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

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Toby Procter

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electic 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 electic 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 electic 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 electic vehicles car servicing

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Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electic 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 electic 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 electic 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 electic vehicles car servicing

Right now our company is working hard to complete two major reports on the markets for car body repairs and servicing. With all the research complete the effects of the falling four-year car parc are already apparent.

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, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in November 2009. (See www.auto-retail.com for subscription details.)

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electic 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 electic 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 electic vehicles car servicing

On 5th November a BBC online news item entitled "Scrappage sees UK car sales surge" reported that new car sales had recorded their biggest increase so far this year in October, helped by the scrappage scheme. "Encouragingly, there has also been an increase in demand in the fleet and business sectors, which will be critical in sustaining recovery next year," the BBC reported SMMT chief executive Paul Everitt saying.

On 11th November, another BBC online news story reported, "UK trade gap widens in September". The UK trade deficit widened more than expected in September, it said, led by a jump in car imports as Britain's scrappage scheme helped foreign carmakers. The difference between what the UK exports and what it imports was £7.2bn in September, well above analyst expectations of a £6.1bn deficit. September's overall trade deficit was the biggest since January.

Who'd have thought that one might cause the other?

When completing a telephone survey you don't obtain an interview from every call. But for franchised dealers we usually complete an interview for every two or three contacts. We call this our 'hit rate'. Lately out 'hit rate' for franchised dealers has fallen from one interview per two or three calls to one in six and the reason is fairly clear - redundancies combined with holidays. The downturn, and dramatic fall in new car sales, has hit franchised dealers hard and they have been forced to act on staffing levels and the average number of staff employed has fallen by over 10% from a year ago.

Digging deeper, we note that car sales executives and service technicians have been affected most by either 'natural wastage' or redundancies. Given that two-thirds of the staff in dealerships work in these positions, it is hardly surprising. But as sales executives and service technicians are responsible for generating sales, are cuts here a sensible choice?

Obviously every franchised dealer has to act swiftly and responsibly to economic conditions otherwise they could join the burgeoning list of failures. Our point, though, is that it might be better to cut jobs in non-productive areas and/or ask employees to accept fewer hours, and therefore less pay, or simply reduce pay rates. This might seem controversial, but other industries and retailers are implementing such options successfully.

Preparing for our forthcoming service report update, we have investigated the effects of the recession on franchised dealer service department revenue and the fall in service sales is around 12% - accounting for both retail and internal (new car preparation). The average dealership employs just short of six technicians so by making one technician redundant, or not replacing one who leaves, the productive capacity is reduced by 17%. The shortfall has to be made up by the remaining five technicians through increased productivity, thus increasing bonus, or overtime working. More than that, we have found a large number of dealers disinclined to take on apprentices, who almost always contribute to overall productivity.

The upshot is that the savings are nowhere near as large as might be expected and it is a similar story in the sales department especially as salaries are highly-geared to commission. Clearly every case is different, but it is well worth considering all the options with staff before acting.

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

Motor Trade Business Management Award
Sponsored by ASE incorporating Trevor Jones
Winner: Julie Oliver, Mitchell North West

Most Improved Business Award
Sponsored by NIG
Winner: L&L Automotive Mercedes-Benz Hertfordshire

Customer Care Award
Sponsored by Car Care Plan
Winner: Ken Jervis (Kia) (Stoke-on-Trent)

Aftermarket Innovation Award
Sponsored by Mobil 1
Winner: Ken Jervis (Kia) (Stoke-on-Trent)

Marketing Award
Sponsored by AutoTrader.co.uk
Winner: The Car Shop (Northampton)

Website of the Year Award
Sponsored by Motors.co.uk
Winner: Sytner Group Ltd (Leicester)
Highly commended: Clive Sutton, Holden Group

Product of her Year Award
Sponsored by Motor Trader
Winner: Castrol Professional - Red Carpet Training
Highly commended: Motor Codes

Used Car Retailer of the Year
Sponsored by Aviva Driveaway Insurance
Winner: Thame Service Station (Oxfordshire)
Highly commended: TC Harrison (Derby)

Bodyshop of the Year
Sponsored by Britannia Accident Assist
Winner: AJC Wilson Bodyshop (Essex)

Garage of the Year Award
Sponsored by Motor Codes
Winner: Academy Group (Manchester)

Car Franchise Of the Year Award
Sponsored by Mondial Assistance
Winner: Kia Motors (UK)

Service Adviser of the Year Award
Sponsored by Castrol Professional
Winner: Michael Allison, Sinclair Volkswagen
Highly commended: Jazz Mann, Chiswick Honda (London)

Sales Team of the Year Award
Sponsored by MAPFRE Abraxas
Winner: L & L Automotive Mercedes-Benz Hertfordshire

Sales Manager of the Year Award
Sponsored by Dealerweb
Winner: Gareth Lloyd Sinclair Volkswagen

Dealer Principal of the Year
Sponsored by eBay Motors Pro
Winner: Amarjit Shokar Romford Mazda (Romford)

Franchised Dealership of the Year Award
Sponsored by Experian
Winner: Now Kingston (Middlesex)

Dealer Group of the Year Award
Sponsored by HPI Finance Gateway
Winner: Sytner Group

Outstanding Achievement Award
Sponsored by Aviva
Winner: Robert Forrester (Vertu Motors)

The RAC Foundation has very different objectives to the authors of 'The Lex Report' who focused entirely on issues of importance to dealers. But then the RAC Foundation was established to protect the interest of the motorists whereas Lex was, at the time, the UK's largest dealer group. Essentially the new report is about the changing nature of car ownership and in many instances the data follow trends over decades. Unlike its distant predecessor, however, this new report is not based on a substantial and original survey but assembles various sources including government statistics. Nevertheless it is an extensive piece of work and many of the key findings and conclusions are crucial indicators for motor retailing.

Unsurprisingly the study finds that cars totally dominate travel in the UK. Quite simply with 85% of individual travel by car, no other form of travel comes even close, which has to be good news for motor retailing. But the report does point out that whilst car use has grown for nearly half a century, this trend now seems to have come to a halt with growth since the early 2000s only in proportion to increases in the adult population. The authors say that the reasons for this are unclear; however it seems to us that their reported 'saturation' of driving licence-holding of 70% of adults might be an important contributor.

Low-income households have experienced the most growth in car ownership over the last ten years. And although there has been some convergence in car use between low income households and the average population the difference is still large. The study confirms that car owners highly value the freedom and independence a car offers. In particular there is reference to the necessity of cars for work, shopping, and even after-school child escort trips for parents. Compelling evidence is provided to suggest that the vast majority of drivers have little interest in public transport and the report points out that between 80 to 90 per cent of people say they would find it difficult or impossible to adjust their lifestyles without a car.

Drivers are, though, not unaware of the costs of owning a car - economically and environmentally. People do adjust car use according to economic pressures, but most cannot envisage a future without their cars and most would go to considerable lengths and expense to maintain their ownership and use.

You cannot help feeling after reading this report that cars are a necessity and it would take events of seismic proportions to change usage patterns, which in the long run has to be good for retailers.

The Car in British Society can be downloaded as a PDF file at www.racfoundation.org.

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

The background to the present troubles began with a financial crisis in the banking system in 2007, followed by a credit crunch in 2008, which has resulted in worldwide recession. The UK government and the Bank of England have taken fiscal and monetary measures to lessen the effects of a potentially severe recession, but so far these actions appear to be having a limited effect on the fundamental problem underlying the recession - the unwillingness of banks to resume lending to small businesses and consumers.

The consequences for car sales have been dire. Registrations of new cars to private buyers were down by 11% in 2008 compared with 1999, but they were down 44% compared with their peak of 1.25 million registrations in 2003. Sales of used cars have remained more resilient falling by an estimated 3% between 2003 and 2008 but still 12% higher than the 6.46 million used sales in 1999.

We estimate that the total retail car finance market including dealer point of sale (POS) and direct lending declined by 50% in value between 2003 and 2008. In real terms, taking into account the effect of inflation, the market fell in overall value by 58% between 2003 and 2008.

The dealer POS car finance market declined in value by 17% between 2003 and 2008 with the number of finance transactions declining by 23%. So clearly the dearth of available direct lending is a major cause of the present problems in the new and used car markets.

Competitors in the retail motor finance market comprise vehicle manufacturers' captive finance companies, independent finance companies, the high street banks and building societies, and other direct lenders. The number of independent finance companies operating in the UK motor finance market has declined over the past decade, due largely to consolidation effected by mergers and acquisitions.

The independent finance companies rely on their bank parents for long-term funding, but the banks' need to shore up their own balance sheets, and coupled with their inability to raise funds cheaply in the wholesale markets, it raises questions over the long-term future of their motor finance subsidiaries. Here in the UK vehicle manufacturers' finance companies need to access state-funded liquidity and credit guarantee schemes to continue lending, which they have so far been unable to do.

Recovery of the new and used car markets, particularly retail, clearly depends on the availability of finance. We estimate that the total number of loans and finance transactions for both new and used retail car purchasing fell by 51% between 2003 and 2008. And although our forecast for the next five years is for an increase of 38%, this falls well short of 2003 levels and represents a market volume similar to 2006/07.

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

The starting point for any prediction of the future prospects for new car sales is the long term trend. What happened in the past? The download chart records new car registrations between 1959 and 2007 and then runs forward with predictions to 2013. Highlighted in red are the years affected by recessions - 1974/75, 1980/81, 1991/92 and 2009/10 (prediction).

At first sight the consequences of previous downturns appear similar. In '74/'75 new car sales fell by nearly 25% and took six years to recover to pre-recession levels. The fall was less at 12.6% in 1980/81 and the recovery only took four years even though the recession was severe with GDP falling by 6.1% between its peak in 1979 and its trough in 1981. A fall of 20.7% occurred '91/'92 and it was another six years before new car sales reached the same level as 1990.

Arguably, though, the consequences of the 1990s recession were actually worse because, as now, new car sales started to fall earlier (in September 1990) and the fall was 31% from the high of 1989 with the recovery taking 12 years on this basis. The present situation has some similarities to '91/'92; new car sales were already falling since the peak in 2003 and have deteriorated substantially since August 2008.

The most optimistic scenario is that shown, which is based on new sales in September 2008. The prediction is 1.78 million new car sales in 2009 - a fall of 18% from 2008 - followed by 1.8 million in 2010 and a six-year recovery period to the same level as 2008. However the picture is potentially much worse if you start with 2007's sales and apply the fall of the early 1990s. This works out as 1.66 million registrations in 2009 and a recovery of 12 years. The downturn could easily be this bad or worse if for no other reason than the present dearth of credit. Back in the early 90s credit was not really an issue if you could afford the sky-high interest rates - the Bank Base Rate reached 15% in 1990.

Our own assumption is the best-case scenario and we have utilised this in several market models already including our recent report on the UK market for servicing and repair. And thinking about servicing and repair this is surely one of the more recession-proof areas, or is it? If new car sales fall as shown, then there will be a consequent reduction in the 0-4 year old car parc of 20% within five years and thus less work for franchised dealer service departments, which rely on younger cars. Overall we don't believe the market for servicing and repair will fall appreciably because when motorists hang on to their cars they eventually have to spend money on maintenance. So servicing and repair is potentially an upside provided dealers act decisively to retain service customers with older cars. The simplest strategy is to retain customers who bought used cars from the dealership. Service retention levels for used cars sold by dealers average 22% but the best performing dealers exceed 40%. It almost goes without saying that upselling service customers is now crucial.

While the new car market has suffered badly in previous recessions, used car sales have been more robust - dropping less than 10% and recovering more quickly. This time it could be more tricky if credit is problematic, but the big slide in used car values does make used cars more accessible and perhaps easier to finance.

As always when business is tough, expenses and overheads must be reined in. Staff cutbacks are inevitable and in 1991/92 the average franchised dealer reduced staffing levels by 15%. Quite simply seventy per cent of an average dealer's total gross profit is spent on wages and salaries, and therefore a 15% reduction here is worth considerably more than a 15% reduction elsewhere.

You view on the final upside depends what happens to your dealership. In the last five years 17% of franchised dealer sites have closed down. In the next five years we believe another 14% are likely to go. Clearly this means more business for those that remain, which was certainly the case after previous recessions.

Written by Trend Tracker director Chris Oakham, this piece first appeared his column in the subscription monthly Auto Retail Bulletin in December 2008. (See www.auto-retail.com for subscription details.)

Discussing the scheme, Auto Retail Bulletin's May issue helpfully notes that when it went live on 18 May, it was still not clear how HMRC would treat the VAT involved in the scheme, particularly where it may involve VAT-registered light commercial vehicle dealers who would not normally pay VAT at the point of sale.

The scheme has been introduced with an apparent lack of joined-up government among the government departments and agencies involved, and with apparently an at best lukewarm blessing from The Treasury. As Professor Garel Rhys has noted, it stands to boost the sales of a number of dealers, but only those of Nissan among the UK's remaining car plants, since 86% of UK-sold new cars are imported, and the rest are all far beyond the reach of those who've made do with old bangers.

Some of us think all scrappage schemes are market-distorting and create sated consumers to dampen a future recovery based on consumer confidence in paying real, sustainable market prices. At least in the UK scheme's case, it hasn't been clouded with dubious claims of environmental benefits. And we can take comfort from the modesty of the UK scheme. The Germans have spent €2.5bn on allowing clunker owners to swap ancient Polos for cheaper new Porsches should they wish, and they can buy them in Poland if they prefer.

While we estimate that if the average price of a scrappage incentive-driven new car purchase in the UK is £8,500 or so, the Government's £3,000,000 budget for the scheme will be more or less recouped by VAT receipts that HMRC would not have had without the scheme. So at least the rest of us won't have to pay for other people's new cars.

Toby Procter
18 May

Auto Retail Bulletin is a subscription journal to which Trend Tracker director Chris Oakham contributes a monthly column on topical auto retail and aftermarket issues. Our thanks to editorial director Rupert Saunders.

The UK Retail Car Finance Market 2009 from Trend Tracker analyses the impact of the global financial crisis and the recession in the UK from a longer-term perspective, basing market forecasts to 2014 on a clear understanding of trends in market volume and value since 2003. If you work for a company that will still be around to exploit the coming recovery, you will need to understand just how far the market has moved since before the crisis erupted. You need to assess how vigorous that recovery is likely to be, and understand why it won't restore demand even to the level of three years ago. This report will help you do just that.

There's no doubt the motor finance market is influenced by complex factors. It plays chicken-and-egg with supply and demand for new and used cars, just as inter-bank lending and retail credit are also directly, painfully related. Finance oils the wheels of car sales, but it can also lock them up, as now. Understanding the complexity of the factors behind the trends is what distinguishes Trend Tracker as the preferred source of intelligible, relevant data to so many major companies in the UK automotive sector.

While the full extent of toxic debt in the banking system is still unknown, and the full horror of 2008's decline in new car sales has yet to be revealed, it's still possible to see clearly beyond the current crisis. Trend Tracker remains confident that our analysis fully supports a rational forecast for the finance market's direction out of the crisis. A forecast that suppliers would be wise to heed when assessing the resources they will need in future.

Please go to the 'reports' section of our website to download the detailed contents pages and list of tables and charts for this report to see if it really can help you plan a post-crisis future for your business.

Available now the report is £1,450 + VAT for a PDF file and bound copy. You can buy the report using your credit card online now and download a zip file containing a PDF of the full report and a 15-slide Powerpoint summary. The hard copy will then be despatched to you within three working days. Alternatively phone us on 0870 421 4350 for other ways to buy.

These individual pages cover:

• Bodyshop Painter / Panel Beater
• Bodyshop Foreman / Estimator (job description for Estimator only)
• Bodyshop Manager
• Bodyshop Receptionist / Adviser
• Car Sales Executive (job description for Sales Executive but salary details merge Sales Executives and F&I Managers)
• Dealer Principal / General Manager
• Dealership Accountant
• General Clerical Assistant (job descriptions are for Ledger/Accounts Clerk, Database Controller, Accounts Assistant/Cashier and Sales Administration Assistant
• Sales Manager (job description for General Sales Manager)
• Parts Counter / Warehouse Assistant
• Parts Manager
• Parts Sales Representative / Telesales (no job description available)
• Parts Delivery Driver / Van Sales (job description for Parts Delivery Driver)
• Service Department Clerical Staff (job description for Warranty Administrator and Service Receptionist
• Service Mechanic (no job description available)
• Service Foreman / Workshop Controller (job description for Service Foreman)
• Service Manager
• Service Receptionist
• Service Technician

This pilot survey revealed a 20 percentage-point gap between the best and worst performers, and most importantly, indicated where each manufacturer is most in need of improving specific aspects of their sales training provision.

We hope to carry out a full-scale version of this initial survey during 2009, and will be inviting manufacturers' training departments to join a syndicate programme to fund the work. And then, we hope to be able to conduct a similar survey of aftersales staff training programmes. For those who pay more than lip service to the principle that competent people are the most valuable resource of a retail network, we believe this research should provide valuable insights that haven't so far been available to benchmark performance in the field.

You can download the Auto Retail Bulletin summary here.

Toby Procter
December 2008

Meanwhile, Wolk & Partner has developed a comprehensive database of 47,594 automotive service & repair businesses which are either franchised dealer workshops or belong to various independent garage networks. All are listed by name and address with mail, phone/fax and e-mail contact details, are mapped to show network densities throughout the German regions, and can be sorted by location and by manufacturer/franchise.
The data can be deployed for mailings, acquisition assessments and network planning, and Wolk is able to support clients' B2B marketing efforts with geo-marketing, applying mapping to the database at federal and regional levels. Wolk can also supply bespoke analyses of the database, analyzing workshops, for example, by number of productive staff. Ask Toby Procter for more information if you could use this data - call 0870 421 4350.

Wolk & Partner, a company which has kept tabs on the structure and size of the German light vehicle aftermarket since 1996, says there are currently some 1,050 trade aftermarket parts outlets serving over 1,950 workshops in the independent aftermarket. The trade is dominated by six major wholesalers (Stahlgruber, WM, Trost, Europart, PV, KSM) operating on a national scale, and 17 supra-regional wholesalers. Around 1,000 parts & accessories retailers serve a still-growing German B2C market.

A recent report from Wolk & Partner covers the German independent aftermarket for parts in two volumes, the first including data on the market size and structure, the second providing detailed information on the various players, with over 60 corporate profiles of aftermarket suppliers and their networks.

A second two-volume report from Wolk & Partner covers Germany's independent workshop networks. The first volume includes the results of a survey of workshops' opinions of their 'soft franchises', and gives contact details for 91 major 'soft franchise' businesses. The second volume compares 44 independent garage networks, each being analysed in 4-6 pages of comparative data for benchmarking purposes.

These reports, in German, are priced from €950 depending on a choice of optional formats and packages, but special UK prices will apply. Contact Toby Procter of Trend Tracker on 0870 421 4350 for more information.

Without expecting many 'punters' to need as much detailed information and forecast data as our new report on the UK Car Body Repair Market 2008 offers, we're happy to point Trend Tracker visitors to this recently-launched vehicle for news and comment aimed at UK motoring enthusiasts. And indeed, whenever any industry or consumer site publisher sees relevance to their own content in what we publish at Trendtracker.co.uk, just let us know and we'll look into the possibility of creating reciprocal links.

Less disposable income will impact on motorists whether running a privately-owned or company-owned car. The most obvious effect is a reduction in travel, which clearly affects demand for servicing and repairs, and during the recession in the early 90s vehicle-kilometres levelled off after a period of substantial growth.

Another likely outcome is that motorists will keep their cars longer. Based on total new and used car sales as a percentage of the car parc - so called 'parc turn' - the current average length of ownership is around 3.1 years and it has been at this level for most of the decade. Surprisingly the average before the recession of the early 90s was shorter. Or perhaps it is not surprising given that cars are so much better built these days. As the recession took hold in the early 90s, the frequency of change increased by 15% and it was new cars that took the hit with sales falling 13% between 1989/1990, and 21% between 1990/1991. On the other hand, used car sales remained relatively stable throughout the period of the recession.

Overall the evidence from the early 90s suggests that although motorists kept their cars longer there could have been a switch to buying used rather than new when they did change. As far as we know there was no research at the time to prove that this was the case, but it seems entirely logical that motorists in reduced circumstances will opt for cheaper alternatives.

Of course franchised dealers already focus a huge amount of effort on used car sales, and this effort needs to be re-doubled if the new car market goes pear-shaped. Or, as the Americans might say: “Bet the farm on used cars!” But which used car market segment will prosper? Households with lower incomes are most likely to be affected by any downturn - the primary market for used cars costing under £6,000. The new to used switchers, and these could even include companies, will be looking for newer and more expensive used cars including 'nearly new'.

With approximately one-third of all independent used car dealers specialising in older used car sales and nearly 60% selling used cars at a retail price of £5,000 or less, any downturn could favour well-prepared franchised dealers over independents. The 'get out of jail card' for independents will be to specialise - prestige, nearly-new cars, performance, etc. For both dealers and independents betting on the used car market, the key issue will be sourcing the right used stock, which is good news for the auctions.

Trend Tracker director Chris Oakham contributed this topical advice for dealers in the credit crunch-afflicted car sales market in his column in the subscription monthly Auto Retail Bulletin (See www.auto-retail.com for subscription details.)

There has been no significant re-balancing of power between supplier and retailer. The consumer has benefited from more price competition, but thanks to oversupply, not regulation reform.

So why keep an automotive BER beyond 2010? Because franchised dealers prefer the devil they know is not a wholly convincing argument in favour. They enter franchise agreements voluntarily. The official argument for the original BER - that cars are dangerous, so safety needs the expertise of tied service and repair channels - wasn't even mentioned last time around, and has anyway been superseded by efforts to dilute these tied channels' monopolies.

This should be crux of the matter for the Eurocrats and ministers now considering the BER review report. CECRA and the other members of the European Right to Repair campaign have right on their side, because their members can offer consumer value which dealers' with their higher cost base can't usually match. Provided, that is, that independent repairers can access the requisite vehicle data and codes at a fair price as is assured (though not fully) by the current BER. Under current EU emissions regulations the 'right to repair' is only assured in respect of Euro 5 vehicles. That right must be extended to pre-Euro 5 vehicles if the BER is abolished, or the baby will be thrown out with the bathwater.

With independent repairers' rights to market access come responsibilities, which under the BER have been left to national regulations. Which brings me to the muted response to the new volntary Motor Industry Code of Practice (http://service.motorindustrycodes.co.uk/). To quote its sponsors, “It's a straightforward, cost effective scheme with no rigorous pre-entry audits or overblown costs … For garages who engage and comply with the code, nothing much changes.”

The same could be said for their customers. The code's low cost (£75 to join, £30 for the code itself and briefing material, and £175 for biennial inspection charges) may encourage more independent garages to apply than have done for the BSI's more costly PAS 80 Kitemark. But why the consumer bodies were ready to welcome so anodyne a proposition, given the weight of their previous verdicts on the misdemeanours of the garage trade, is not immediately clear. Maybe they couldn't face any more meetings on the subject.

Toby Procter
13 June

The severity of the fall in new car sales was the most surprising aspect of the recession of the early 90's with new car sales plummeting almost overnight. The result was a fall of over 400,000 in the annual new car market between 1990 and 1991, and it was 1996 before the market recovered. Partly because of this, almost one-fifth of franchised dealership sites disappeared in the six years from 1990 to 1996 - an attrition rate nearly twice as high as subsequent years.

We say “partly” because the damaging fall in new car sales (and used car sales) was, for franchised dealers, followed by a 'black hole' in aftersales. This was caused by falling new car sales knocking on to a decline in the four-year car parc - the traditional customer base for dealer aftersales. And with motorists seeking cheaper ways of getting their cars serviced and repaired during the recession, franchised dealers lost over ten per cent of the service and repair market to the independent sector. The body repair market was hit too as many motorists moved from fully comprehensive to third party insurance.

Today the retail motor industry could be in better shape than in the early 90's. The number of retail sites - franchised dealers, independent garages, bodyshops, etc - has fallen considerably since the early 90's, and this has benefited those which remain. Thinking about franchised dealers, the average dealer now sells one-third more new and used cars compared to 1996 with only 15% more staff. And while dealers have exited body repairs in great numbers, service and parts operations are reaching owners of older cars thanks mainly to three-year warranties.

The only question mark for dealers is the heavy reliance of new car sales on fleet and business users, which could be much higher than the SMMT data indicate; dealerships which endured in the recession of the early 90's were those with a spread of revenue streams.

Another difference between the early 90's and now is the domination of dealer groups with 70% of franchised dealers now in groups compared to just over 50% in 1996. Of course this is no guarantee of financial robustness in the face of recession, as recent group failures have demonstrated, but it could mean better financial controls and the ability to cut back quickly if and when problems arise.

(This first appeared in Chris Oakham's April 2008 column in Auto Retail Bulletin. For a FREE trial copy of Auto Retail Bulletin go to www.auto-retail.com or e-mail: francis@auto-retail.com.)

One example of unintended consequences was 'The Supply of New Cars Order 2000', which planned to create a level playing field for private and fleet buyers of new cars. However used car residual values over-reacted and the 'cost to change' actually increased so making all new car buyers worse off. Another example is how, between 1921 and 1948, Vehicle Excise Duty (VED) was based on RAC Horsepower. This encouraged inefficient engines with long strokes and held back technical progress.

A similar litany of unintended consequences could result from Chancellor Darling's recent budget with its selective increases in VED and increases in 'showroom tax' to be introduced in 2010/2011. In particular the Chancellor has set a VED trap for cars emitting more than 226g of CO2 per km, registered after 1st March 2001 but before 23rd March 2006. The Chancellor will also increase duty on fuel in October on top of the 20% increase in fuel prices over the past twelve months.

Another measure in the budget, which has received far less publicity, will be a write-down allowance of only 10% from next year for company cars emitting more than 160g/km of CO2 and 20% for emissions below 160g/km. The rules disallowing a proportion of car lease rental payments will also be reformed in line with the new capital allowances rules.

The budget changes over the next two years will probably affect the new and used car markets much sooner because business cars make up nearly 80% of new car purchases. Although DVLA figures say 50%, an investigation by the International Car Distribution Programme (ICDP) suggested that non-private new car sales should include company fleets of all sizes, Motability, public sector purchases, rental companies, franchised dealers, and vehicle manufacturers and their employee purchase schemes. On this basis ICDP calculated that the new car market in 2004 was split 22%/78% between private and non-private.

Clearly the Chancellor's measures will affect business users more than most and thus the new car market. And the effects might come to pass much sooner than the proposed dates of introduction because leasing and contract hire payments are sensitive to residual values, which are calculated far in advance when agreements commence. It would also be surprising if the trade market for used cars did not react quickly to the budget measures and the present economic uncertainties by marking down prices - especially for the most affected cars.

The unintended consequences could be a dampening down of the new and used car markets, and a complete change in the future shape of the car parc - the latter Alastair Darling's RAC Horsepower legacy.

(This first appeared in Chris Oakham's April 2008 column in Auto Retail Bulletin. For a FREE trial copy of Auto Retail Bulletin go to www.auto-retail.com or e-mail: francis@auto-retail.com.)

For the automotive industry, the world has changed in many ways since Trend Tracker last published a conventional newsletter. We've covered the startling rise of private equity in one of our white papers, but this first Trend Tracker blog provides a first opportunity to comment on what has surely become the biggest issue for anyone involved in making, selling or fixing cars: the cost of complying with greenhouse gas emissions limits while facing up to the likelihood that oil will never again be as cheap or plentiful as it has been.

It's not a done deal, but it seems more than likely that in four years' time, 130 g/km of tailpipe CO2 will be as much as any manufacturer's fleet will be permitted to emit without being fined in Europe. And on the basis that both the manufacturers' lobby and the anti-car green lobby have greeted the EC's proposals with a degree of simulated outrage, this policy is probably as good a political compromise as it could be. True, the fines envisaged by Brussels are apparently much more expensive per tonne of carbon than the 'market' value enshrined in the EU's Emissions Trading Scheme. But, at least in the early years of the regime, the fines for non-compliance with the EU limit - assuming they are passed on to buyers of high-emissions cars - are unlikely to be big enough to change the complexion of the car market overnight. Nor will the £5 gallon, or the UK's new showroom tax plans for high-emissions vehicles.

A deficit of 10 mpg alone costs the driver of a big petrol-fuelled car around £1,000 a year compared to the driver of a comparable diesel car - so another £500 in purchase tax on a large BMW or Mercedes using a present-generation powertrain, or another £2,000 to pay for a comparable hybrid, won't be enough to drive many large cars off the roads.

Since 2007 was the first year that the majority of the globe's population living in cities, it may be that urban congestion and scarce parking spaces will have a greater effect on consumers than the cost of their cars, or the mild incentives available to buy more abstemious models.

With its legislation on car CO2 the European Commission seems to have been as clever in balancing conflicting interests as it was in drafting its 2002 block exemption regulation. The result is horribly complex, and will still leave governments open to the temptation to levy taxes on bogus 'green' premises. One of the most egregious is the UK's tenacious grip on a duty premium on diesel fuel, which serves as a disincentive to make the most rational, environmentally-sensitive choice of powertrain currently available to most car buyers. Even more absurd than the premiums some manufacturers still exact for the diesel versions of their cars.

Toby Procter