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Blog Entries from 2010
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Subsidy junkies or realists?
Daimler CEO Dieter Zetsche was reported by Bloomberg to have said on 11 November at a corporate CSR event in Stuttgart that “Governments should offer consumers financial incentives to buy electric vehicles to help offset the extra cost for manufacturers to build the cars.”
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Only 5% of new car buyers are influenced by green credentials
Research released on 19.11.2010 by Bosch revealed that despite 69% of drivers claiming to do their best for the environment, only 5% of motorists buying a new car would be influenced by a car’s ‘green’ credentials.
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EVs: When to turn off the subsidy tap?
Over the past century the use of cars has evolved to create an emergent organism which has oil in its bloodstream, and the auto industry at its heart, the supply chain, distribution channels and aftermarket as limbs. Its tentacles reach along the roads which control where we go and where and how we live, into the banks that finance the cars, and the governments that tax them and finance the infrastructure they need.
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Could GE help EVs bust out of the green niche?
GE-WHIZ! GE has confirmed that it will buy 25,000 EVs by 2015 for its own fleet and through its Capital Fleet Services business – the biggest-ever single EV order. Could the global elec-tech. and asset finance giant bring profits for EV suppliers within sight?
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Where has all the work gone?
Auto Retail Network ran two aftersales workshops at the beginning of October and it was our job to present the latest information on the state of the market, which in these tough times was not the most upbeat of assessments. Once we had elucidated the problems, the delegates were tasked with finding solutions as they rotated around four workshops facilitated by experts in relevant areas.
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The new normal for motor retail
We’ve had a credit crunch, a recession, a new government and an emergency budget – all in the space of three years. So is that it? Will everything go back to ‘normal’ now? Yes, but probably not the ‘normal’ we experienced before. To use a current buzz-phrase, it will be a ‘New Normal’. Before we describe the ‘New Normal’, let’s dwell for a moment on what has happened.
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Pessimism and optimism
The least fun part of research is the statistics especially the maths required to work out cause and effect. We employ experts to do all this sort of stuff for us who render forth in what seems like a foreign language full of mysterious words and phrases like ‘t-tests’, ‘significance’ and ‘correlation’.
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The remarkable resilience of retailers
At least some of Trend Tracker’s analysts, myself included, have shown a glass-half-empty attitude towards the standard-model new car franchise system, as some of our past white papers have attested. But we have to admit that earlier reports of its impending demise were more than a little premature. The system isn’t bust yet, indeed it survived the 2008 recession rather better than many might have expected.
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Rare earth metals to get rarer faster?
The New York Times reported on Thursday (22.09.10) that the Chinese government had officially denied halting exports of rare earth metals to Japan, in retaliation for the detention of a Chinese trawler skipper in a long-standing territorial dispute. China had already cut export quotas for the cerium, lanthanum, neodymium etc. etc. on which Toyota et al depend for their NiMH batteries, permanent magnet electric motors and much else besides, and has over 90% of the world’s known rare earth metals deposits.
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Forecasting the Future 2009-2015
Essentially the Car Service and Repair Trend Tracker Update 2010 combines three longstanding research reports into one. First, and perhaps best known, is the Service Trend Tracker. Published since 1995, this report is based on extensive consumer surveys. Every month, 1,000 motorists are asked about where they last had their car serviced. The result is ‘servicing retention’ by make of car and provider of servicing – dealers, independents and DIY – a measure we have always found to mirror, very closely, the industry standard ‘service retention’ that includes all types of mechanical work including routine servicing.
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Facts and figures - DfT analysis of MOT Testing
Two invaluable sources of facts and figures for our research reports come from the Department for Transport (DfT) – the snappily-named Transport Statistics Great Britain and Transport Trends. Hardly the most thrilling reads, but crucial to understanding what’s happening in the car market and why.
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And so it begins
Previously we have explained how the number of cars on the road up to four years old has a knock-on effect to the aftersales market. As new car sales fall the so-called 'four-year car parc' diminishes in size and franchised dealerships, which rely on younger cars for servicing business, start to feel the effects. Then as time passes this dearth of cars becomes a problem for independent garages targeting older cars. What is less well understood is that a falling four-year car parc impacts on the market for car body repairs too, because it is generally newer cars that are repaired after an accident.
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Grossing up gross margins
At this time of year, dealer group PLC’s publish their half-year results – informative barometers of the past six months. Also at this time of year private limited companies with financial years ending last December must post their accounts to Companies House.
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Small percentages add up to bigger percentages
We make no apologies for returning to the subject of parts wholesaling again because it appears, judging by our workload, that this sector is seeing a real renaissance in the franchised sector. However our work with several vehicle manufacturers, looking at network performance on their behalf, has highlighted one interesting problem – staff lacking basic knowledge.
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Automotive Mark-ups & Margins
If you buy something for £100, what do you have to sell it for to make a gross profit margin of 33%? The answer is, of course, £150. Certainly every reader of Auto Retail Network’s Bulletin where this article was first published, would have got this simple example of ‘mark-ups and margins’ correct. However, our experience running training courses for sales executives and aftersales personnel is that the mathematical skills of dealer staff are often sadly lacking, and many would come up with £133 as the answer – how would yours fare? Furthermore, our research on gross margins strongly suggests that this lack of knowledge has an impact on profits.
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Testing times
The coalition government is, we hear, to review Britain's MOT test regime, the previous government having decided only two years ago to reject a government commission's proposal to save motorists money by complying only with the EU minimum requirement for a first test after four years, and biennial tests thereafter. It took two years for the no-change decision to be made after a delayed consultation.
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Range Rover Evoque
From time to time, former Trend Tracker analyst and now business academic Dr. Michael Wynn-Williams delivers us his personal view of events and issues in the automotive sector. Happily this week sees Michael letting us air his view of the Evoque, the latest extension to the Land Rover brand portfolio. Whatever road-bound 4x4s in general evoke to you, I hope you’ll enjoy his robust critique of a company that has “thrown off its old mud-plugging ways,” but has nevertheless “slowly become bogged down in its models and brands.”
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Pricing strategies for a declining market
In a month's time, Ford is cutting the RRPs on all its medium and small cars, as it did in April with its large ones. And it has cut dealer margins too, with the stated aim of making “the whole purchase process more transparent and the value of Ford cars more obvious."
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Are new cars overpriced?
Last month in this column, we shared our views on the scrappage scheme and how this had influenced new car sales in the short-term. New car sales volumes are, of course, important in their own right but also exert a crucial influence on the used car market and aftersales. Longer term we believe that new car sales volumes will respond in a similar fashion to the recoveries experienced after previous recessions. One potential obstacle to this recovery is the possibility that new cars have become overpriced - something that What Car? magazine raises in its latest issue.
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Do Quangoids Dream of Electric Cars?
(With apologies to Philip K. Dick.) In July six electric Mitsubishi i-MiEVs will arrive in the North East for trials run by Cenex's Low Carbon Vehicle Procurement Programme at a leasing cost of £137,450 over four years, plus (we guess) around £6.5m for installing 1,300 charging points. The latter approximate figure is included in the last government's 'Plugged in Places' programme, channelled via the regional development agency One North East. In London, 20 Toyota Prius plug-in hybrids on lease will arrive on the fleets of various public bodies in London, courtesy of Toyota and EDF Energy. Similar trials are under way in the Midlands, funded by the Technology Strategy Board and Advantage West Midlands. Correction: funded by all of us.
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Charting The Decline in SMR Work
Download and read our latest aftersales article, published in the June 2010 issue of Auto Retail Networks' Bulletin.
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Black and Blue in the Bayou
Dr Peter Wells of Cardiff Business School's Centre for Automotive Industry Research (co-author of Car Futures - Rethinking the automotive industry beyond the American model”, available from Trend Tracker), speculated recently in Automotiveworld.com's Environment Weekly that BP's fiasco could prove a tipping point in the evolution of a market for electric vehicles. Market and public sentiment can turn bad on a dime, and BP's bonds have dropped to junk status, although with oil at $75 a barrel, BP is still gushing cash flow and can easily afford the $billion+ Gulf clean-up cost, and pay a dividend to its US shareholders.
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More power to your elbow
According to ASE (incorporating Trevor Jones), the average overall labour efficiency of dealers' service departments fell from 83% in 2008 to 80% in 2009. Our own data record a similar fall and you have to go back more than a decade to find service labour efficiencies regularly exceeding 100%. Bodyshops, too, have seen overall labour efficiencies declining over time.
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Wrong-Footed in Recession
Trend Tracker's associate Dr. Michael Wynn-Williams of Greenwich University Business School contributes some incisive thoughts on the state of the global car industry, reflecting at leisure on the variously effective and irrelevant ways that different automotive OEMs at the Geneva Motor Show were responding to the current dearth of demand. His overall impression of the show was that “this is an industry that is in almost complete denial.” See if you agree.
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DIY job card analysis
Analysing job cards is an essential research tool for our reports on the market for servicing and repairs. It is the simplest way of deriving the average values of jobs and revealing the strengths and weaknesses of the two principal market suppliers - franchised and independent. The method, albeit arduous and boring, is relatively straightforward and it's the kind of research any franchised workshop or independent garage can do for themselves.
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Dealer survey is not all doom and gloom
Earlier in the year in this column we discussed the state of franchise networks and our new study of the used car market. As is often the case in these troubled times, the situation changes almost daily as better information comes to light. For once, though, the new information is not all doom and gloom.
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Death and Taxes
The saying “Nothing is certain but death and taxes” has been attributed to various authors including Daniel Defoe and Benjamin Franklin. Almost as inevitable as 'death and taxes' is the way the UK's population is ageing. This evolving age profile will be a key factor in car purchases in the future. And it is not even the distant future that politicians baffle us with when they talk about pension provision. Your customers' needs will be changing quite dramatically within ten years.
The chart is our interpretation of data freely available from the Office of National Statistics and shows the age profile of the UK's population now and in five years. Noticeably the two lines are almost identical in shape reflecting the certainty that people who are around now are quite likely to be here in five years - give or take influences like immigration and emigration.