Terrifying news for all who are betting on hybrids & EVs weaning us off oil. First they flood us with cheap exports of almost everything, then turn off the tap just when we get addicted. See the issue assessed in Trend Tracker’s forthcoming report on the future of EVs, of which more news soon. One point is clear: technology which depends on costly metals which may be depleted sooner than oil is something to be cautious about. But don't imagine we can relax with our nice, familiar petrol and diesel cars. They need platinum for catalysts, and cerium, Europium, Yttrium for glass manufacture, and goodness knows what else, too. What isn't getting scarce, apart from scare stories?

Toby Procter

Trend Tracker Limited

0870 421 4350

aftermarket report, bodyshop market, car finance, electric vehicles, car servicing, automotive research

The most recent editions of these compendiums give some reason for optimism. For example in 1952, buses accounted for 42% of all travel (expressed as billions of passenger kilometres) followed by cars at 27% and rail 18%. In the latest year for which complete statistics are available, cars were the basis of 84% of all travel with buses and rail on 6% and 7% respectively. So cars are firmly entrenched as the UK’s premier mode of travel and it would require a seismic shift in public transport to compete. Indeed the forecasts provided by the DfT going forward to 2025 anticipate a 33% increase in the number of cars compared to 2003.

The popularity of cars is further emphasised by the growth in driving licence holders – up from 48% of all adults in 1975 to 75% in 2008 to around 34.5 million. Access to cars for households has also increased dramatically, from a mere 16% of households having one or more cars in 1952 to 76% in 2007, when 6% of households had three or more.

On the downside, car owners are driving less, according to the DfT. In their 1995/1997 survey, they calculated average annual mileage as 9,700 miles. In 2008 it had fallen by 10% to 8,690 miles per annum, with private motorists averaging 8,130 miles and company car users 19,760. The fall in average mileage probably has a lot to do with multiple car ownership.

The DfT’s analysis of MOT testing reveals the potential of this area of aftersales business. Before 2006/07 MOT testing was not computerised, so the data are not as robust, but in 1999/00 some 22 million cars were tested and 7.4 million failed. In 2008/09, with computer data available, 28 million cars were tested and 10.2 million failed. The major areas for failure in 2008/09 were lighting (18.9%), brakes (17.1%) and suspension (12.2%). While a reasonably significant proportion of MOT tests is paid for by dealers when selling used cars – perhaps three million tests –MOT testing clearly represents an important profit centre in its own right, in addition to the ten million failures requiring a fix.

Another point of interest from these reports is how many people are employed. The DfT lists garage owners and proprietors, mechanics and technicians, car body operatives, and tyre and windscreen fitters, so there are many other occupations not researched by the DfT. The total for these four categories in 2008 was over 300,000, with mechanics and technicians the largest contingent at 207,000.

Overall, then, the facts and figures paint a picture of a large and essential sector of the UK economy, and leave you with the overwhelming impression that the car business is here to stay, along with cars.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in May 2010. (See //auto-retail.co.uk
for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

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Using information taken from our car body repair and car servicing reports we can explore the effects of the falling four-year car parc.

The four-year car parc has been falling since 2004 because new car sales peaked in 2003. However the fall was barely detectable at around four per cent, 2004 to 2007. Then as new car sales fell off the proverbial cliff in the second half of 2008, the pace quickened and we calculate that by the end of 2009 the fall will amount to 15% since 2004; and by 2012 the fall will be 25%.

In the bodyshop market, the number of repairs has fallen eight per cent since 2006 and the falling four-year car parc is a key driver. Clearly there are other factors at work including: car usage, write-offs, recession, weather, vehicle design, used car sales (refurbishment), propensity for motorists to claim, etc. But there is a strong correlation with changes in the four-year car parc.

In the market for car servicing, maintenance and repair, our principal indicators come from a consumer survey we have run continuously since 1993. This survey asks 1,000 motorists every month the simple question: “Where did you last have your car serviced”. The earliest results found that 24% of motorists had their last service at a franchised dealership. This peaked at 30% in 2005 and the trend has been downwards ever since. The latest result for 2009 is 27.8%. Again there is a strong correlation with the four-year car parc.

Of course players in the service market do not have to accept this situation and they can reach out to motorists in other age segments. But in the car body repair market it is insurers that decide which cars are repaired. The number of car body repairs has already fallen by eight per cent in three years and our forecast model suggests a fall of 14% between the recent peak in 2006 and 2014.

Adapting to these 'black holes' in the aftersales markets will be a challenge for players, who need to adopt long-term strategies as these markets will not 'right' themselves any time soon.

Written by Trend Tracker director Chris Oakham, for his column in the subscription monthly Auto Retail Bulletin. (See www.auto-retail.com for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

In some ways private limited company accounts are a better indicator of the state of the retail motor industry. Small companies are more sensitive and vulnerable to market conditions, and hence they often react more quickly than PLC’s because they have to. As many private limited companies have still not posted their accounts, it is early days yet, but we have noticed already that the companies bucking the recession have clearly worked hard to improve their gross profit margins.

You will have undoubtedly come across the basic financial model so beloved of consultants everywhere. It goes like this. Imagine a dealership with a turnover of £100 that generates a gross profit of £15. The cost of sales (mainly purchases of new and used cars) is therefore £85. Expenses and overheads come to £12 and thus the net profit is £3, or three per cent of turnover. The consultant then says what if turnover is increased by £1. And what if expenses are reduced by £1 and overheads are reduced by £1. The answer is that net profit as a percentage of turnover increases to five per cent. Magic!

But what some consultants tend to ignore is the gross profit margin. Their model often leaves the gross profit margin – in this example 15% - the same. And therein lies a problem that we have noted across many sets of 2009 accounts: static or even falling gross profit margins. Indeed some dealers express pride in maintaining their gross profit margin at 2008 levels.

In a recession rather than turnover increasing, it is more likely to fall. If you then aim for the same gross profit margin, gross profit as money falls and you have to over-compensate by larger cuts in expenses and overheads. Obviously in a recession you have to act fast and cutting expenses and overheads – principally headcount – must be a priority. But savage cuts, especially to staffing levels, can exacerbate the downward pressure on turnover caused by the recession.

The alternative is to improve the gross profit margin and we have discovered many instances where it has been a clear strategy. For example in the accounts for one dealership, the directors describe 2009 as “a very successful year” despite the fact that new and used car sales fell by six per cent as did turnover. However, the business managed to increase its gross profit margin by two percentage points – “by implementing a strict used car purchasing policy” – and maintained expenses and overheads at 2008 levels by cutting headcount by 10% “without any detrimental effect on the business”. The net result was that pre-tax profit actually increased by one-third in monetary terms compared to 2008. The improvement in gross profit margin was a major contributory factor.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in September 2010. (Seeauto-retail.co.uk for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

To be more specific, staff, and this sometimes includes parts managers, are less than adequately equipped to extract maximum performance from their business. It is not, as you might think, a deficiency of technical skills or product knowledge, but a lack of commercial acumen. Perhaps this was inevitable given the sophistication of stock control computers, which mean many staff members can get by with a minimal understanding of how the parts department’s financial model works – until the day dawns when thing go wrong, of course. In this respect it seems that available training quite often misses the mark.

By way of example, we came across a franchised parts wholesaling operation turning over £3 million including retail, workshop, bodyshop and trade; the latter accounting for 70% of turnover. The overall gross profit margin on these sales was just over 20% (after stock adjustments) and the operating or direct profit margin a fraction under 10%. With a contribution of almost £300K to the dealership you might be happy with this result and, admittedly, it is by no means the worst we have come across. What made us unhappy was it could have been so much better – at least £30K better.

The problem was a simple one: small percentages building up to bigger percentages. Buying margins were off the average of similar franchised operations as were sales discounts. All of this added up to an overall gross margin that was at least one percentage point – equivalent to a shortfall of £30K in profits - down on the average and some way off the best performers.

Ignoring stock adjustments, the dealer’s parts department results could be described as follows. For parts worth £100 at retail, they paid £54.40. When they sold the parts the average discount given was 31.9% off retail resulting in a sale price of £68.10. Hence the overall gross margin was £13.70 divided by £68.10, or 20.1%. The average overall gross margin for almost identical businesses of the same franchise, with a similar buying and selling mix, was 21.2% because they bought at £54.00 and sold at £68.50.

The lower than average buying discount was caused by bad deals on non-OE parts and equally poor deals on OE parts bought from other dealers. The selling margins suffered because discounts given on captive accident repair parts were too generous.

The parts manager in this case could extract the relevant data from the computer, but he was unable to analyse the results and isolate the fall-down areas. With appropriate training and a better grasp of key yardsticks, he has now added £45K to his department’s contribution.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in December 2007. (See //auto-retail.co.uk
for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

For example, a few years ago we carried out a series of site visits for a dealer group client looking specifically at gross margins in their service departments, and with their permission, we can share one of the findings. The group’s minimum margin for sublet and sundry sales was fifteen per cent. But the actual average across all the sites we visited was just over fourteen per cent. On closer inspection, we found the majority of sites just added 15% to the cost price of sublet and sundry sales, which is a margin of 13%. To achieve a minimum 15% margin they should have added 17.6% to the cost price.

In this case, the difference in gross profit between a 13% and 15% margin is around £2,000 per annum for the average service department, because sublet and sundry sales only make up eight per cent of sales. However this group’s minimum margin on sublet and sundry was too low anyway – between 17.5% and 21.5% is average. At this higher level, more than £3,000 potential profit is lost because of the wrong mark-up.

We have seen similar instances of incorrect mark-ups that cause far larger losses in potential profit in sales, service, bodyshop, and parts. We have also seen evidence that ignorance of this relatively simple maths can affect the ability to negotiate good deals with suppliers and customers.

In the body repair market,for instance, bodyshops invariably have an inflated idea of their margins on refinish paint. When you research the specific question of paint margins, the results usually range from thirty-five to forty-five per cent. Yet the average gross profit margin achieved on paint is a fraction over 30%. In fact body repairers are probably quoting the discount they get from their suppliers – their so called ‘buying discount’. They are not taking into account discounts they give to work providers and customers, the vagaries of computer estimating systems, or any wastage (which can be huge for the more careless).

Going back to the dealer group case study, the upshot of the gross margins audit was a five-hour training course on mark-ups and margins. This extended to all departments across the group, and individual courses included a mixture of departmental delegates. A further audit after twelve months revealed a big improvement, with some of the best results coming from accessory sales through the showroom. Getting the basics right can make all the difference.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in June 2006. (See auto-retail.co.uk
for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

Let's hope the right decision is reached quicker this time. Never mind that the European Commission Road Safety Programme announced this week wants to improve vehicles' active safety by mandating ESP and six other technologies for various types of vehicle; nor need we believe everything the independent garage trade may say about vehicle condition-related accidents increasing up to 150%: health and safety may be the nation's least favourite words in combination, but there's no point in having more mandatory safety equipment if it doesn't actually work, or if its effectiveness is compromised by duff tyres which are only inspected every two years.

Reducing MOT intensity to the EU Directive's minimum might save motorists £520 million a year in fees, as was calculated last time around. But the likely cost of at least a few more severe accidents, coupled with the cost of job losses and lost tax revenues from the garage sector, would cost a net increase of £270 million, according to the MOT Forum interest group that fought the last MOT cuts - as it thought, successfully. We ran these numbers in more detail in the 2008 edition of the Castrol Car Service & Repair Trend Tracker, and really didn't expect to have to revisit them again.

Toby Procter

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

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Toby Procter

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

This represents a bit of an about-turn for Ford. It has not been alone in raising prices in the last year or so. My Trend Tracker colleague Chris Oakham's noted in his column in Automotive Retail Bulletin recently that the Ford Fiesta 1.25's list price had risen 32.6% in twelve months, while other Ford prices had risen 19% (Mondeo1.6) and 17.6% (Focus 1.6). Reporting these price rises, What Car? also noted that dealer discounts had been falling. (See Chris' column in his 1 July blog on this site, Are new cars overpriced?

New car price increases in 2009 (and Ford's weren't the only examples) were justified by the weakness of sterling and the inflationary impact of $75/barrel crude.

The affordability of base model Fiestas (defined as list price divided by months of national average gross pay) has veered between six months when the first Fiesta was launched 34 years ago, just over four months back in 2006, and recently, back up to over five.

Ford's move in the UK won't, it seems, make Fords more affordable. Right now, a Ford dealer is offering 24% off the list price of a 3-dr Fiesta Studio. Ford's new RRP for this model will be 17% lower than the present one. The lowest dealer price will probably rise a bit as margins shrink.

As we wait to find out whether the recession will be a double-dip model, all acknowledge that it's going to be increasingly hard to sell almost any new car. Dealers should prize any wriggle-room to cut a deal. It's at the dealership that transparency is valued, rather than on the manufacturer's website, and there are enough price comparison sites around now to reduce the significance of manufacturers' RRPs - except to dealers.

Successful pricing strategies always involve effective balancing of demand and supply. Few volume car brands can strangle supply in line with demand falling at the rate we can now expect.

Given the weakening post-scrappage market, this week may not have been the ideal time for Peugeot to launch its Just Add Fuel, “completely transparent peace of mind motoring package”, wherein monthly payments include finance, insurance, servicing, road fund, warranty and roadside assistance.

“Completely transparent” is a questionable claim, inasmuch as bundling items makes price comparisons tricky, and new-car warranty cover was in any case never a chargeable item. “Peace of mind” in Peugeot's concept refers to fixed prices eliminating inflation, which is not the greatest of our concerns at present. And finance, insurance and servicing can be acquired easily, and possibly more cheaply, from third-party suppliers.

Toby Procter

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

What Car? notes some significant price increases in the last twelve months: Ford Fiesta 1.25/60 up 32.6%; Ford Mondeo 1.6/110 up 19%; Fiat 500/1.3 up 17.6%; Ford Focus 1.6 up 17.6%; and Vauxhall Insignia/2.0 up 17.2%. In addition, What Car? reports that dealer discounts have been falling.

These are clearly substantial price increases and What Car? mentions the weakness of the pound generally and against the euro in particular. Since the introduction of the euro, one pound has bought 1.5 euros, but today it only buys 1.1 euros. This means that a new car coming off the line in Europe valued at 10,000 euros used to cost us £6,700 but now it's £9,100, which is an increase of 36%. So it's surprising that new car prices haven't increased even more and perhaps they will. Obviously we manufacturer a large number of cars here in the UK, but this doesn't help because most are exported.

There are also many other factors pushing up the prices of new cars both here and in Europe. The oil price is probably one of the biggest because it affects manufacturing and transportation costs. Before 9/11 the oil price had been fairly stable at less than US$30 per barrel since the mid 80s. After 9/11 oil prices increased considerably with, in the last twelve months, Brent Crude up from $45 to $75.

For new car buyers 'affordability' is the key and one way of assessing this is how long it takes 'the man on the Clapham omnibus' to buy a new car. In 1976 when the Ford Fiesta first went on sale the entry level model cost £1,860 and national average gross pay was £3,750 - so it took six months of gross pay to buy a Fiesta. Right now the entry level model Fiesta is £11,500 and the latest average gross pay (April 2009) is £26,470 and thus it takes 5.2 months. However only a few years ago (2006), the entry level Fiesta cost £8,300. So with national average gross pay of £24,134 in that year, it took 4.1 months to buy.

From this perspective, 'affordability' of new cars could have been adversely affected in a very short time and even more so when you consider the lack of cheap credit. If the pound doesn't grow stronger, the recovery of new car sales could falter unless private and company buyers are willing to downgrade.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in March 2010. (See www.auto-retail.com for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

By comparison with the <£5,000 subsidy the last government proposed paying to EV buyers, let alone the size of the national debt, the cost of these EV trials may seem trivial. But what are they trialling? Users driving within the restricted range of these i-MiEVs from one conveniently placed socket to another will undoubtedly say how great they are. But then, they won't be paying. Who'd want to pay £30,000 for essentially untried technology for a second car? (No current-generation automotive lithium-ion batteries have yet undergone their expected lifecycles. Without a battery, an EV is worthless, as CAP has reasonably determined.) EV buyers will typically need access to two cars, because their EV may barely take them 40 miles and back.

A recent forecast from J.D. Power Automotive Forecasting suggests that the global market for pure electric cars will amount to no more than 500,000 units in five years' time. As 40m+ annual car sales drive us towards a global car population of two billion, that's so far away from reducing oil dependency, it's hard to imagine that EVs will be any real help by the time the stuff actually runs out.

Yet the whole point of electric cars is help us survive the eventual end of the 'Oil Age'; With our present energy mix, they won't cut global warming emissions. We need to invest in better energy, smart grids, and much better energy storage, before pump-priming a fantasy market with trials of vehicles that aren't market-ready. Unless we soon discover the battery technology needed to expand EV demand beyond a niche market of do-gooders subsidised by taxpayers at large, governments' EV support will have proved an expensive diversion from other, more urgent tasks. Those include investing in more energy production, and reducing car dependency - not expanding the second-car population with ruinously expensive EVs, used by the few, paid for by the many.

Toby is the lead author of a forthcoming Trend Tracker report which will survey the activities of the auto industry, governments and utilities relating to the electrification of personal transport, and assess the likely outcomes of efforts to replace oil as its fuel by the middle of the century. Details of this report will be posted on this site nearer publication in Q3 2010.

Toby Procter

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

Auto Retail Network is the leading networking and best practice organisation for senior executives in the auto retail industry. Get free trial membership by registering at The Bulletin.

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

Moving from the horrific to the trivial, my own diesel car sprang a fuel leak last night, and the sulphurous, stinking mess it left on the street was a reminder that there's nothing nice about oil, except what it permits us to do. But breaking oil dependency is going to be hard, BP or no BP. Working on a report the future of the electric car for Trend Tracker, I pay a lot of attention to the renewable energy sectors without which EVs can't do what oil-haters and greens hope for them. EVs are being hyped no end, but there's scant evidence of industry, money markets and governments joining forces to accelerate the switch from hydrocarbons with the urgency required.

Talking of urgency, the German government's refusal yesterday to lend to Opel is only the fifth story on the BBC website's business page as I write. And GM's site has yet to respond at all. The Obama administration has been lauded for allowing US automotive capacity to shrink to a probably sustainable level, and the Europeans condemned for funking the necessary restructuring. The freshly sanitized, right-sized GM can hardly complain if the Germans, now saddled with bankrolling the whole Eurozone, apply some of the same medicine that helped save what's left of Detroit.

Toby Procter

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

On a brighter note, ASE reckons that car sales per sales executive increased by 22% from 144 in 2008 to 176 in 2009. Of course this improvement could have been distorted by redundancies due to the recession, but our own figures - based on new car sales per member of staff - confirm a near-20% improvement over the last ten years.

Given that around 70% of gross profits generated in a dealership go on paying wages and salaries, efficiency is a key factor when it comes to improving bottom line profits. Obviously if you can get more sales out of fewer people then you make more money. Recessions create the opportunity to improve efficiency and get more from less. Indeed the more successful dealer groups over the last two years have cut staff and actually increased turnover or at the very least balanced staff numbers with changes in turnover.

The apparent improvement in car sales efficiency has never been researched to our knowledge, but anecdotal evidence suggests that the internet (and computers more generally) and the appointment of fleet sales specialists could be the reasons. In other words, dealerships have got more from less thanks to technology (the internet) and through specialisation. Sadly, though, it appears that service departments and bodyshops haven't applied 'more power to your elbow' or embraced specialisation.

Clearly workshop overall labour efficiency is complex - composed as it is of productivity, or how fast technicians work relative to standard times, and utilisation which depends on having plenty of paying work available. Utilisation will have undoubtedly been affected by the recession, but looking at the longer term trends, utilisation has been falling but productivity has fallen more in both service departments and bodyshops. The fall in productivity could be because standard times are tighter now, but as cars change it is difficult to assess. What we probably can say is that, in general, workshops haven't focused on the potential benefits of investment in technology and specialisation but continued to operate along traditional lines.

This is not the place for a rundown on workshop equipment, but one example we came across recently was Robodry, which can massively reduce the time required to paint a car. And there are plenty of other technological solutions available for service workshops and bodyshops. As well as technology, it seems that sales departments have benefitted from specialisation and it is equally possible for workshops to employ a similar approach even if it means breaking with traditional practices.

Put simply, there has never been a better time to change things for the better, and workshop efficiency is a good place to start.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in April 2010. (See www.auto-retail.com for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

There are two approaches: either an uncomplicated 'job count' or a full analysis including average job values. To paraphrase the instructions for computer software, the former is 'recommended' and the latter is for 'advanced users'.

For a 'job count', you just need to list common jobs in a table. These could include, for example, routine servicing, tyres, MOT testing, brakes, exhausts, engine/electronics, battery/electrical, suspension/steering, gearbox/clutch, cooling ….. 'other' (to cover everything else not specifically identified). As we are usually only concerned with the retail market for servicing, maintenance and repairs, we don't include internal or warranty work but you might like to add these as broad categories.

Next you select at least 100 job cards from a week or two during a reasonably busy period like September or October. If, for instance, the first job card off the top shows a routine service, two tyres replaced and front brake pads, then you place one tick against each of these categories. Then you just carry on through the rest of the job cards in a similar fashion. Finally add up the total number of entries in each category and overall to arrive at what percentage each is of the total.

In an analysis we completed recently on a franchised workshop, the dealer returned 1.7 operations per job card or 170 separate operations for 100 job cards. Of these 170 operations, 69 were routine services, 24 brakes, 19 MOTs, 16 engine/electrical, 7 tyre replacements and 3 suspension/steering. On the other hand a recent check on an independent revealed 1.3 operations per job card with 47 MOTs in 100 jobs cards, 29 routine services, 12 tyre replacements, 10 brakes and 7 suspension/steering.

These results are fairly typical and not unexpected. The franchised workshop is a routine service specialist with 70% of job cards led by a service. The independent garage carried out many more MOT tests than the dealer, more 'repairs' and does reasonably well from servicing too.

Interestingly, the franchised dealer concerned has a comprehensive DMS computer (dealer management system), but only markets its MOT facility infrequently. The independent has no computer at all however the owner runs a simple MOT reminder system. This consists of a filing box divided into 24 months (because MOTs can be for 13 months). He makes out MOT reminders when customers collect their cars and places them in the divider 12 months hence. When the time arrives he sticks stamps on that month's MOT reminders and puts them in the post. Remarkably simple but obviously very effective!

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in January 2010. (See www.auto-retail.com for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

The latest intelligence on franchise networks indicates far fewer site closures than was estimated nearly twelve months ago from trends early in the recession. The number of franchise sales points is presently estimated to be just over 5,000 operating from around 4,300 sites. While this is a lot healthier than the estimates reported in January, thanks to many fewer closures in the second half of 2008, the rate of closure is still averaging over three per cent of sites per annum. This equates to 600 closures over the next five years.

In April we covered the half-time results of a survey of franchised and independent dealers looking at used cars. At that point the news was far from good with enquiries overwhelmingly down and interviewees - both franchised and independent - predicting used car sales down 15% this year compared to 2008.

The survey was completed at the end of May after interviewing 200 dealers in depth. The final result for used car enquiries compared to 2008 was still negative with 81% of franchised dealers and 75% of independents saying they had definitely noticed a fall. The final result for used car sales in 2009 compared to 2008 was less pessimistic than the half-time results indicated with both franchised and independent dealers predicting an average fall of 10%.

Another area we examined in April was gross profit margins, which at that stage of the survey were similar to 2006. The results of the completed survey confirm that franchised dealers are sustaining similar gross margins to 2006 - around 10% - but independents' margins have fallen three percentage points to just under 13% mainly because of a substantial rise in reconditioning costs to the same level as franchised dealers.

The dealer survey also looked at vehicle stock and what changes dealers will make because of the recession. Sixty per cent of franchised dealers and 57% of independents said they are re-profiling their stock and the chart details the expected changes.

How dealers are changing their stock profile due to recession

While the survey did not explicitly cover the now widely-reported shortage of used car stock, both franchised and independent dealers had between 5% and 10% less stock than in our 2006 survey. Comments collected during the survey reinforced the notion of stock shortages with franchised dealers apparently experiencing most problems probably because lower new car sales mean fewer part-exchanges to resell as used cars. We would therefore speculate that the current stock shortage is due to higher demand from franchised dealers focusing on used and buying at auction to make up for the lack of part-exchanges - rather than genuine consumer demand.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in September 2009. (See www.auto-retail.com for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

If you look carefully, there is presently a distinct peak at 62 years old, but the largest group by age is between 38 and 47. Looking forward another five years to 2014, the peaks move along five years to 67 and 43 to 52. Clearly in ten years the peaks are 72 and 48 to 57 …. and so on.

This ageing process has implications for car sales and even aftersales. Older customers have different requirements - you don't need us to tell you that - and gradually you will see customer preferences change. Older customers are, for a start, more risk averse, which might see them choose, for example, cars with longer warranties or safer cars. Despite the recession these customers will be wealthier with many perhaps enjoying an inheritance. This could affect point of sale finance volumes. It is believed that older customers tend to be more loyal, but you have to wonder how this loyalty might be challenged by prolonged exposure to the internet in ageing generations who are undoubtedly savvy in this respect.

As these various 'lumps' of population get older their requirements might change when it comes to the style of car they buy. They might only need a small car if their children have left home with some opting for a sports car, perhaps. They might not need more than one car.

Other retailers are obviously already adapting and you can see the results in clothes shops and supermarkets. Clothes are bigger and styles are changing for an older population; supermarkets too are appealing to older customers in smaller households with reduced portion sizes and meals for two.

Our main point is that the UK's ageing population changes your customers and you will have to make a conscious effort to adapt. But how? What will happen and what you must do falls into a category we call 'research we would like to do' because, to the best of our knowledge, nobody has addressed this very important area as it relates to car dealers - unless the vehicle manufacturers are keeping very quiet!

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in August 2009. (See www.auto-retail.com for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing