In the ‘real world’ economy of average earnings, inflation, unemployment and consumer confidence there is every indication that the UK economy will struggle in the short-term. Economic growth will be flat and there is a chance of the UK dipping back into recession in 2012.

The year on year increase in average earnings has been around 2% for the last three months, and apart from January and June 2011, it has barely exceeded 3%. On the other hand, inflation as measured by RPI has run at around 5% during 2011. Clearly this disparity makes people poorer.

Unemployment increased substantially during the recent recession and has stayed stubbornly high since the middle of 2009, reaching 8.3% in October 2011 - the highest since 1994.

Predictably consumer confidence is extremely low. The Nationwide Consumer Confidence Index stood at 36 points in October, which is the lowest since its inception in April 2004. As we have pointed out here before, new car sales correlate strongly with consumer confidence.

These and other economic trends, suggest that 2012/2013 will be a re-run of 2011. After that, the return of economic growth depends on the success of government policies and what happens in the global economy and Euroland in particular.

It seems to us that the coalition government is on the right track with its aim of reducing government spending as a proportion of the economy. But, so far the coalition has failed to get a grip and will probably have ended up taxing, borrowing and spending more in 2011 than recent years.

The big unknown is what will happen to the euro. EU politicians seem utterly determined to keep the euro alive even if it means reducing southern Europe to permanent penury rather than fixing the basic flaws in the design of the currency.

This could end in the disorderly failure of the euro and even the collapse of the European Union. It is more likely, however, that ailing countries like Greece will be forced out of the euro. Whatever happens, the UK will undoubtedly suffer.

For UK auto retailing, uncertain economic conditions make planning difficult. Past experience suggests that used cars and aftersales represent the most reliable profit centres in times of uncertainty, and there is every reason to hope these departments will not disappoint in 2012.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin.(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

Every month since mid 1994, we have interviewed 1,000 motorists about where they last had their car serviced. Since 2005 we have added a host of other questions about common SMR operations. It is this extensive consumer survey that forms the basis of our Castrol Professional Car Service and Repair report.

Comparing retention of routine servicing and retention of the full range of SMR exposes only minor variations. Hence retention of routine servicing (“servicing retention”) is an excellent guide to the state of play in the SMR market.

Trend in retention of routine servicing by provider segments

Last month we took delivery of the interim results (January to September 2011) for our servicing retention consumer survey question.

These data have been added to the trends since 1995 for franchised dealers (“dealer for make”), independent garages and fast-fits (“other garage”), and DIY. Also shown is the percentage of motorists interviewed who hadn’t had their car serviced since buying it, noting that the “not yet serviced” element is included in the calculations.

As the chart makes abundantly clear, the independent sector has increased its share dramatically since 2006 (to 45.7%) whereas franchised dealers are going the wrong way and losing share (25.4%). DIY has apparently levelled off although a more detailed analysis of all SMR operations actually records a slight increase.

The reasons for these changes in fortune are complex but one of the biggest drivers is car parc age – and the chart shows this recent ageing trend. By segment, franchised workshops tend to appeal to owners of cars up to four years old, independents four to eight years old, and DIY over eight years.

Because new car sales have been falling since 2005, the number of cars up to four years old has fallen by over 20%. Meanwhile the high new car sales pre-2005 have populated the four to eight year old car parc and handed a lot of SMR business to independents. Clearly the recent recession has not helped.

Of course not every retailer is equally affected. Some makes of cars, like Skoda, have increasing four-year car parcs. And we have first hand experience of volume dealer groups bucking the trend with imaginative aftersales strategies including: service plans, customer communication centres, upselling and retention of used car buyers.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in November 2011.(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

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Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing