• Further rise in servicing retention for independent workshops and fast-fits
• Servicing retention by franchised dealers for make at lowest level since 1998
• Customers influenced primarily by cost, value, technician expertise and preconceptions over warranty requirements
• Ageing car parc means outlets must demonstrate the value of servicing

Research by Trend Tracker Ltd in The Future of the Used Car Market 2012-2017 report shows that the decline in used car sales began in 2004 at the same time as interest rates began to rise. Historically, when interest rates are low, sales of new and used cars tend to rise, and then fall when interest rates increase. This is because around half of all used car purchases are made using some form of credit. However, the reduction in bank base rates to just 0.5% in 2009 has not stimulated demand because the typical cost of a £5,000 loan for a car purchase has risen from a monthly interest rate of 8.7% in March 2007 to 15.8% in April 2012 .

While banks have restricted consumer lending, they have also increased the cost of loans. Consequently, the margin or 'spread' between the sterling inter-bank lending rate and the combined bank and building society interest rate on a £5,000 loan has increased from a low of just 2.6% in August 2007 before the financial crisis began to a peak of 15.1% in April 2012. As bank lending rates on £5,000 loans increased from 9% in January 2007 to 15.4% in January 2012, while inter-bank lending rates fell from 5.4% to 0.8%, total gross lending to consumers for loans and overdrafts by banks and building societies fell by 46% from £80.8 billion in 2006 to £43.5 billion in 2011.

The impact of this rising cost of credit and the near halving in the value of gross lending to consumers for loans and overdrafts has therefore been particularly felt in consumer market sectors such as new and used cars which are dependent on credit finance. Consequently, credit-dependent consumer markets such as automobiles will be slow to recover to previous peaks experienced during the pre-financial crisis credit boom.

Consumers are running scared of the high cost of borrowing at a time of wider economic uncertainty. The impact of the reduced availability and higher cost of credit on consumer purchase behaviour in general is that consumers will continue to defer the purchase of high cost durable goods for as long as possible, although this is resulting in pent-up demand which will break when credit conditions eventually ease. The used car market has over the last decade been characterised by consumers purchasing more expensive used cars over £8,000 in value, but Trend Tracker forecasts that average used car purchase prices will fall by 7% between 2012 and 2017.

This is because the lack of credit availability and its high cost will impair households’ ability to finance car purchases, and especially the purchase of higher value used cars, the larger proportion of which are financed on credit. This will impact negatively on both independent and franchised car dealers and may result in the failure of some large car retailers, including some of the large used car supermarkets and franchised dealer groups which concentrate on higher value used cars.

Robert Macnab, Trend Tracker’s lead analyst said, “Hopes among both the Bank of England and the Treasury that consumer demand will be stimulated by maintaining a low-interest rate monetary policy may be forlorn. With evidence growing that UK exporters are using a lower sterling exchange rate to increase profits in overseas markets rather than increase market share, the manufacturing sector is unlikely to replace consumer spending as the driver of economic growth in the short term. Bearing in mind that consumer spending represents 60% of gross domestic product (GDP), the high cost of credit will continue to dampen demand, so growth in the UK economy is likely to bump along at only a moderate level for some time to come with periodic increases in sales offset by subsequent falls.”

ENDS

Information from Trend Tracker Ltd
June 2012
For immediate release

Notes to Editors
The data on consumer loans and overdrafts is taken from Table A5.6 (Consumer Credit) from the Bank of England’s Bankstats publication. The data is gross unsecured lending to individuals not including mortgage and credit card lending and therefore comprises mainly loans and overdrafts to finance current consumer expenditure on goods and/or services. http://www.bankofengland.co.uk/statistics/Pages/bankstats/default.aspx

Data on interest rates for £5,000 loans is taken from Table G1.3 (Average quoted household interest rates) from the Bank of England’s Bankstats publication. The Bank calculates rates by collecting the headline rates advertised by a sample of banks and building societies as collected using the Effective Interest Rates return, Form ER. In the calculation of averages, the interest rates for individual banks and building societies are weighted using the end of month or average monthly balances or new business amounts reported by those institutions. Personal loan rates are expressed in terms of APR (Annual Percentage Rate). The Bank publishes quoted personal loan rates for amounts of £5k and £10k loans.

The spread or margin on personal loan rates is the difference between the sterling interbank lending rate (LIBOR) and the combined bank and building society interest rate on a £5,000 loan. The British pound sterling LIBOR interest rate is the average interbank interest rate at which a large number of banks on the London money market are prepared to lend one another unsecured funds denominated in British pounds sterling.

Trend Tracker has been granted a Licence of Copyright by the Bank of England for reproduction of data held on the Bank's Interactive Database.

Trend Tracker’s latest used car study forecasts used car market trends, including sales volumes, used car values, and franchised and independent used car retailer numbers, for the coming five years. The study also analyses all the economic and demographic factors that influence demand for used cars. For further information, please call Robert Macnab on 07767 861440 or email rmacnab@trendtracker.co.uk or Chris Oakham on +44(0)870 421 4350 or email coakham@trendtracker.co.uk

Aimed at a professional industry readership, The Future of the Used Car Market in Great Britain 2012 - 2017 is available from Trend Tracker priced at £1,250 plus VAT inclusive of electronic and bound copies and a Powerpoint executive summary. The table of contents and a list of tables and charts can be downloaded at www.trendtracker.co.uk.

The value of the used car market increased by 11% between 2001 and 2011, but taking out the effect of inflation it actually fell by 18%. This was caused by a real-terms (i.e. inflation adjusted) fall in average used car retail prices over the period.

Disregarding any effects of inflation, Trend Tracker forecasts that the value of the used car market in 2017 will be 3% down on 2011 due to a real-terms drop in used car prices as the parc age profile becomes older after the recent decline in new car sales – and despite an increase in used car sales volume of 7% over the period.

Model segmentation
An increase in the used car market share of superminis from 26% to 31% since 2003 reflects increased demand for smaller, more economical cars, as well as increased supply of superminis filtering through from new car sales as fleet companies and ‘user-choosers’ specify more fuel-efficient models with less exposure to benefit-in-kind tax.

The popularity of superminis has increased at the expense of the lower medium and upper medium segments, whose used market shares dropped from 30% to 27% and from 21% to 17% respectively between 2003 and 2011. The executive segment’s share has fallen from 7% to 5% over the same period.

Age segmentation
Cars aged over nine years old account for the largest proportion of used car transactions. Between 2001 and 2006, their share of market volume declined from 40% to 33%, recovering back to 39% by 2011.

Cars aged 6 to 9 years have been the fastest-growing age band in used cars, with sales rising by 31% in the period 2001 to 2007 and falling only slightly since. Sales of used cars up to three and three to six years old grew 24% and 22% respectively in the period 2001 to 2006, but have weakened noticeably since, particularly those of cars aged up to three years old. Falling new car sales have reduced the availability of the latter, and the recession has affected their appeal to used buyers.

Robert Macnab, Trend Tracker’s lead analyst for the study, noted, “Sales of new cars appear unlikely to achieve pre-recession levels for several more years. Only then will sales of used cars up to six years old start to pick up as more stock becomes available. The age segment between six and nine years old exhibited strong growth between 2001 and 2011, but will fall away as the dearth of new car sales during and after the recession has an impact on availability. Cars over nine years’ old will continue to be the largest segment and relatively stable at around 40% of total used car sales.”

ENDS

Further information

Trend Tracker’s latest used car study forecasts used car market trends, including sales volumes, used car values, and franchised and independent used car retailer numbers, for the coming five years. For further information, please call Chris Oakham on +44(0)870 421 4350 or email coakham@trendtracker.co.uk.

Aimed at a professional industry readership, The Future of the Used Car Market in Great Britain 2012 - 2017 is available from Trend Tracker priced at £1,250 plus VAT inclusive of electronic and bound copies and a Powerpoint executive summary. The table of contents and a list of tables and charts can be downloaded at www.trendtracker.co.uk.

Trend Tracker’s long-established and authoritative study of the used market shows that along with rises in operating costs, stagnation in used car demand, the influence of the internet, and changing customer preferences, have cut a swathe through used car retailers. The number of dealers selling used cars has fallen by over a quarter in a decade.

There were an estimated 11,610 sites retailing used cars in Great Britain in 2001, comprising franchised dealers, independent used car sites and used car supermarkets. Ten years later in 2011, there were 25% fewer sites. Both franchised dealers and independent used car retailers experienced a similar decline in numbers.

Trend Tracker’s latest report forecasts that the number of sites retailing used cars in the UK will continue to decline with 11% of sites closing between 2012 and 2017. Franchised dealer sites will decline in number at almost the same rate as independents. The main causes of the diminishing number of franchised dealer sites will be a shortage of working capital, a decline in solus sites as more manufacturers sanction multi-franchise dealerships, and the closure of less profitable sites by dealer groups, especially in the regions likely to experience slower growth.

Used car supermarkets have grown rapidly in numbers by specialising in nearly-new, ex-fleet and pre-registered cars. However, the recent recession has apparently put further expansion on hold as plummeting new car sales created a shortage of the very stock which stimulated their past success.

Robert Macnab, Trend Tracker’s lead analyst for the report says, “In a new car market that will continue to be weak for a while, some franchised dealers will face a shortage of working capital as their showroom costs cannot be cut in line with already marginal profitability in new car sales. There’s likely to be some decline in single-brand sites as manufacturers sanction multi-franchise dealerships to preserve local representation. Dealer groups can be expected to close some of their least profitable sites, especially in the regions which will experience the slowest recovery from recession - Wales, the North East and the West Midlands. And for some franchised dealers, used cars will not be the dependable source of higher-margin business they were with the rise in reconditioning costs associated with manufacturers’ approved used car schemes.”

Further information

Trend Tracker’s latest used car study forecasts used car market trends, including sales volumes, used car values, and franchised and independent used car retailer numbers, for the coming five years. For further information, please call Chris Oakham on +44(0)870 421 4350 or email coakham@trendtracker.co.uk.

Aimed at a professional industry readership, The Future of the Used Car Market in Great Britain 2012 - 2017 is available from Trend Tracker priced at £1,250 plus VAT inclusive of electronic and bound copies and a Powerpoint executive summary. The table of contents and a list of tables and charts can be downloaded at www.trendtracker.co.uk.

Trend Tracker’s forecasts indicate that demand for used cars in 2012 will be similar to 2011. But if the UK economy experiences a modest recovery from 2013 onwards, as predicted by the Office for Budget Responsibility, Trend Tracker’s forecasts suggest that demand for used cars will pick up, with an average annual growth rate of 1.5% from 2013 resulting in a used car market of 7.27 million units by 2017.

Although the volume of sales in 2011 fell back to 2001 levels, used car market value increased by 11% between 2001 and 2011, reaching a peak in 2004 before falling back to £36.6 billion in 2011. However, taking into account the effects of inflation, used car market value actually fell by 18% between 2001 and 2011. This was caused by used car unit selling prices falling in real terms (excluding inflation).

Supply and demand both to blame

The supply of used cars from both fleets and private vendors has declined since the recession as a direct result of the weakness of the new car market. And new car sales have continued to be affected by the agonisingly slow recovery of the UK economy, with one effect being a sharp increase in demand since 2010 for used cars costing £8,000 or more.

While this suggests that an element of demand has switched from new to used cars as a lower-cost alternative, the recession and higher fuel prices have also caused demand for smaller, more fuel-efficient cars to increase; ‘B’ segment superminis accounted for 31% of used car volume in 2011, compared to 26% in 2003.
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This sustained depression of used car supply and demand can be blamed at least in part on consumers’ continuing difficulties in borrowing for purchases such as used cars. Around half of all used car sales are financed with some form of credit, and sales volume tends to rise when interest rates fall, and vice versa. Despite record low base rates, consumer interest rates are high and lenders’ criteria remain cautious.

Robert Macnab, Trend Tracker’s lead analyst for The Future of the Used Car Market in Great Britain 2012-2017, said, “Affordability being the main priority for used car buyers makes low-cost, volume brands popular, but it also boosts the appeal of premium brands, because they are more affordable as used than as new car choices.”

Falling numbers of dealers

The headwinds facing the used car sector are hitting many of the businesses that sell used cars. Over one-fifth have disappeared in the past decade with franchised dealers and independent outlets experiencing similar losses in numbers.

Trend Tracker forecasts that from 2012 to 2017, the number of sites retailing used cars in the UK will decline by 11%; independent dealers are predicted to experience the largest rate of decline with a loss of 13% of sites.

Further information

Trend Tracker’s latest used car study forecasts used car market trends, including sales volumes, used car values, and franchised and independent used car retailer numbers, for the coming five years. For further information, please call Chris Oakham on +44(0)870 421 4350 or email coakham@trendtracker.co.uk.

Aimed at a professional industry readership, The Future of the Used Car Market in Great Britain 2012 - 2017 is available from Trend Tracker priced at £1,250 plus VAT inclusive of electronic and bound copies and a Powerpoint executive summary. The table of contents and a list of tables and charts can be downloaded at www.trendtracker.co.uk.

Summary Findings

• 2011 marks further decline in franchised workshop servicing retention
• Independent outlets increase share of servicing market to over 45 per cent
• Dealers urged to explore new strategies to retain value-conscious customers

Trend in retention of routine servicing by provider segments

As franchised dealerships have lost even more work, independent garages and fast-fit outlets have made clear gains. The updated results indicate that independents and fast-fits now account for 45.7 per cent of servicing work, up from 42.1 per cent in 2010. A decade ago the independent garage share of servicing was just 30.2 per cent.

“Independent workshops now hold as great a share of the market as franchised dealerships did 15 years ago, and the growing influence of the independents is showing no signs of letting up,” commented Trend Tracker analyst Chris Oakham. “Almost a third of servicing on cars between three and four years old goes to independent providers, and, with an ageing car parc as a result of poor new car sales since 2008, the decline in customer retention among franchised workshops could accelerate.”

Nigel Head, Castrol Professional OEM and Franchised Workshop Marketing Manager – UK & Ireland, said: “While franchised dealers have seen another drop in custom, the decline is far from terminal. It’s down to dealers to reinvigorate their aftersales offer, and provide customers with an incentive to return for servicing work. National fast-fit chains and the independent sector are becoming more professional as they expand and are aggressively targeting franchised dealer customers – it’s time for dealers to fight back if they are to hold on to increasingly value-conscious customers.

“There is little scope for service pricing reductions, but that isn’t to say that dealerships can’t adopt other proactive strategies,” added Head. “Dealers could consider offering courtesy transport, fixed price servicing for older cars, or even using more transparent invoicing to increase customer trust. These are all ways in which franchised dealers can fight to retain customers and remind them of the service the workshop can offer over and above the competition.”

ENDS

Notes for editors

The new Castrol Professional Car Service and Repair Trend Tracker 2011 report combines in one volume an update of data from three long-established Trend Tracker reports covering the UK market for retail mechanical car servicing, maintenance and repairs. The new report is based on a survey of 15,725 motorists carried out by Lake Research over the last 16 months – as well as extensive B2B research. These data add to Trend Tracker consumer survey records going back to the early 90s.

Details of the report can be downloaded from www.trendtracker.co.uk.

For further comment, please phone Trend Tracker director and lead aftermarket analyst Chris Oakham on 0870 421 4350 or email coakham@trendtracker.co.uk.

About Castrol

Castrol (www.castrol.com) is part of BP, one of the world’s largest energy companies. Through strategic partnerships with many of the world’s leading car manufacturers, Castrol is able to maintain its position as the market and technical leader for automotive lubricants for trade and retail customers.

Castrol has a specially tailored offer for franchised workshops combining three professional lubricant brands with a range of business support programmes for improved business performance, training, re-engineering processes, workshop equipment planning, delivering tele-business solutions, and creating and managing effective sales and marketing programmes.

Named Castrol Professional, the offer has been specifically designed to help maximise workshop profit margins across three key sources of value: lubricant sales, increased parts and labour sales, and customer satisfaction. It is supported through the largest field management team in the sector.

The Castrol Professional product range comprises a line-up of lubricants exclusive to franchised workshops:

*Castrol EDGE Professional: a range of premium fully synthetic lubricants, each uniquely co-engineered with – and exclusively and globally recommended by – BMW, Jaguar, Land Rover, Volkswagen, Seat, Skoda, Volvo, MINI and Audi, which contains Castrol’s proprietary Fluid Strength Technology to exceed the specific requirements of their modern engines.

*Castrol Magnatec Professional: the premium semi-synthetic lubricant which features unique ‘intelligent molecules’ that provide extra protection where it’s needed most in the engine, an globally recommended by Ford.

*Castrol GTX Professional: superior engine protection.

For further information about Castrol Professional visit www.castrolprofessional.co.uk.

For further media information please contact:

• Most car buyers want their next car to reduce their personal emissions, women more so than men
• Men are more inclined than women towards diesels and hybrids
• None of the 12,000-strong survey sample expected their next choice to be an electric car

Forty-two per cent of motorists interviewed face-to-face in their homes for Trend Tracker by Lake Research said they wanted to choose a car that would reduce their personal emissions. Sixteen per cent agreed strongly with this proposition, while 25% neither agreed nor disagreed, 14% disagreed, and 3% disagreed strongly.

What type of engine their next car will have will clearly influence motorists’ personal emissions, and here 45% of respondents said their next car would be petrol-fuelled and 42%, a diesel. Just 2% said they would choose a hybrid-electric car, but none opted for a fully-electric car. A dual-fuel LPG-petrol engine was the preferred choice of 1% of respondents.

Broken down by gender, the survey responses showed a slightly greener attitude among women concerning the wish for a car that would reduce their personal emissions, while male respondents showed a slightly higher inclination to choose a fuel type that might achieve that aim.

Over half (53%) of women said their next car would be petrol-fuelled, and 28% diesel-fuelled, while under half (43%) of men would choose a petrol car against a higher 39% opting for diesel. Two per cent of men would consider a hybrid, against 1% of women. Overall, women are more likely than men (63% versus 52%) to want to choose a car with lower emissions, but this does not necessarily make them more inclined to purchase a hybrid or pure electric car.

According to the Society of Motor Manufacturers, ‘Alternative Fuel Vehicles’ (cars using neither conventional petrol or diesel power) accounted for 3,026 units or 1.0% of the first-half 2011 UK new car market, private and business buyers combined. Of these AFVs, pure battery-electric cars accounted for just 670 vehicles, or 0.06% of new car purchases, according to data obtained by the RAC Foundation, and these were most likely to comprise a large majority of corporate registrations.

Trend Tracker analyst Toby Procter commented, “While the zero score for ‘zero emissions’ electric cars in the Trend Tracker consumer study may disappoint those pushing for electrification, the 2% of the male and 1% of the female samples surveyed interested in a hybrid is actually pointing in a greener direction than the current new-car market.”

Procter added, “A high prevalence of ‘Other/Don’t know’ responses in our survey may well indicate a lack of knowledge concerning what alternatives may be available when buyers come to choose a given car make and model in up to three years’ time.”

Notes for editors

About the Car Buyer Brand Perceptions Study

Trend Tracker’s new Car Buyer Brand Perceptions 2011 study is based on a face-to-face survey of a nationally representative sample of 12,000 motorists intending to buy a new or used car within specified periods, carried out by Lake Research.
The study is an independent monthly survey of car buyer brand preferences and purchase intentions in the UK. The survey has been designed to provide detailed information on the brands that both new and used car buyers are thinking of purchasing. The survey also tracks the criteria upon which car buyers select individual brands, the size, type and cost of car they intend to purchase, the extent of research they intend to carry out and the strength of any relationship with a dealer.

The survey tracks rational, emotional or low involvement purchasing and identifies which brands will be emotional, rational or low-involvement purchases. Most consumers prefer to believe that they make purchase decisions based on purely rational criteria, but in reality, and especially with the purchase of cars, emotional factors, including socially undesirable motives, can influence the brand selection and purchase decision.

Most car buyers prefer not to admit that the purchase of a particular brand might help to support their self-esteem. A unique series of questions developed by Trend Tracker based on Consumer Involvement Theory (CIT) allows the research in this quantitative survey to identify rational, emotive and low involvement purchasing intentions without respondents needing to articulate their motivations or reveal socially undesirable motives.

In addition to analysing brand selection and purchasing intentions based on consumer involvement theory, the survey also identifies for each of the 34 car brands in the survey the levels of customer retention or intention to re-purchase the same brand, individual brand strengths and weaknesses, and brand positioning analysis using brand maps. Details of the report can be downloaded from www.trendtracker.co.uk.

About Trend Tracker

Trend Tracker Ltd. was formed in the UK in 2003 by experienced specialists as a company dedicated to providing accurate and informed automotive industry research. The company undertakes bespoke client studies and publishes its own reports, and unlike most research businesses, has the automotive industry experience to help customers implement business improvements predicated by the information provided.

Further information:

Please phone Trend Tracker lead analyst Robert Macnab on +44 (0)7767 861440 or email rmacnab@trendtracker.com, or phone Trend Tracker director Toby Procter on 07974 453911 or email tprocter@trendtracker.co.uk.

*More car buyers are letting their hearts overrule their heads, despite the general lack of cash in the economy.

*New research by automotive industry specialists Trend Tracker into UK car buyers’ perceptions and behaviour shows they evaluate car brands using a mix of criteria appealing to the ‘rational’ left brain and the ‘emotional’ right brain.

*People still care about cars: predominately “rational” car buyers make up 44% of the market, while more emotionally engaged buyers account for 56%.

Because the purchase of a car is second only in value to the purchase of a house, many of us default to using rational economic criteria when making a brand purchase decision. At least, that is what we would like to believe. The evidence shows people tend to choose brands such as Porsche and Alfa Romeo, with their sleek and sensual styling and their exclusivity, purely for their emotional appeal.

Emotionally engaging design

Other brands we evaluate on a more balanced mix of rational and emotional criteria. The more rational brand choices tend to be the least differentiated volume budget brands, such as Hyundai, Skoda, Renault, Kia and Ford, which we are more likely to evaluate purely on price and value. Trend Tracker’s research shows that these brands are all perceived as relatively weak in terms of attractive styling.

But in purchase decisions, emotionally engaging design must be supported by attributes supporting more rational considerations. Trend Tracker’s research confirms that while many aspire to own premium brand cars, because their prices and running costs are beyond reach, many buyers choose more affordable volume brands.

The Holy Grail for volume car brands is to have left- and right-brain appeal. MINI, for example, is perceived as both an affordable and economical-to-run car brand and a stylish one.

For other, ‘full-range’ volume car manufacturers, the emotional appeal of design provides an opportunity to differentiate their brand from direct competitors, and lift margins by moving away from competing mainly on price and value.

Emotional and rational brand preferences

Trend Tracker’s research identifies which brands car buyers tend to make more rational or emotional decisions when considering and ultimately making a purchase decision. The more emotive or emotionally engaging car brands tend to be at the premium end of the range but less costly “right brain” brands include Alfa Romeo and Subaru. The more rational end of the spectrum includes the traditional high-volume brands of Fiat, Ford, Renault and Peugeot, but more significantly also the ‘value’ brands of Hyundai, Skoda, Kia and Daihatsu.

Value brands are winning the battle for the “head-driven” motorist and eating into the market shares of the traditional volume brands with apparent better value on price, part-exchange, build quality and warranties. Predominately “rational” car buyers make up 44% of the market, with more emotionally engaged “heart-driven” car buyers accounting for 56% of purchasers - and their numbers are growing. This is demonstrated by the growth in sales of the typical emotional brands such as Audi, BMW, Mercedes-Benz, Jaguar, MINI and even Alfa Romeo.

To stem the tide of a steadily declining market share, the traditional volume brands must embrace stronger emotionally appealing design. The volume brands have traditionally relied on ‘sports’ versions of models to provide emotional brand presence, but these ‘halo’ variants have limited appeal due to higher running costs. While emotionally engaging design may require higher investment, for the car buyer there is no additional cost, only greater brand satisfaction and brand loyalty.

Consumer Involvement Theory

Trend Tracker’s research into emotional and rational car purchasing is based on Consumer Involvement Theory (CIT) which is a form of analysis based on how much time, thought and energy consumers invest in the purchase process. The core of this is the Emotional/Rational scale which is a measure of reason versus impulse, desire versus logic and passion versus prudence.

To measure the extent of rational and emotional involvement in car purchasing, Trend Tracker devised a set of unique consumer research questions to identify and analyse the extent to which car buyers use rational or emotional criteria when considering the purchase of specific car brands and car purchase benefits.

According to left-brain, right-brain dominance theory, the right side of the brain is used for expressive and creative tasks, while the left side of the brain is better at tasks involving logic, language and analytical thinking. A simplification of this theory is therefore that the left-brain processes more rational information and the right-brain more emotional information.

Top ten emotional and rational car brands (% of potential purchasers of each brand responding to emotional or rational statement), Jun 2010-May 2011

Base: 6,162 car buyers intending to buy in next 3-5 years

Source: Lake Research/Trend Tracker

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Notes for editors

About the Car Buyer Brands Study

Trend Tracker’s new Car Buyer Brand Perceptions 2011 study is based on a face-to-face survey of a nationally representative sample of 12,000 motorists intending to buy a new or used car within specified periods, carried out by Lake Research.
The study is an independent monthly survey of car buyer brand preferences and purchase intentions in the UK. The survey has been designed to provide detailed information on the brands that both new and used car buyers are thinking of purchasing. The survey also tracks the criteria upon which car buyers select individual brands, the size, type and cost of car they intend to purchase, the extent of research they intend to carry out and the strength of any relationship with a dealer.

The survey tracks rational, emotional or low involvement purchasing and identifies which brands will be emotional, rational or low-involvement purchases. Most consumers prefer to believe that they make purchase decisions based on purely rational criteria, but in reality and especially with the purchase of cars, there can be emotional factors, including socially undesirable motives, that influence the brand selection and purchase decision.

Most car buyers prefer not to admit that the purchase of a particular brand might help to support their self esteem. A unique series of questions developed by Trend Tracker based on Consumer Involvement Theory (CIT) allows the research in this quantitative survey to identify rational, emotive and low involvement purchasing intentions without respondents needing to articulate their motivations or reveal socially undesirable motives.

In addition to analysing brand selection and purchasing intentions based on consumer involvement theory, the survey also identifies for each of the 33 car brands in the survey the levels of customer retention or intention to re-purchase the same brand, individual brand strengths and weaknesses, and brand positioning analysis using brand maps. As the survey progresses over time, trends in brand attitudes, purchase intentions and may other factors will become apparent enabling brand managers to track and anticipate trends. Details of the report can be downloaded from www.trendtracker.co.uk.

About Trend Tracker

Trend Tracker Ltd. was formed in the UK in 2003 by experienced specialists as a company dedicated to providing accurate and informed automotive industry research. The company undertakes bespoke client studies and publishes its own reports, and unlike most research businesses, has the automotive industry experience to help customers implement business improvements predicated by the information provided.

• One in six UK owners of premium brand cars is considering trading down
• Volkswagen, MINI and Toyota are their most likely choices.
• Less than half of all motorists expect to buy the same car brand next time
• BMW, Audi and Ford drivers in Britain are the most loyal to their brands

Trend Tracker’s lead analyst, Robert Macnab, says, “There’s a clear message: premium brand vehicles are maintaining greater customer loyalty in this difficult economic climate, but more than half of car owners are seriously considering a cheaper option when they next buy.”

The Trend Tracker study, UK Car Buyer Brand Perceptions 2011, has been drawn from a nationally representative sample of 12,000 motorists, all of whom were interviewed face-to-face by Lake Research. The study shows that 16% of owners of premium brand cars are considering a volume brand for their next purchase, with Volkswagen, MINI and Toyota the most likely beneficiaries of this shift.

Robert Macnab says, “This may reflect a need for affluent car buyers to make savings in the current state of the UK economy. It certainly indicates that large numbers of people are intending to spend less than they have done on a new car in more prosperous times.”

However, 68% of all current owners of premium brand cars do intend to buy the same or another premium brand. In many cases it appears that the perceived value and status of the most sought-after vehicles are still managing to outweigh often higher running costs. The main benefits car buyers associate with premium brand cars are style, design, quality and reliability, but running cost economy is the next most important criterion for buyers considering a premium brand.

Volume products including Ford, Vauxhall, Volkswagen, Peugeot and Toyota, are mainly chosen for their economy, practicality and affordability. But some volume brands are making up ground on their more costly cousins by building a reputation for high levels of quality and reliability. Volkswagen and Toyota in particular have made significant strides in this area of public perception but are less appreciated for their style and design, while MINI is seen as being “chic” but affordable.

The premium brands’ main perceived weakness is being expensive to buy and to run.

Robert Macnab says, “To maintain their sales growth, the premium brands may need to offer more economical models, particularly in the current weak car market, though they need to take care to maintain their differentiation from brands with less exclusive appeal. At whichever end of the market they are buying, the public is intent on finding value for money. With this in mind it is interesting to note BMW, Audi and Mercedes-Benz have made significant advances in producing more fuel-efficient engines and compact models that compete directly with volume brand alternatives.”

Premium brand demographics

The Trend Tracker study shows that premium brand car buyers are typically affluent 25-44 year olds and older affluent retired people living in London, the South East, East Anglia and the Midlands. During the easy credit period of the economic boom before the financial crisis of 2008, there had been an increase in premium brand purchases among a slightly less affluent but broader base of car buyers, demonstrated by the rising market shares of Audi and BMW.

The Trend Tracker research shows that many people still aspire to own a premium car brand with BMW and Audi consistently appearing in car buyers’ top five preferred brands, but many end up buying a volume brand for budgetary reasons. Among all car buyers, being economical to run (38%), practicality and size (36%) followed by affordability and value for money (36%) are currently the most important car purchase criteria.

Proportion of current brand owners likely to re-purchase same brand again, Jun 2010-May 2011

Base: 6,162 car owners expecting to buy within next 3-5 years

Source: Lake Research/Trend Tracker Ltd

Make of car that premium car brand owners are likely to buy next, Jun 2010-May 2011

Base: 500 premium brand car owners expecting to buy within next 3-5 years

Source: Lake Research/Trend Tracker Ltd

-ENDS-

Notes for editors

Journalists are welcome to join a webinar with report author Robert Macnab at 1pm on Wednesday 21 September. The webinar will reveal some of the report's highlights and include a Q&A with Robert. Registration at www.trendtracker.co.uk is free.

About the Car Buyer Brands Study

Trend Tracker’s new Car Buyer Brand Perceptions 2011 study is based on a face-to-face survey of a nationally representative sample of 12,000 motorists intending to buy a new or used car within specified periods, carried out by Lake Research.

The study is an independent monthly survey of car buyer brand preferences and purchase intentions in the UK. The survey has been designed to provide detailed information on the brands that both new and used car buyers are thinking of purchasing. The survey also tracks the criteria upon which car buyers select individual brands, the size, type and cost of car they intend to purchase, the extent of research they intend to carry out and the strength of any relationship with a dealer.

The survey tracks rational, emotional or low involvement purchasing and identifies which brands will be emotional, rational or low-involvement purchases. Most consumers prefer to believe that they make purchase decisions based on purely rational criteria, but in reality and especially with the purchase of cars, there can be emotional factors, including socially undesirable motives, that influence the brand selection and purchase decision.

Most car buyers prefer not to admit that the purchase of a particular brand might help to support their self esteem. A unique series of questions developed by Trend Tracker based on Consumer Involvement Theory (CIT) allows the research in this quantitative survey to identify rational, emotive and low involvement purchasing intentions without respondents needing to articulate their motivations or reveal socially undesirable motives.

In addition to analysing brand selection and purchasing intentions based on consumer involvement theory, the survey also identifies for each of the 33 car brands in the survey the levels of customer retention or intention to re-purchase the same brand, individual brand strengths and weaknesses, and brand positioning analysis using brand maps. As the survey progresses over time, trends in brand attitudes, purchase intentions and may other factors will become apparent enabling brand managers to track and anticipate trends. Details of the report can be downloaded from www.trendtracker.co.uk.

About Trend Tracker

Trend Tracker Ltd. was formed in the UK in 2003 by experienced specialists as a company dedicated to providing accurate and informed automotive industry research. The company undertakes bespoke client studies and publishes its own reports, and unlike most research businesses, has the automotive industry experience to help customers implement business improvements predicated by the information provided.

Further information:
Please phone Trend Tracker lead analyst Robert Macnab on +44 (0)7767 861440 or email rmacnab@trendtracker.com, or phone Trend Tracker director Toby Procter on 07974 453911 or email tprocter@trendtracker.co.uk.

The Trend Tracker report, the third in an annual series of comprehensive intelligence reports on the UK automotive aftersales market, reveals that, after a period of decline, total retail spending on car servicing and repairs in the UK increased between 2008 and 2010 to reach £8.43bn (excluding MOTs and VAT).

However, with the car parc ageing as a result of year-on-year falls in new car sales since 2005, much of the increase in demand for service and repair work is for vehicles over three years old. The reports highlights that franchised outlets are not doing enough to capture this business.

Trend Tracker analyst, Chris Oakham, explained: “Particularly since 2007, a greater proportion of recession-hit motorists have been keeping their cars for longer. This helps explain the recent upturn in the retail service and repair market, as motorists have become liable for more expenditure on servicing and repairs. It’s a case of ‘make do and mend’ for many, and it’s clear that car owners have sought to reduce costs by going to independents or even doing the work themselves.”

Nigel Head, Castrol OEM & Franchised Workshop Marketing Manager - UK & Ireland, said: “Although the amount of service and repair work in 2009/10 rose only marginally in terms of volume, the long-term trend is a gradual decline, as car build-quality improves and service intervals increase. Franchised dealer workshops in particular are currently suffering because the number of cars up to four years old has fallen.

“Dealers need to fight hard and be proactive and innovative in their approach to retaining aftersales work on older cars, and in encouraging owners of ageing cars to come back into the dealership. They must clearly communicate to motorists that the value of their proposition is better: workshop opening times are more convenient, for example, and the quality of lubricants, parts and servicing is superior, reducing motorists’ costs over the long-term.”

In the decade to 2010, total retail spending on mechanical servicing and repairs to cars in the UK fell in real terms by 17 per cent, although the decline levelled off in 2004/2005.

ENDS

Notes for editors

The new Castrol Professional Car Service and Repair Trend Tracker 2011 report combines in one volume an update of data from three long-established Trend Tracker reports covering the UK market for retail mechanical car servicing, maintenance and repairs. The new report is based on a survey of 15,725 motorists carried out by Lake Research over the last 16 months – as well as extensive B2B research. These data add to Trend Tracker consumer survey records going back to the early 90s.

Details of the report can be downloaded from www.trendtracker.co.uk.

For further comment, please phone Trend Tracker director and lead aftermarket analyst Chris Oakham on 0870 421 4350 or email coakham@trendtracker.co.uk.

About Castrol

Castrol (www.castrol.com) is part of BP, one of the world’s largest energy companies. Through strategic partnerships with many of the world’s leading car manufacturers, Castrol is able to maintain its position as the market and technical leader for automotive lubricants for trade and retail customers.

Castrol has a specially tailored offer for franchised workshops combining three professional lubricant brands with a range of business support programmes for improved business performance, training, re-engineering processes, workshop equipment planning, delivering tele-business solutions, and creating and managing effective sales and marketing programmes.

Named Castrol Professional, the offer has been specifically designed to help maximise workshop profit margins across three key sources of value: lubricant sales, increased parts and labour sales, and customer satisfaction. It is supported through the largest field management team in the sector.

The Castrol Professional product range comprises a line-up of lubricants exclusive to franchised workshops:

*Castrol EDGE Professional: a range of premium fully synthetic lubricants, each uniquely co-engineered with – and exclusively and globally recommended by – BMW, Jaguar, Land Rover, Volkswagen, Seat, Skoda, Volvo, MINI and Audi, which contains Castrol’s proprietary Fluid Strength Technology to exceed the specific requirements of their modern engines.

*Castrol Magnatec Professional: the premium semi-synthetic lubricant which features unique ‘intelligent molecules’ that provide extra protection where it’s needed most in the engine, an globally recommended by Ford.

*Castrol GTX Professional: superior engine protection.

For further information about Castrol Professional visit www.castrolprofessional.co.uk.

For further media information please contact:

Toby's in-depth presentation and interview covered a wide range of topics including:

• Core problems for mobility
• Core problems with the EV solution
• Reducing costs to make EVs sustainable
• Improving EV range
• External factors needed to help EVs survive
• The scale of the challenge
• The value of ‘feebates’
• Big questions on EV infrastructure
• Supporting one car for the price of two
• The structure of public recharging markets
• Ramping up EV production
• Creating competitive products
• The need for EVs to be game-changers

View The Slides from the AWPresenter Webinar Below

In December 2009, London Mayor Boris Johnson unveiled plans to invest £60m in installing over 25,000 charge points by 2015 to make London “the electric capital of Europe” with 100,000 electric cars on the UK capital’s streets.

Most of these were to be at workplaces, with just 500 on the street and 2,000 in public car parks. Two years later, the Mayor’s downsized target for the ‘Source London’ scheme, to be run by Siemens, is now “at least 1,300” for 2013, a fraction of the earlier five-year target.

Trend Tracker’s new report considers infrastructure issues for electric vehicles in detail. In the London area including its outer suburbs, Department for Transport estimates indicate 44% of all households depend on street parking, while only 13% have garages. In the US, data quoted by one charge point supplier suggests only 22% of the country’s light vehicles could access overnight chargers in domestic garages. While the installation of 3-phase charging equipment on a suburban driveway may cost anything from around £3,000 to £15,000, it will also be essential to provide fast-charge recharging points where electric cars are parked on-street during the day - or parking spaces priced to discourage congestion will be occupied for hours by energy-hungry EVs hooked up to charge points – where they can find them.

“Politicians, and some car makers,” says the Trend Tracker report’s lead author Toby Procter, “tend to announce impressive targets with round figures. In reality, the mass-market adoption of electric cars will depend on consistent, long-term fiscal support in the face of considerable uncertainty over technology and consumer response to EVs. And it will require as much or more investment in de-carbonising the world’s power supplies and smart grid distribution as in electric car technologies.”

The reduced London charge point target illustrates the high political risks facing electric vehicle makers. In the UK, as in the US and elsewhere, they can rely on four-figure state subsidies and tax concessions to reduce their cars’ uncompetitive purchase prices – but maybe not for long. In the medium term, low nominal EV per-mile running costs based on the low cost of electricity and low maintenance are likely to be offset by the high depreciation of vehicles whose batteries may cost the price of a used car to replace at least once during the typical vehicle lifecycle.

In the longer term, the price of electricity for EVs will have to rise substantially to truly reflect the cost of urgent power station and grid investment – and ultimately, to replace lost petroleum tax revenues.

“We need EVs to succeed if they are to make more than a tiny impact on our increasingly worrying dependence on oil,” says Procter, “and for that to happen, the automotive sector will need more concerted and consistent focus on both energy and infrastructure from politicians, to justify the risks of the increasingly intensive powertrain R&D needed to make EVs truly competitive.”

Toby Procter

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electic vehicles car servicing

A new review of the global market prospects for electric vehicles by UK-based Trend Tracker Ltd concludes that given a steady increase in producer investment; positive legislative and fiscal influences and consumer acceptance, and subject to requisite technical advances, by 2050 the cumulative sales of electric cars could feasibly reach 30 million units—approximately 1.5% of the global car parc (2 billion units) projected for then.

Read more about this story on: Green Car Congress

Toby Procter

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

The global car population is expected to more than double to over two billion as China and other BRIC countries become motorised, but the proportion for which electric cars will account is much less clear.

This 242-page report suggests that moving from oil to electricity could represent one of the greatest challenges humanity will have ever faced. Yet little thinking to date makes sense of the enormous challenges ahead if electric vehicles (“EVs”) are to fulfil their promise and break out of a tiny niche of high-income suburban commuters with home charging facilities.

Challenges discussed in this report include:

*To compete with petrol/diesel engines, EV traction batteries have to be much more than twice as energy dense as lithium ion ever will be, at least three times cheaper, and last much longer before replacement

*For EVs to take off, conventional cars have to become less and less attractive – but in fact they’re still getting better, cheaper to buy, and cheaper to run, thanks to the same emissions legislation that seeks to privilege EVs.

*Massive petroleum tax revenues need to be replaced if mobility goes electric – but how?

*Costly EVs require heavy subsidies to attract even affluent early adopters – typically, governments are offering €5,000 or more to second-car buyers, installing free charging points at upwards of €10,000/unit, providing free power, and slashing ownership taxes. Will governments have to turn off the tap before such subsidies have created sustained market momentum?

Smart grids and more storage will be essential to managing more intermittent renewable energy supply and extra power demand from EVs. Can EVs truly contribute to grid balancing?
With radically reduced parts consumption and probable high depreciation, EVs represent a strategic threat to the standard automotive industry business model. Meanwhile, alternative new powertrain technologies are fragmenting vehicle production and markets.

The report’s lead author, Toby Procter, says these challenges must be met, or, given the longevity of cars, the swelling global car population will remain oil-dependent after oil has become too scarce and/or too expensive to fuel it. Arguably we need to electrify transport, or mobility at the end of the ‘Oil Age’ will be so severely compromised that whole economies will collapse.

Toby Procter

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

Trend Tracker has records of servicing retention by make of car going back to 1994. This period includes the general move by vehicle manufacturers from a one-year new car warranty to three years back in 1998. Trend Tracker analysed the servicing retention benefits realised by franchised dealers from this improvement in warranty terms and applied the same logic to Toyota. The analysis demonstrated that Toyota dealers can expect a minimum of seven per cent more service department business once the effects of the five-year warranty work through.

Trend Tracker’s lead aftermarket analyst, Chris Oakham, said: “Of course it will take five years for every Toyota up to five years old to be covered by the manufacturer’s warranty. Once this point is reached, Toyota dealers will see the full benefits of increased retention of workshop business.

“Clearly, by extending a new-car warranty to five years, there is loss of retail business to the warranty account. However, wear and tear replacements - and routine servicing – will still be paid for by motorists, and Toyota dealers will increase their share of this lucrative work as a result of the five-year warranty.”

Toyota service departments could also see a more immediate benefit if new car buyers find the five-year warranty attractive enough to boost Toyota’s new car sales. This will increase the number of Toyotas under four years old, the age group that Trend Tracker’s historic data shows to be the core market for dealers’ workshops.

Chris Oakham

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

Headline findings from this latest report include:

- As in Trend Tracker’s 2008 survey, Honda drivers are still the most loyal to the dealers for the make when it comes to having their cars serviced. Honda dealers successfully retained the custom of 39.5 per cent of Honda cars of all ages for servicing in 2009. Combined, the dealers for the prestige German makes - Audi, BMW and Mercedes-Benz – retained the servicing custom of 38.8% of these brands’ drivers. Toyota dealers also recorded a well-above average performance in 2009 by retaining 35.6% of its owners for routine servicing.

- At the bottom end of the routine servicing loyalty table, only 16.1% of Rover and MG owners said they used the dealer for their make to service their car (the XPart network took on support for the brands’ dealers after the demise of MG Rover in 2005). Fiat dealers retained a lowly 16.7% and the Nissan network 22.9%.

- Most other makes surveyed were much nearer the all-marques average dealer-for-make servicing retention of 27.8%.

- Conversely, half of the Rover and MG owners surveyed had used independent garages for their last car service (50%), while at the other end of the scale only 31.7% of all Honda owners had used an independent garage. 45.2% of Fiat owners had used an independent garage. Across all brands and ages of cars surveyed, independent garages accounted for 38.4% of all services carried out.

- Since 1995, Trend Tracker’s research into the retail car service and repair market has regularly measured the popularity of DIY servicing. In 2009 only 8.2% of motorists said they carried out their last service themselves, or had it done by a friend or relative.

- Declining overall demand for car servicing is another trend tracked by this Car Service and Repair Trend Tracker Update 2010. The ever-improving build quality of new cars, and extended servicing intervals, mean that 17.5% of all motorists surveyed had not yet had their cars serviced.

Repairs

Besides being asked for information on routine servicing, the latest (2009) 17,000-strong sample of motorists was asked if they had had a repair or MOT test carried out to their car in the last month, and if so, what type of repair, and who carried out the work. Across all 14 marques surveyed, 13.3% of motorists quizzed had some type of work carried out in the previous month – a service, MOT or repair(s). Of those, 57.4% had required repairs to be completed on their car.

The variations between marques in terms of how many cars had work of any kind carried out fell within a range of six percentage points, between the low of Toyota (11.2%) and the high of the Fiat Group (17.7%). When the service/MOT/repairs figures were broken down by make of car (not by age, for reasons of sample size), Hondas required the least repairs, and Fiats the most with 73.5% of Fiat owners who had any work done in the last month needing repairs - against 37.1% of Honda owners and 39.5% of Toyota owners.

Trend Tracker director and analyst Chris Oakham commented: “Franchised dealers depend heavily on aftersales service and repairs for their profitability, while their manufacturers naturally hope to offer customers trouble-free motoring. To secure repeat custom, manufacturers need to cut dealer visits to the minimum, while their dealers need to focus relentlessly on matching the value for money offered by independents and fast-fits on the increasingly infrequent occasions when they can expect to see their customers’ cars.”

Oakham added, “Facing a dearth of young cars needing attention since the economic crisis hit new car sales, dealers will need to redouble their efforts to attract service/repair custom from owners of cars over four years old. However, last year our sample of motorists showed independents did over half (51.3%) the work, while the average dealer for the make did only 24.3% of it, and fast-fits 7.1%.

“MOT tests comprise 34.1% of all jobs our respondents had done, which, of course, often trigger repair jobs and parts replacement. Independent garages did almost half (47.6%) of our respondents’ MOT tests, while the dealers for the makes concerned did only 25.2% of them.”

Toby Procter

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

The report also measures how well franchised dealer networks, independent garages and fast-fits have fared in attracting custom from the owners of different car brands in the last two years.

Headline findings from this latest report include:

- Although the number of cars in use in the UK grew by 13% in the last decade, it shrank by 0.7%, 2008/2009. This is the first time the number of cars on UK roads has fallen since the Second World War and will have an adverse effect on the retail car service and repair market. Motorists are also driving less according to the National Travel Survey with average annual mileage down by 9% between 1998 and 2008 to 13,985 km per year (8,740 miles), while improvements in vehicle build quality have eroded retail service and repair demand by 3-4% per year, along with extended service intervals and reduced work content per service.

- At current prices, the value of the retail car service and repair market increased over the past decade by two per cent. One positive driver in this respect has been increases in labour charges by workshops, designed to compensate both for inflation and a reduction in the work available to workshops. From 1999 to 2009, franchised dealers’ labour rate increases exceeded inflation by 36%, while independent garages raised their charges by a more modest 15% above the Retail Prices Index (RPI).

- But these labour rate hikes have not been able to offset the decline in demand for retail car servicing and repair in the first decade of the new century. In real terms, the value of the retail car service and repair market – including private motorists and businesses - dropped by 21% from 1999 to £7.70 billion last year, while the number of services and repairs carried out dropped 17% from 55.9 million to 46.6 million.

- Back in 1999, garages could count on motorists paying for an average 2.04 transactions a year. By last year, this had dropped to an estimated 1.50 transactions yearly.

- This decline in demand has already taken its toll on the providers of servicing and repairs. Today’s UK motorists now have one-third fewer garages to choose from – 20,195, down from over 30,000 in 1999.

- Across all brands and ages of car, 27.8% of all motorists interviewed for this latest Trend Tracker report had used the franchised dealer for their make of car for the last routine service undertaken, down from 28.4% in 2008. Across all franchises, dealers slightly improved their retention of servicing for own-brand cars up to four years old, from 53.3% to 53.9%.

- Looking at the whole range of service, maintenance and repairs – and not just routine servicing – independent garage workshops carried out 51.3% of all retail servicing, MOTs and repairs in 2009, franchised dealers accounted for 26.3%, and fast-fits for 7.1%.

- In part due to the labour rate increases mentioned above, franchised dealers gained share in terms of retail service and repair market value between 1999 and 2009, from 36% to 45% of the total, including MOT testing. However, franchised dealers appear not to be increasing their penetration of the older car market fast enough to neutralise the effect of extended service intervals, and are vulnerable to further declines in demand.

- The decline in market value and repair demand will continue, and by 2015 Trend Tracker forecasts that retail service and repair demand will be 19% lower than in 1999 in volume, and 25% lower in value (in real terms).

- Franchised dealer workshops will be affected in the medium term by a decline in their principal market – cars up to four years old. Because of weakening new car sales since the peak years of 2003/2004, and especially as a result of the recession, the ‘parc’ of cars aged 0-4 years will fall by 25% by 2012 compared to its peak in 2004/2005.

Toby Procter

Trend Tracker Limited

0870 421 4350

aftermarket report bodyshop market car finance electric vehicles car servicing

No conventional management report, Car Futures - Rethinking the automotive industry beyond the American model - is aimed at policy makers, academics, environmental NGOs, and of course, the industry itself. The authors say, “We hope to shock all of these interest groups at least some of the time as a contribution to the reconstruction of what remains a vital industry.”

Drawing on the history of the auto industry since mass production began in Detroit, the authors argue that the crisis of the once-'Big Three' (GM, Ford, Chrysler) has put in question the whole American business model, copied worldwide, that once underpinned their dominance.

They write in the report's Executive Summary, “There is a mistaken belief among car manufacturers that their activity is the be all and end all of automobility. While there is no car market without somebody making a car, there is no business without somebody making money, and that is where car makers seem to be missing a trick or two. Manufacturers only capture a limited slice of the total automotive value chain.

“New business models for the future would need to capture more of that value chain by integrating assembly, distribution and aftercare. This kind of thinking could also ultimately lead to a more sustainable car industry in economic, social and environmental terms. The current recession with its attendant credit crunch may well accelerate this process of industrial transformation. Many current players have proved to be ill-adapted to the 21st century automotive ecosystem. We may see some radically new business models emerge within the next 10 or 20 years.”

If you are interested in the future shape of the industry, see the Reports pages on this site for more details of this report and how to get hold of it.

25 September 2009

For immediate release

New report shows resilience of £38.1 billion used car market

The latest report from Trend Tracker, The Future of the Used Car Market in Great Britain 2009-2014, shows that demand for used cars in Britain has been remarkably stable compared to the new car market.

Castrol (now Castrol Professional) has sponsored Trend Tracker's reports on the UK market for service, maintenance and repair since 1995 including the latest report - The Castrol Professional Car Service and Repair Trend Tracker 2008. The attached press release, from 2 March 2009, is published by kind permission of Castrol Professional. We believe you will find the contents extremely informative.

Castrol (now Castrol Professional) has sponsored Trend Tracker's reports on the UK market for service, maintenance and repair since 1995 including the latest report - The Castrol Professional Car Service and Repair Trend Tracker 2008. The attached press release, from 4 December 2008, is published by kind permission of Castrol Professional. We believe you will find the contents extremely informative.

Castrol (now Castrol Professional) has sponsored Trend Tracker's reports on the UK market for service, maintenance and repair since 1995 including the latest report - The Castrol Professional Car Service and Repair Trend Tracker 2008. The attached press release, from 11 November 2008, is published by kind permission of Castrol Professional. We believe you will find the contents extremely informative.

For immediate release

New research shows dearth of direct loans hitting car sales

The latest report from the automotive research specialist Trend Tracker - The UK Retail Car Finance Market 2009 - shows just how hard the financing of car purchases has been hit by the credit crunch.

• The value of the UK retail car finance market has fallen by 58% in real terms in the last five years.
• Direct lending has fallen faster than dealer finance.
• The weakness of the car market may combine with their weakened balance sheets to encourage some banks to exit car finance.
• With low interest rates already in place, the return of consumer confidence will be key to the recovery of demand.
• Car finance demand will return over the next five years, but not to its peak level of 2003.

Please download the Word file to see the full press release

For immediate release

BMW dealer staff are highest paid

Employees of BMW dealerships are, on average, the highest paid in the franchised dealer sector, according to the rts Auto Retail Industry Salary Survey 2009, just published.

The rts Auto Retail Industry Salary Survey 2009 analysed the total pay for six franchised dealer jobs - dealer principal, accountant, sales manager, sales executive, service manager and parts manager - across 16 franchises. BMW dealer staff were found to be the highest paid for each of these positions.

The majority of staff working for dealers with other premium franchises - Jaguar, Land Rover and Mercedes-Benz - recorded total salaries in the top fifty per cent (see table below). Ford and Vauxhall dealer staff make a good showing, as do employees of Honda, Toyota/Lexus and Volkswagen/Audi dealerships.

Please download the Word file to see the full press release

For immediate release

Franchised dealers freeze pay as recession bites

Franchised car dealers across the UK have responded to the downturn in the economy by freezing pay scales, according to the rts Auto Retail Industry Salary Survey 2009, published today - 25 November.

The survey reports that 25% of franchised dealers responding to the survey did not increase basic pay for their staff between 2007 and 2008. More than that, it seems that dealers have been taking advantage of the industry's high staff turnover rates to actually reduce pay rates for new recruits.

Comparing the results of the 2008 and 2009 Salary Surveys on a weighted basis across all jobs, the average increase in basic pay worked out at just 1.4% and total pay - including overtime, bonuses and commission - was up 1.6% year-on-year. To put these increases into context, the government's 2008 Annual Survey of Hours and Earnings reports that average total pay for all employees (including full-time and part-time) increased by 3.3% between 2007 and 2008. Therefore franchised dealer employees have probably fared worse than average.

However the increases in basic and total pay were by no means evenly distributed. The two biggest 'winners' amongst full-time staff were Dealer Principals and Bodyshop Managers with basic pay up 4.4% and 3.7% respectively. Vehicle Technicians, whilst seeing basic pay rise, experienced a fall in total pay probably due to a fall in overtime and bonus. Bodyshop Painters/Panel Beaters saw a similar fall in total pay - more than likely for the same reason.

Please download the Word file to see the full press release

Release Date: June 2008

New Trend Tracker mfbi UK Car Body Repair Market report:

Crash repairs fall behind rise in car numbers

The UK car population increased by 18% between 1998 and 2008, but the number of collision repairs to cars rose only 1%, thanks to a 10% decrease in the average distance travelled per car over the same period. That in turn has been caused in part by growth in the number of cars owned per household. As a result of this static market and ongoing margin pressure the UK analyst Trend Tracker forecasts a decline of over one-fifth in the number of bodyshops over the next five years, leading to seasonal shortfalls in repair capacity as soon as 2010.

These are just some of the many facts and figures reported by the latest, 2008 edition of the biennial mfbi study The UK Car Body Repair Market just published by the independent research firm Trend Tracker Limited.

Why the number of repairs has fallen away in relation to the distance travelled by cars is partly due to what many will see as an astonishing rise in insurance write-offs. Annual total losses declared by insurance companies increased by 86% between 1998 and this year, to a total of to 0.79 million, representing 17% of all motor insurance accident damage claims. If claims for theft, glass and personal injury are deducted, write-offs account for virtually a quarter (24%) of claims.

The £6.8bn estimated current value of the UK body repair market is only 4% higher after inflation than in 1998, and the number of accident repairs this year - to 5.78m vehicles - is set to remain below the peak of 5.83m in 1999.

Current average repair costs of £1,175 (including fleet and private cars, excess payments and VAT, but excluding claims for motor theft, glass and personal injury) are in real terms only 3% higher than a decade ago, after cuts in replacement parts prices brought prices down in 2004 and 2005.

The effect of these less than inflationary trends on the bodyshop sector forms a major part of this latest Trend Tracker report. It estimates that there are now 4,010 businesses in operation whose primary work is car body repair, which represents a decline in numbers of 36% since 1998. Bodyshops operated by franchised dealers as opposed to independents have declined faster, by 60%, from 2,200 outlets to just 870 now, with many dealers switching resources to the more profitable business of mechanical repair and servicing.

The shrinking of authorised repair networks by insurance companies is one reason for the decline of bodyshop numbers. Surplus repair capacity enabled insurers to put more work through smaller numbers of larger groups. Another is consumers' preference to have smaller, lower-value repairs carried out without paying insurance excesses and risking no-claims bonuses. These repairs are increasingly carried out by SMART (Small to Medium Area Repair Techniques) repairers rather than by conventional bodyshops, few of which have invested in SMART techniques. This has effectively reduced the volume of the repair market for bodyshops.

This decline in numbers has not led to steady growth in the numbers of large bodyshop groups, as happened over the last decade in the franchised dealer sector, though the top 20 bodyshop groups now operate 196 outlets between them, compared with an estimate of only 40 in 1999. The vast majority of independent bodyshops in the UK are still relatively small, single-site businesses employing fewer than ten staff and repairing up to 20 cars per week - and many of them are at risk of being unable to fund the investment needed to repair vehicles featuring advanced structural materials and electronic equipment.

In stark contrast, the largest bodyshop group, Nationwide Crash Repair Centres, operates 70 outlets, and had sales turnover last of £151.9 million with a healthy net operating margin of 4.3%, comfortably beating most franchised dealers' returns.

The mfbi reports forecasts average repair costs will rise by 17% at 2008 prices, from £1,175 in 2008 to £1,370 over the next five years. That 17% increase in average repair costs combined with a 2% increase in volume repair demand will result in a 19% increase in market value at constant 2008 prices, to £8.09 billion. Within that figure, the proportion of repair costs accounted for by labour and replacement parts will rise as vehicle complexity continues to increase, with premium marques increasingly requiring specialist repair skills and more expensive parts.

The recent introduction of the EU Paint and Products Directive (PPD) and the development of the PAS 125 repair standard will continue to work through the supply structure of the car body repair market as bodyshops, and in particular smaller bodyshops, face the greater investment burden that compliance will require. Consequently, Trend Tracker expects that the number of primary bodyshops operating in the UK car body repair market will decline by 21% between 2008 and 2013, from 4,010 outlets to 3,160. Small bodyshops will experience the sharpest decline, by 37% from 1,930 outlets in 2008 to 1,210 by 2013.

The declining number of repairers, combined with a projected 2% growth in repair demand will have a significant impact on total UK repair capacity. Even taking into account the approximately 0.5m annual repairs capacity provided by SMART repairers, the market will move into absolute repair capacity deficit by 2010. But Trend Tracker analyst Robert Macnab believes this deficit may not result in enhanced labour rates for bodyshops. Most are members of at least one and usually several insurer-authorised networks, and committed to contracted levels of service and labour rates.

Capacity generally only becomes a severe problem for insurers when they are unable to have their non-fault accident claims repaired promptly; otherwise, they can overcome delays by providing non-fault customers with courtesy cars, the costs of which are claimed against the at-fault party's insurer. Moreover, repair capacity shortfalls tend to occur only during the winter peak demand period, when insurers may find an increase in variable claims costs preferable to a fixed cost increase from higher labour rates applying through the year.

(use the link above to download the rest of this press release)

(use the link above to download the rest of this press release)

(use the link above to download the rest of this press release)

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• Market volume has risen 25% and market value by 68% in last decade to reach 7.73m and £43.5bn in 1996, down 270,000 units/£2.4bn from the peak of 2004.
• Today's average used car price is estimated at £5,625, again down from 2004.
• Market growth is forecast to resume from 2008, to reach 8.33m units and a value of £55.4bn in 2011
• Average used car prices will rise by 18% to £6,650 by 2011
• Independent dealers' market share has risen since from 27% to 34% over the past decade; although on average franchise dealers sell 50% more used cars than 10 years ago, their share has stuck at 28%.
• The number of used car outlets is forecast to fall over the next five years - independent dealer numbers falling by 8% and franchise dealers by 7%.
• On average, independent dealers make bigger profits per used car sale than franchised dealers, despite selling lower-priced cars with lower operational efficiency - because they can control their purchasing and stock profiles.

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• A new report from research firm Trend Tracker Limited on the UK car body repair sector has uncovered a significant investment and skills gap in the body repair industry which could leave many accident-damaged cars repaired in ways that could compromise their crashworthiness.
• Making sure this doesn't happen with potentially fatal consequences to company car drivers could be an important element in fleet managers' risk management, whether or not the impending Corporate Manslaughter Bill proves tougher than the Health & Safety at Work Act when it is passed later this year.
• The warning applies particularly to self-insured fleets which take direct responsibility for vehicle repairs.

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