales and prices lead to fall in new car market value
Used car market was more resilient but still declined
Negative factors affecting consumers
Motoring costs mushroom largely due to higher-cost servicing
Dealers sell more used cars as new car penetration falls
Nearly-new cars may be helping online sales
ABs are confident new car buyers but may stray for servicing
Older drivers are key customers for franchised dealerships
Youngest and poorest confined to older used cars
Price, aftersales and dealer reputation key to the buying decision
Still widespread perception that new car prices are too high
Internet research up as readiness to buy online drops
More research makes consumers a harder sell
Consumers unmoved by impressive showrooms
Women improving their car knowledge
Most manufacturers using quality standards to control dealers
Consolidation pressure intensified by revised rules
The rise of the ‘superdealer’
Global overcapacity a major problem for dealers
Showroom standards exacerbate rising dealer costs
Dealer viability under threat
No rush to multi-franchising
No sea change in servicing
Economic restraints on consumers may limit future demand
Dealers and outlets may grow in size
INDUSTRY ISSUES AND INSIGHTS
 RECENT MARKET PERFORMANCE
Constraints on consumers limit new car retail
Used market performance
Segment sales performance
Rise of the small car
Is model variation a route to better dealer margins?
Relative dealer performance
Car supermarkets
Channel leakage may weaken franchised dealers
Global oversupply continues to constrain dealers
 IMPACT OF THE NEW BLOCK EXEMPTION
Main aims of the revised regulation
New rules mainly benefiting larger groups
Block Exemption: spot the difference?
No stampede to sell multiple brands
Clarification required on multi-franchising
No significant effect so far
No fast fit for the servicing market
Longer service intervals
 DEALERSHIP PROFITABILITY
Dealer revenues under threat
POS finance income declining
New regulatory burden may impact insurance sales
Rising costs annihilate dealer margins
A showroom upgrade too far?
Franchise standards are costing dealers
Showrooms may be surplus to requirements
Dealer margins barely visible
Dealers demand more from manufacturers
What are dealers doing about it?
 CONSUMER BEHAVIOUR
Car buying and the Internet
Internet research changes shopping behaviour
Showrooms and garages still required
Factors important to car-buying consumers
Economics more influential than environmental issues
Income availability defines the car-buying consumer
 LEGISLATION AND REGULATION
Industry unimpressed by government green initiatives
Mixed reactions to VED banding
More regulation feared by dealers
RETAIL SALES
 NEW CAR SALES
Figure 1: Private new car registrations, 2000-06
Private sales lead the 2005 decline
Figure 2: Total new car registrations, by private, fleet and business sales, 2000-06
Record share for diesel
Depression continues into 2006
Seasonality
New car market value and pricing
Figure 3: Value of new car sales, at current and constant prices, 2000-06
 USED CAR SALES
Volume sales
Figure 4: Volume of used car sales, 2000-06
Used car market value
Figure 5: Value of used car sales, at current and constant prices, 2000-06
 SEGMENTATION – NEW CARS
New car sales by product category
Figure 6: New car sales, by product category, 2001-05
New car sales by marque
Figure 7: Manufacturer shares of new car registrations, 2001-05
CONSUMER EXPENDITURE
Private car spend fell in 2005
Figure 8: Consumer expenditure on car purchasing, at current and constant 2001 prices, 2001-06
Figure 9: Consumer expenditure on car purchasing, at current and constant 2001 prices, 2001-06
Servicing & repair spend escalates
Figure 10: Consumer expenditure on car purchasing, servicing & repair and motoring expenses, at current prices, 2001-06
Figure 11: Consumer expenditure on vehicle purchasing, servicing & repair and motoring expenses, at constant 2001 prices, 2001-06
RETAIL STRUCTURE
 NEW CAR RETAILING
Figure 12: Number of UK franchised dealer outlets, 1996-2005
Failures up in a tough market
Suffer little dealers
Number of franchised dealerships forecast to grow
Rise of the ‘superdealer’
Pendragon snaps up Vardy…
…but remains hungry
Major dealer groups gather strength
New regulations may be spurring consolidation
Location clause removed
 MARKET CONSOLIDATION
What is driving consolidation?
New car dealerships by marque
Figure 13: Number of UK franchised dealer outlets, by marque, 2001-05
 USED CAR RETAILING
New car boom leads to influx of nearly-new cars
Pre-registration dilemma for dealers
Used cars become more crucial to franchised dealers
Independent dealerships
Car supermarkets
 OTHER RETAIL CHANNELS
Car auction companies
Car importers
Online car retailers
MARKET FACTORS
More older consumers is good for new car sales
Figure 14: Total UK population, by age group, 2001-11
Car parc rising faster than population
Figure 15: Trends in UK population and car parc, 2001-11
Growth in affluent consumers a likely positive factor
Figure 16: UK adult population, by socio-economic group, 2001-11
Increase in unemployment may damage car demand
Figure 17: Structure of the UK working population, by gender, 1996-2011
Strong growth in PDI and consumer expenditure
Figure 18: PDI and consumer expenditure, at current and constant 2001 prices, 2001-11
Number of UK driving licence holders
Figure 19: Full driving licence holders, by age and gender, 1992/1994-2004
The costs of motoring
Substantial tax revenues raised from motoring
Tax incentives for cleaner diesel cars
New road tax structure based on emissions
Figure 20: Vehicle Excise Duty rates, from 23 March 2006
Use of greener fuels encouraged by taxation
Figure 21: Main effective* fuel duty rates, 1996-06
Petrol prices continue to soar
Figure 22: Average annual retail motor fuel prices*, 1996-2006
Car financing costs
Pressure for more road pricing
Legislative and regulatory factors
Block Exemption regulations
Location clause removed from October 2005
VAT rebates boosted 2004 dealer profits
THE CONSUMER
 KEY CONSUMER FINDINGS
 CAR OWNERSHIP
Figure 23: Car ownership and age of most recently obtained car, by demographic sub-group, 2005
Penetration of driving licences
Figure 24: Type of driving licence held, by demographic sub-group, 2005
 MINTEL’S CONSUMER RESEARCH
Driving population
Figure 25: Respondents that already drive, and those that currently do not drive but plan to do so in the next 12 months, by gender, age and social grade, May 2006
Source of car purchase
Figure 26: Source of car purchase, January 2002, February 2004 & May 2006
Figure 27: Source of car purchase, by gender, age and socio-economic group, May 2006
THE CONSUMER – DETAILED CONSUMER DEMOGRAPHICS
Figure 28: Respondents that already drive, and those that currently do not drive but plan to do so in the next 12 months, by lifestage, Mintel’s Special Groups, region, ACORN category, media usage, commercial TV viewing and source of regular grocery shopping, May 2006
Source of purchase
Figure 29: Source of purchase of car, by lifestage, Mintel’s Special Groups, region, ACORN category, media usage, commercial TV viewing and source of regular grocery shopping, May 2006
CONSUMER ATTITUDES AND TYPOLOGIES
 KEY CONSUMER FINDINGS
 CAR CONSUMER TYPOLOGIES
Figure 30: Car consumer typologies, May 2006
Price-led (28%)
Car-savvy (19%)
Loyalists (17%)
Unconcerned (36%)
Females relatively loyal while males more motivated by price
Figure 31: Car consumer typologies, by gender, age and socio-economic group, May 2006
 KEY ISSUES AND THEMES
 CONSUMER ATTITUDES
Figure 32: Consumer attitudes towards car buying, 2002, 2004 and 2006
Car choice based on more than just looks and performance
Internet research up but willingness to buy online down
More enthusiasm for used cars online
Consumers less confident as sales pressure rises?
Showroom upgrades don’t necessarily deliver more customers
 INTENTION TO BUY
Youngsters keen to own their dream car
Car aspirations may exceed income level
Figure 33: Consumers planning to buy a new or used car in the next 12 months, those who research before they buy, and those who always return to the same dealer, by gender, age and socio-economic group, May 2006
 PURCHASING BEHAVIOUR
Male-oriented industry tends to neglect the female audience
Mature consumers guided by experience
Figure 34: Consumers who decide what make/model before visiting showroom, those who are confident buying new and used, and those who always return to the same dealer, by gender, age and socio-economic group, May 2006
 THE INTERNET AND PRICE COMPARISONS
Car-savvy women
Young family-aged consumers most likely to buy a new car online
Figure 35: Consumer attitudes towards car research and buying new and used cars over the Internet, by gender, age and socio-economic group, May 2006
 FACTORS DETERMINING WHERE CONSUMERS BUY
Price comes first
Figure 36: Factors important in determining source of car purchase, May 2006
Fine line between helpful and pushy?
Only 3% of consumers influenced by nice showroom
Under-44s most concerned about price
ABC1s and younger consumers likely to have particular spec in mind
Figure 37: Factors that determine source of purchase, relating to price, trade-in value, and range or specification of cars available, by gender, age and socio-economic group, May 2006
Reputation of dealer more important to women
Figure 38: Factors relating to dealer reputation and experience, aftersales service and showroom advice, by gender, age and socio-economic group, May 2006
 CONSUMER ATTITUDES TOWARDS CAR PRICING, RANGE OF BRANDS AND SERVICING
Figure 39: Consumer attitudes towards car pricing, range of brands and car servicing, 2004 and 2006
45% of consumers still feel ripped off by new car prices
More consumers like single-brand than multi-brand dealerships
Little change in servicing
 ATTITUDES TOWARDS CAR PRICES
What a rip-off
But are prices falling?
Figure 40: Consumer attitudes towards car pricing, by gender, age and socio-economic group, May 2006
 RANGE OF BRANDS/MANUFACTURERS
ABs less keen than average on multi-franchise dealerships
Figure 41: Consumer attitudes towards the range of car brands, by gender, age and socio-economic group, May 2006
 CAR SERVICING ISSUES
ABs open to use of non-franchised garages
Focus on longer-term customer relationships required
Figure 42: Consumer attitudes towards car servicing, by gender, age and socio-economic group, 2006
CONSUMER ATTITUDES AND TYPOLOGIES – DETAILED CONSUMER DEMOGRAPHICS
Figure 43: Intention to buy, by lifestage, Mintel’s Special Groups, region, ACORN category, media usage, commercial TV viewing and source of regular grocery shopping, May 2006
Figure 44: Purchasing behaviour, by lifestage, Mintel’s Special Groups, region, ACORN category, media usage, commercial TV viewing and source of regular grocery shopping, May 2006
Figure 45: The Internet and price comparison, by lifestage, Mintel’s Special Groups, region, ACORN category, media usage, commercial TV viewing and source of regular grocery shopping, May 2006
Figure 46: Price and range/specification factors determing source of car purchase, by lifestage, Mintel’s Special Groups, region, ACORN category, media usage, commercial TV viewing and source of regular grocery shopping, May 2006
Figure 47: Dealer-related factors determining source of car purchase, by lifestage, Mintel’s Special Groups, region, ACORN category, media usage, commercial TV viewing and source of regular grocery shopping, May 2006
Figure 48: Price-related consumer attitudes towards car purchasing, by lifestage, Mintel’s Special Groups, region, ACORN category, media usage, commercial TV viewing and source of regular grocery shopping, May 2006
Figure 49: Consumer attitudes towards multi-franchising, by lifestage, Mintel’s Special Groups, region, ACORN category, media usage, commercial TV viewing and source of regular grocery shopping, May 2006
Figure 50: Consumer attitudes towards car servicing, by lifestage, Mintel’s Special Groups, region, ACORN category, media usage, commercial TV viewing and source of regular grocery shopping, May 2006
RETAIL MARKET SHARES
Figure 51: Top ten UK franchised car dealers, by turnover, number of outlets and market share, 2005
RETAILER PROFILES
Pendragon plc
Figure 52: Pendragon Plc, financial performance, 2001-05
Figure 53: Pendragon UK, sales and operating performance, 2001-05
Reg Vardy plc
Figure 54: Reg Vardy Plc, financial performance, 2001-05
Arnold Clark Ltd
Figure 55: Arnold Clark Ltd, financial performance, 2001-05
Sytner Group Ltd
Figure 56: Sytner Group Limited, financial performance, 2003 and 2004
Inchcape Retail Ltd
Figure 57: Inchcape UK*, financial performance, 2001-05
Lookers plc
Figure 58: Lookers Plc, financial performance, 2001-05
Camden Motor Group Ltd
Figure 59: Camden Motor Group Ltd, financial performance, 2001-05
Jardine Motor Group plc
Figure 60: Jardine Motors Group Plc, financial performance, 2004-05
European Motor Holdings plc
Figure 61: European Motor Holdings plc, financial performance, 2002-06
Bristol Street Motors
Figure 62: Bristol Street Group Ltd, financial performance, 2000-04
HR Owen plc
Figure 63: HR Owen Plc, financial performance, 2001-05
Ryland Group Ltd
Figure 64: Ryland Group Ltd, financial performance, 2001-05
Marshall Motor Group Ltd
Figure 65: Marshall Motor group Ltd, financial performance, 2001-05
Dixon Motor Group Ltd
Figure 66: Dixon Motor Group Ltd, financial performance, 2001-05
 FACTORY-OWNED DEALER GROUPS
DaimlerChrysler Retail Ltd
Figure 67: DaimlerChrysler Retail Limited, financial performance, 2001-04
Ford Retail Group Ltd
Reagroup UK (Renault Retail Group)
Figure 68: Renault Retail Group Ltd*, financial performance, 2003 and 2004
Robins & Day
Figure 69: Robins & Day Ltd, financial performance, 2003-04
 CAR SUPERMARKET OPERATORS
Carcraft
CarLand
Motorpoint
Carshock
 ONLINE/PHONE RETAILERS
THE FUTURE
Oil price rises will heighten motoring costs
Economic pressure will continue to weaken demand
But cars remain integral to modern lifestyles
Cars also an emotional support
Showrooms standards may need to be relaxed
Multi-brand sites more likely than multi-franchised dealerships
Further consolidation expected at the top
Fewer but larger outlets likely
Dealer margins remain under pressure
Servicing landscape little changed
More regulation likely in servicing
FORECAST
Figure 70: Forecast of car sales, by value, 2006-11
Factors incorporated in the forecast