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Car Retailing - UK - August 2011

“The huge number of price comparison websites is influencing the way consumers shop for all kinds of products, with it becoming common practice to compare prices online before choosing where to buy. Car dealerships are not immune to this shopping around, as over a third of adults would compare prices online before choosing which dealership to buy a car from. The bricks and mortar dealership faces little competition for consumers cash from internet sites at present, however, as under one in ten would choose to go online and buy a car directly from a car manufacturer.”

– Michelle Strutton, Senior Consumer Analyst

This report investigates the retailing of cars to private individuals, and therefore excludes sales to businesses or operators of company car fleets. It is exclusively focused on cars, and therefore excludes any discussion of the market for light commercial or other goods vehicles. The retailing of cars takes place through the following distribution channels:

  • Franchised new car dealers – those under contract to specific car manufacturers or importers
  • Multi-franchise new car dealers – those with contracts that enable them to sell the products of more than one manufacturer (NB throughout this report, diverse franchises trading from a single location are counted separately)
  • Independents – dealers that sell used vehicles from various manufacturers, some of which specialise in nearly-new or pre-registered cars
  • Second-hand dealers – those selling any make of used car, of any age
  • Automotive auctions – these are mainly used by motor dealers to buy their own stock, but some private individuals also buy through auctions
  • Car supermarkets – large, out-of-town retail sites selling a wide variety of new, nearly-new, pre-registered and imported cars.

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Table of contents

  1. Introduction

      • Definition
        • Abbreviations
        • Executive Summary

            • The market
              • Figure 1: New and used car sales, 2006-16
            • Car sales suffer during recent recession
              • Figure 2: Price of fuel, January 2009-May 2011
            • Companies
              • Figure 3: Number of UK franchised dealer outlets, 2000-10
            • Retail landscape continuing to evolve
              • Smaller cars and smaller brands proving popular with buyers
                • Advertising support by dealers remains small
                  • The consumer
                    • Importance of used cars among consumers illustrates cost issues
                      • Figure 4: Source of purchase of next car, 2008 and 2011
                    • Consumers are more aware of the need to price compare online
                      • Car finance gets the thumbs down
                        • Figure 5: Attitudes towards dealerships, 2008 and 2011
                      • Consumer attitudes towards purchasing a car vary
                        • Figure 6: Perceptions of car buying, 2008 and 2011
                      • What we think
                      • Issues in the Market

                          • What impact have the recent recession and rising motoring costs had on car purchasing?
                            • How are dealers performing?
                              • How is car retailing changing?
                                • How big is the role of the internet?
                                  • How do consumers currently feel about their prospects of buying a car?
                                  • Future Opportunities

                                      • Experience is All
                                        • Why Buy
                                        • Internal Market Environment

                                          • Key points
                                            • Expenditure on cars falls back since recession
                                              • Figure 7: New and used car sales, at current prices, 2006-11
                                            • Costs of motoring continue to increase
                                              • Figure 8: Consumer expenditure on car servicing and repair and motoring expenses, at current prices, 2006-11
                                            • Price of fuel reaching a new high
                                              • Figure 9: Escalation of price of motor fuel in the recent years, January 2009-May 2011
                                            • Running costs continue to mount for drivers
                                              • Figure 10: Motoring costs for petrol and diesel cars, 2011
                                            • Used car buyers pay more
                                              • Long car replacement cycles are a feature of the retail market
                                                • Figure 11: When current car was obtained, 2010
                                              • Growth of the internet as a sales channel
                                                • Figure 12: Internet and other distance automotive sales (units), 2009 and 2010
                                              • Support for AFVs set to impact on types of vehicles being sold
                                              • Broader Market Environment

                                                • Key points
                                                  • Recent slowdown for UK economy is set to be followed by rebound...
                                                    • Figure 13: Trends in personal disposable income and consumer expenditure, 2006-16
                                                    • Figure 14: GDP quarterly percentage change, Q1 2004-Q1 2011
                                                  • ...although the future for retail sales suggests something different
                                                    • Figure 15: UK retail sales year-on-year growth, BRC vs. ONS, 2010-11
                                                  • Rise in multiple car ownership slows...
                                                    • Figure 16: Number of cars owned by households, 1985/86-2008
                                                  • ...with evidence that household car ownership has stagnated
                                                    • Figure 17: Number of cars per household and cars per adult aged 17+, 1985/86-2008
                                                  • Mixed opportunities for car sector from population changes
                                                    • Figure 18: Trends in the age structure of the UK population, 2006-16
                                                  • Increasing affluence should stimulate trading up
                                                    • Figure 19: Forecast adult population trends, by socio-economic group, 2006-16
                                                  • Smaller households should drive interest in smaller cars
                                                    • Figure 20: Number of households and persons per household, 2000-31
                                                  • Women and the over-70s are getting more mobile
                                                    • Figure 21: Full driving licence holders, by age and gender, 2002-09
                                                • Who’s Innovating?

                                                  • Key points
                                                    • Buying online
                                                      • Car supermarkets strengthen their presence in the market
                                                        • Manufacturers and retailers move into social media...
                                                          • ...with an increasing number also going green
                                                          • Competitive Context

                                                            • Key points
                                                              • Cars are a major item of expenditure
                                                                • Figure 22: Consumer expenditure, by sector, 2011
                                                              • Food expenditure leads in terms of expenditure increases
                                                                • Figure 23: Consumer expenditure (current prices), by major category, 2006 and 2011
                                                              • New car sales perform better than commercial vehicle sales during the recent recession
                                                                • Figure 24: New car vs. truck and commercial vehicle new registrations, 2005-10
                                                            • Strengths and Weaknesses in the Market

                                                              • Strengths
                                                                • Weaknesses
                                                                • Market Size and Forecast

                                                                  • Key points
                                                                    • New car market shows little evidence of recovery
                                                                      • Figure 25: Total new car registrations, by private, fleet and business sales, 2006-11
                                                                    • Initial boost to new car sales by SIS falls away as scheme is removed
                                                                      • Fall in 2011 sales reveals the true state of car retailing
                                                                        • Private buyers remain the stumbling block
                                                                          • Used car sales appear more promising
                                                                            • Figure 26: Sales of used cars, by volume, 2006-11
                                                                          • Used volumes appear more promising
                                                                            • The future
                                                                              • Figure 27: Sales of new and used cars, by volume, 2006-16
                                                                            • Forecast
                                                                              • Figure 28: Best- and worst-case forecasts of new car registrations (volume), 2006-16
                                                                              • Figure 29: Best- and worst-case forecasts of used car sales (volume), 2006-16
                                                                          • Makes and Models and Dealership Numbers

                                                                            • Key points
                                                                              • Smaller vehicles benefit from strongest demand
                                                                                • Figure 30: Sales of new vehicles, by vehicle type, 2006-10
                                                                              • Mini category sees strongest growth
                                                                                • Larger and top-of-the-range models suffer from recession
                                                                                  • Purchasers turning away from big brands
                                                                                    • Figure 31: Manufacturer shares of new car registrations, 2007-10
                                                                                  • British and French brands falling out of favour?
                                                                                    • Japanese brands also losing reputation
                                                                                      • In contrast, German brands are proving increasingly popular
                                                                                        • Growing interest in small brands is also evident
                                                                                          • Dealer distribution network in decline
                                                                                            • Figure 32: Number of UK franchised dealer outlets, 2000-10
                                                                                          • Individual dealer fortunes vary
                                                                                            • Figure 33: Ten largest UK franchised dealer networks, by brand and number of outlets, 2006-10
                                                                                        • Companies and Outlets

                                                                                          • Key points
                                                                                            • Big names dominate the dealer market
                                                                                              • Figure 34: Top ten dealership groups in the UK*, 2010
                                                                                            • Supermarket sector dominated by major names
                                                                                              • Figure 35: Leading car supermarket operators, 2010
                                                                                            • Consolidation remains a feature of the retail market
                                                                                            • Retailer Profiles

                                                                                                • Pendragon
                                                                                                    • Figure 36: Pendragon Group Plc, financial performance, 2006-10
                                                                                                  • Inchcape
                                                                                                      • Figure 37: Inchcape UK, financial performance, 2006-10
                                                                                                    • Jardine Motors Group
                                                                                                        • Figure 38: Jardine Motors Group UK Limited, financial performance, 2006-09
                                                                                                      • Greenhous Group
                                                                                                          • Figure 39: Greenhous Group, financial performance, 2006-10
                                                                                                        • Lookers
                                                                                                            • Figure 40: Lookers Plc, financial performance, 2006-10
                                                                                                          • Sytner
                                                                                                              • Figure 41: Sytner Group, financial performance, 2006-09
                                                                                                            • Vertu Motors
                                                                                                              • Car supermarket operators
                                                                                                                • Carcraft
                                                                                                                  • Cargiant
                                                                                                                    • Motorpoint
                                                                                                                      • Factory-owned dealer groups
                                                                                                                        • Mercedes-Benz Retail Group
                                                                                                                          • Ford Retail Group
                                                                                                                            • Renault Retail Group
                                                                                                                              • Robins & Day
                                                                                                                                • Other dealer groups
                                                                                                                                  • Marshall Motor Group
                                                                                                                                    • Listers Group
                                                                                                                                      • JCT600
                                                                                                                                        • Perrys Group
                                                                                                                                          • Online sellers
                                                                                                                                            • eBay Motors
                                                                                                                                            • Advertising and Promotion

                                                                                                                                              • Key points
                                                                                                                                                • Promotional expenditure records a dip during recession
                                                                                                                                                  • Figure 42: Main media advertising expenditure by car retailers, 2008-10
                                                                                                                                                • Promotional expenditure remains a small share of overall sales
                                                                                                                                                  • Big players in the market record an increase in advertising support
                                                                                                                                                    • Figure 43: Main media advertising expenditure by car retailers, top 20 companies, 2008-10
                                                                                                                                                  • Several dealers record a doubling of advertising expenditure between 2008 and 2010
                                                                                                                                                    • Radio and press advertising dominate retail communications
                                                                                                                                                      • Figure 44: Main media advertising expenditure by car retailers, % share, by media type, 2008-10
                                                                                                                                                    • Radio and press advertising perform well as many other channels suffer from a fall in spend
                                                                                                                                                    • Consumer – Car Ownership and Brand

                                                                                                                                                      • Key points
                                                                                                                                                        • Majority of adults have access to a car
                                                                                                                                                            • Figure 45: Car drivers, by type of ownership, June 2011
                                                                                                                                                          • Majority of car drivers have their own vehicle
                                                                                                                                                            • Young adults least likely to drive a car
                                                                                                                                                              • High earners are more likely to drive a new car
                                                                                                                                                                • Londoners are least likely to drive
                                                                                                                                                                  • Age of car
                                                                                                                                                                    • New cars are in the minority
                                                                                                                                                                        • Figure 46: Age of car driven, June 2011
                                                                                                                                                                      • Nearly four fifths of drivers drive a vehicle over three years old
                                                                                                                                                                        • Income again a factor when it comes to driving a new car
                                                                                                                                                                          • Most popular brands
                                                                                                                                                                            • Ford is the most popular brand currently on the road
                                                                                                                                                                                • Figure 47: Make of car owned, June 2011
                                                                                                                                                                              • Mass-market brands dominate
                                                                                                                                                                              • Consumer – Car Purchase Behaviour

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • Sizeable minority expect to change their car in the coming 12 months
                                                                                                                                                                                      • Figure 48: Intention to buy a car in the next 12 months, 2008 and 2011
                                                                                                                                                                                    • Men and high earners opt to buy new
                                                                                                                                                                                      • Second-hand cars appeal to young adults
                                                                                                                                                                                        • Drivers of newer vehicles are more likely to purchase from new again
                                                                                                                                                                                          • Figure 49: Car buying expectations, by age of car driven, June 2011
                                                                                                                                                                                        • Dealers are the most popular destination to purchase a vehicle
                                                                                                                                                                                            • Figure 50: Car buying process for next car, June 2011
                                                                                                                                                                                          • Dealers are important but the way to them varies
                                                                                                                                                                                            • Online and trade magazines have an important role when not purchasing from a dealer...
                                                                                                                                                                                              • ...although online has less of a role in replacing a dealer
                                                                                                                                                                                                • Older drivers find greater favour with dealers...
                                                                                                                                                                                                  • ...with young drivers looking at alternative sources of information
                                                                                                                                                                                                    • Londoners are more likely to look at other channels for purchasing
                                                                                                                                                                                                      • Wealthier individuals show greatest interest in dealerships
                                                                                                                                                                                                        • New and used buyers opt for different purchase channels
                                                                                                                                                                                                          • Figure 51: Source of purchase of next car, by intention to buy new or used, June 2011
                                                                                                                                                                                                        • Dealers dominate for those buying new
                                                                                                                                                                                                          • Dealers less important for used cars with other channels more significant
                                                                                                                                                                                                          • The Consumer – Attitudes towards Dealerships and Car Buying

                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                              • Dealerships
                                                                                                                                                                                                                • Costs are on the mind of many consumers when purchasing
                                                                                                                                                                                                                    • Figure 52: Attitudes towards dealerships, June 2011
                                                                                                                                                                                                                  • Dealers generate differing views
                                                                                                                                                                                                                    • Costs are an issue for many
                                                                                                                                                                                                                      • Improvements highlighted by a small minority
                                                                                                                                                                                                                        • Men record greatest concerns when using dealers
                                                                                                                                                                                                                          • Dealers have strongest connection with older drivers
                                                                                                                                                                                                                            • High earners have mixed views on dealers
                                                                                                                                                                                                                              • Attitudes towards dealers vary with age of car
                                                                                                                                                                                                                                • Figure 53: Attitudes towards dealerships, by age of current car, June 2011
                                                                                                                                                                                                                              • Drivers of new cars appear wedded to dealer benefits...
                                                                                                                                                                                                                                • ...with drivers of older cars more inclined to have negative views
                                                                                                                                                                                                                                  • Those owning a car from new are also positive towards dealers
                                                                                                                                                                                                                                    • Figure 54: Attitudes towards dealerships, by type of car driven, June 2011
                                                                                                                                                                                                                                  • Those who bought from new view dealers as offering a number of benefits
                                                                                                                                                                                                                                    • Used driver views on dealers are more limited
                                                                                                                                                                                                                                      • Mixed views from consumers towards car purchasing
                                                                                                                                                                                                                                          • Figure 55: Perceptions of car buying, June 2011
                                                                                                                                                                                                                                        • Stark differences exist between buyer groups
                                                                                                                                                                                                                                          • Internet offers consumer benefits
                                                                                                                                                                                                                                            • Older buyers appear more confident and savvy
                                                                                                                                                                                                                                              • Younger buyers opt for the internet for help
                                                                                                                                                                                                                                                • Income breeds confidence
                                                                                                                                                                                                                                                  • Purchasers of new cars appear most confident
                                                                                                                                                                                                                                                    • Figure 56: Perceptions of car buying, by car buying expectations, June 2011
                                                                                                                                                                                                                                                  • Interest in cars helps new buyers
                                                                                                                                                                                                                                                    • Used buyers may be hampered by financial concerns...
                                                                                                                                                                                                                                                      • ...with this also true of those who already drive a new car
                                                                                                                                                                                                                                                        • Figure 57: Perceptions of car buying, by driver type, June 2011
                                                                                                                                                                                                                                                    • Appendix – Competitive Context

                                                                                                                                                                                                                                                        • Figure 58: New registrations – trucks, 2004-10
                                                                                                                                                                                                                                                        • Figure 59: New registrations – commercial vehicles, 2004-10
                                                                                                                                                                                                                                                        • Figure 60: Manufacturer shares in new truck registrations, 2008-10
                                                                                                                                                                                                                                                        • Figure 61: Manufacturers shares in new commercial vehicle registrations, 2009-10
                                                                                                                                                                                                                                                    • Appendix – Consumer – Car Ownership and Brand

                                                                                                                                                                                                                                                        • Figure 62: Car drivers, by type of ownership, by demographics, June 2011
                                                                                                                                                                                                                                                        • Figure 63: Age of car driven, by demographics, June 2011
                                                                                                                                                                                                                                                      • Most popular brands
                                                                                                                                                                                                                                                        • Figure 64: Most popular make of car owned, by demographics, June 2011
                                                                                                                                                                                                                                                    • Appendix – Consumer – Car Purchase Behaviour

                                                                                                                                                                                                                                                        • Figure 65: Car buying expectations, by demographics, June 2011
                                                                                                                                                                                                                                                    • Appendix – Consumer – Attitudes towards Car Purchasing

                                                                                                                                                                                                                                                        • Figure 66: Most popular source of purchase of next car, by demographics, June 2011
                                                                                                                                                                                                                                                        • Figure 67: Next most popular source of purchase of next car, by demographics, June 2011
                                                                                                                                                                                                                                                        • Figure 68: Most popular attitudes towards dealerships, by demographics, June 2011
                                                                                                                                                                                                                                                        • Figure 69: Next most popular attitudes towards dealerships, by demographics, June 2011
                                                                                                                                                                                                                                                        • Figure 70: Most popular attitudes towards dealerships, by demographics, June 2011
                                                                                                                                                                                                                                                        • Figure 71: Most popular perceptions of car buying, by demographics, June 2011
                                                                                                                                                                                                                                                        • Figure 72: Next most popular perceptions of car buying, by demographics, June 2011

                                                                                                                                                                                                                                                    Companies Covered

                                                                                                                                                                                                                                                    • AB Volvo
                                                                                                                                                                                                                                                    • Alfa Romeo
                                                                                                                                                                                                                                                    • Appleyard Vehicle Contracts
                                                                                                                                                                                                                                                    • Arnold Clark Automobiles Ltd
                                                                                                                                                                                                                                                    • Aston Martin Lagonda Limited
                                                                                                                                                                                                                                                    • Audi United Kingdom
                                                                                                                                                                                                                                                    • Automobile Association (AA)
                                                                                                                                                                                                                                                    • Automobili Lamborghini Holding S.p.A.
                                                                                                                                                                                                                                                    • Autoquake
                                                                                                                                                                                                                                                    • Bank of England
                                                                                                                                                                                                                                                    • Bentley Motors Limited
                                                                                                                                                                                                                                                    • BMW (GB) Ltd
                                                                                                                                                                                                                                                    • Bristol Street Group Ltd
                                                                                                                                                                                                                                                    • British Car Auctions Ltd
                                                                                                                                                                                                                                                    • British Red Cross
                                                                                                                                                                                                                                                    • British Retail Consortium
                                                                                                                                                                                                                                                    • British Sky Broadcasting Group plc (BSkyB)
                                                                                                                                                                                                                                                    • Carcraft
                                                                                                                                                                                                                                                    • Cargiant
                                                                                                                                                                                                                                                    • CC Automotive Group Ltd
                                                                                                                                                                                                                                                    • Chrysler LLC
                                                                                                                                                                                                                                                    • Facebook, Inc.
                                                                                                                                                                                                                                                    • Ferrari S.p.A.
                                                                                                                                                                                                                                                    • Fiat Auto
                                                                                                                                                                                                                                                    • Flickr
                                                                                                                                                                                                                                                    • Ford Motor Company Limited (UK)
                                                                                                                                                                                                                                                    • Freeview
                                                                                                                                                                                                                                                    • Government Actuary's Department (GAD)
                                                                                                                                                                                                                                                    • Greenhous Group
                                                                                                                                                                                                                                                    • Harley Davidson, Inc
                                                                                                                                                                                                                                                    • Honda Motor Co. Ltd (UK)
                                                                                                                                                                                                                                                    • Hyundai Car (UK) Ltd
                                                                                                                                                                                                                                                    • Inchcape Retail Ltd
                                                                                                                                                                                                                                                    • Isuzu Motors Limited
                                                                                                                                                                                                                                                    • Jaguar Cars Limited
                                                                                                                                                                                                                                                    • Jamie Oliver
                                                                                                                                                                                                                                                    • Jardine Matheson Holdings Ltd
                                                                                                                                                                                                                                                    • Jardine Motor Group plc
                                                                                                                                                                                                                                                    • JCT600
                                                                                                                                                                                                                                                    • Kantar Media
                                                                                                                                                                                                                                                    • Kia Motors UK Ltd
                                                                                                                                                                                                                                                    • Land Rover UK
                                                                                                                                                                                                                                                    • Lidl (UK)
                                                                                                                                                                                                                                                    • Listers Group
                                                                                                                                                                                                                                                    • Lookers plc
                                                                                                                                                                                                                                                    • Loot
                                                                                                                                                                                                                                                    • Macmillan Cancer Relief
                                                                                                                                                                                                                                                    • Marshall Motor Group Ltd
                                                                                                                                                                                                                                                    • Maserati S. p. A.
                                                                                                                                                                                                                                                    • Mazda Motors UK Ltd
                                                                                                                                                                                                                                                    • McLaren-Mercedes
                                                                                                                                                                                                                                                    • Mercedes-Benz UK
                                                                                                                                                                                                                                                    • Mitsubishi Motors Corporation
                                                                                                                                                                                                                                                    • Motorpoint
                                                                                                                                                                                                                                                    • Nissan Motor Co., Ltd.
                                                                                                                                                                                                                                                    • Orange plc (UK)
                                                                                                                                                                                                                                                    • PayPal Inc.
                                                                                                                                                                                                                                                    • Pendragon plc
                                                                                                                                                                                                                                                    • Penske Automotive Group, Inc.
                                                                                                                                                                                                                                                    • Peugeot Motor Company Plc
                                                                                                                                                                                                                                                    • Pilling Motor Group
                                                                                                                                                                                                                                                    • Porsche Cars Great Britain Ltd
                                                                                                                                                                                                                                                    • PSA Peugeot Citroën S.A.
                                                                                                                                                                                                                                                    • Renault (UK) Ltd
                                                                                                                                                                                                                                                    • Rolls-Royce Motor Cars Ltd
                                                                                                                                                                                                                                                    • Royal Automobile Club
                                                                                                                                                                                                                                                    • Saab Automobile AB
                                                                                                                                                                                                                                                    • SEAT SA
                                                                                                                                                                                                                                                    • Skoda Auto a.s.
                                                                                                                                                                                                                                                    • Skype Technologies S.A.
                                                                                                                                                                                                                                                    • Society of Motor Manufacturers and Traders
                                                                                                                                                                                                                                                    • Subaru (UK) Ltd
                                                                                                                                                                                                                                                    • Suzuki GB PLC
                                                                                                                                                                                                                                                    • Sytner Group plc
                                                                                                                                                                                                                                                    • T-Mobile (UK) Ltd
                                                                                                                                                                                                                                                    • Tesco Plc
                                                                                                                                                                                                                                                    • Toyota (GB) PLC
                                                                                                                                                                                                                                                    • Trafford Centre
                                                                                                                                                                                                                                                    • Twitter, Inc.
                                                                                                                                                                                                                                                    • UK Car Group
                                                                                                                                                                                                                                                    • United Auto Group, Inc.
                                                                                                                                                                                                                                                    • Vauxhall Motors Ltd
                                                                                                                                                                                                                                                    • Vertu Motors
                                                                                                                                                                                                                                                    • Virgin Media Ltd
                                                                                                                                                                                                                                                    • Virgin Mobile
                                                                                                                                                                                                                                                    • Vodafone Group Plc (UK)
                                                                                                                                                                                                                                                    • Volkswagen UK
                                                                                                                                                                                                                                                    • Wessex Garages
                                                                                                                                                                                                                                                    • Yamaha Motor Co., Ltd
                                                                                                                                                                                                                                                    • YouTube, Inc.

                                                                                                                                                                                                                                                    Car Retailing - UK - August 2011

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