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Car Retailing - UK - July 2012

“The much-expected recovery of the new car market following the recent recession has failed to materialise. Cautious consumers have in many cases opted to delay the purchase of a vehicle or buy used. For manufacturers and dealers, the result is ever more intense pressure to ensure that they fully understand the needs and desires of buyers.”

– Neil Mason, Head of Retail Research

Some questions answered in this report include:

  • When will new car sales recover?
  • Do the public prefer buying used?
  • Where next for the car market?
  • How will manufacturers cope with a fragmenting market?
  • How should dealers and others engage with buyers?

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Table of contents

  1. Introduction

      • Definition
        • Abbreviations
        • Executive Summary

            • The market
              • Retailers hit by sluggish UK economy
                • Figure 1: New car sales, 2007-17
                • Figure 2: Used car sales, 2007-17
              • Market factors
                • Failure of UK economy to grow a major concern
                  • Internet fails to provide any quick fix
                    • Small and medium-sized vehicles dominate
                      • Figure 3: Share of new vehicle sales, by vehicle type, 2011
                    • Companies, brands and innovation
                      • Mass-market brands in decline
                        • Figure 4: Percentage point change in manufacturer market share, 2009-11
                      • Dealers focus on bigger sites
                        • Figure 5: Number of franchised dealership outlets, 2000-11
                      • Innovation moves online
                        • The consumer
                          • Car ownership and purchasing remains complex
                            • Figure 6: Number of cars in household, March 2012
                            • Figure 7: Car buying in the next 12 months, March 2012
                            • Figure 8: Resources used to research which vehicle last bought, March 2012
                            • Figure 9: Attitudes towards car dealerships, March 2012
                          • What we think
                          • Issues in the Market

                              • When will new car sales recover?
                                • Do the public prefer buying used?
                                  • Where next for the car market?
                                    • How will manufacturers cope with a fragmenting market?
                                      • How should dealers and others engage with buyers?
                                      • Future Opportunities

                                          • Influentials
                                            • Slow It All Down
                                              • Old Gold
                                              • Internal Market Environment

                                                • Key points
                                                  • Expenditure on cars falters
                                                    • Costs of running a car continue to increase...
                                                      • Figure 10: Consumer expenditure on car purchasing, servicing and repair and motoring expenses, seasonally adjusted at current prices, 2008-11
                                                    • ...with rising fuel prices a major driver
                                                      • Figure 11: Monthly UK petrol, diesel and oil price trends, January 2009-April 2012*
                                                    • Running costs higher for petrol vehicles
                                                      • Figure 12: Motoring costs for petrol and diesel cars, by purchase price of car, 2011
                                                    • Car prices moving in different directions
                                                      • Mixed messages on vehicle replacement intentions
                                                        • Figure 13: Car buying in the next 12 months, March 2012
                                                      • Development of the internet as a sales channel
                                                        • Figure 14: Internet and other distance automotive sales (units), 2009 and 2010
                                                    • Broader Market Environment

                                                      • Key points
                                                        • UK economy shows signs of slow recovery
                                                          • Figure 15: GDP, PDI, consumer expenditure and savings, at constant 2007 prices, 2007-17
                                                        • Confidence remains depressed
                                                          • Figure 16: GfK NOP Consumer Confidence Index, January 1988-December 2011
                                                        • A resilient economy
                                                          • Figure 17: UK retail sales year-on-year growth, BRC vs ONS, 2010-12
                                                        • Rise in multiple car ownership continues
                                                          • Figure 18: Number of cars owned, by individual households, 2002-10
                                                        • Mixed opportunities from changes in population structure
                                                          • Figure 19: Trends in the age structure of the UK population, 2007-17
                                                        • Increasing wealth should encourage trading up
                                                          • Figure 20: Forecast adult population trends, by socio-economic group, 2007-17
                                                        • Smaller households set to grow in number
                                                          • Figure 21: Number of households and persons per household, 2007-17
                                                        • Older, female drivers looks set to drive forward demand
                                                          • Figure 22: Full car driving licence holders, by age and gender, 1975/76 -2010
                                                      • Who’s Innovating?

                                                        • Key points
                                                          • Online continues to develop as a channel
                                                            • Mixed fortunes for existing e-tailers...
                                                              • ...with a move towards the use of flash sales by new entrants
                                                                • Online classified market becoming more crowded
                                                                  • Social media continues to prove popular
                                                                    • Personal Contract Purchase – a new way to buy a car
                                                                    • Market in Context

                                                                      • Key points
                                                                        • Cars are a major item of expenditure
                                                                          • Figure 23: Consumer expenditure, by sector (£m), 2010
                                                                        • Cars performing better than commercial vehicles
                                                                          • Figure 24: New car and commercial vehicle sales, 2000-11
                                                                      • Strengths and Weaknesses in the Market

                                                                        • Strengths
                                                                          • Weaknesses
                                                                          • Market Size and Forecast

                                                                            • Key points
                                                                              • New car market shows little signs of recovery
                                                                                • Figure 25: Total new car registrations, by private, fleet and business sales, 2007-12
                                                                              • New car sales fail to recover
                                                                                • Fall in sales since 2010 illustrates difficult retail environment
                                                                                  • The private sector continues to hold back sales
                                                                                    • Used car sales show strong growth
                                                                                      • Figure 26: Sales of used cars, by volume, 2007-12
                                                                                    • Buyers turning to the used sector
                                                                                      • The future
                                                                                        • Figure 27: Sales of new and used cars, by volume, 2007-17
                                                                                      • Forecast
                                                                                        • Figure 28: Best- and worst-case forecasts of new car registrations (volume), 2007-17
                                                                                        • Figure 29: Best- and worst-case forecasts of used car sales (volume), 2007-17
                                                                                    • Makes and Models

                                                                                      • Key points
                                                                                        • Recession forces buyers to make hard decisions
                                                                                          • Figure 30: Sales of new vehicles, by vehicle type, 2007-11
                                                                                        • Smallest models proving most popular
                                                                                          • Executive and specialist vehicles also see sales rise...
                                                                                            • ...although the market remains dominated by small to mid-sized models
                                                                                              • Figure 31: Share of new vehicle sales, by vehicle type, 2007-11
                                                                                            • German brands performing well
                                                                                              • Figure 32: Manufacturer shares of new car registrations, 2009-11
                                                                                            • Audi, VW and BMW all make good progress
                                                                                              • Far East brands face mixed fortunes
                                                                                                • Is a lack of va va voom affecting French brands?
                                                                                                  • Individuality proving attractive
                                                                                                    • Dealer network in decline
                                                                                                      • Figure 33: Number of UK franchised dealer outlets, 2000-11
                                                                                                    • Sales performance affecting dealer presence
                                                                                                      • Figure 34: Ten largest UK franchised dealer networks, by brand and number of outlets, 2007-11
                                                                                                  • Dealerships

                                                                                                    • Key points
                                                                                                      • Dealer market dominated by major groups
                                                                                                        • Figure 35: Top ten dealership groups in the UK*, 2011
                                                                                                      • Pendragon leads in terms of outlets
                                                                                                        • Individual strategies mean a differing approach to new and used sales
                                                                                                          • Arnold Clark and Pendragon are the largest in the new car market
                                                                                                            • Figure 36: Top ten used car dealership groups in the UK*, 2011
                                                                                                          • Car supermarkets growing their presence in the market
                                                                                                            • Figure 37: Leading car supermarket operators, 2012
                                                                                                          • Online is slowly growing its presence
                                                                                                          • Retailer Profiles

                                                                                                              • Pendragon
                                                                                                                  • Figure 38: Pendragon Group plc, financial performance, 2007-11
                                                                                                                • Inchcape
                                                                                                                    • Figure 39: Inchcape UK, financial performance, 2007-11
                                                                                                                  • Jardine Motors Group
                                                                                                                      • Figure 40: Jardine Motors Group UK Limited, financial performance, 2007-10
                                                                                                                    • Greenhous Group
                                                                                                                        • Figure 41: Greenhous Group, financial performance, 2006-10
                                                                                                                      • Lookers
                                                                                                                          • Figure 42: Lookers plc, financial performance, 2007-11
                                                                                                                        • Sytner
                                                                                                                            • Figure 43: Sytner Group, financial performance, 2007-10
                                                                                                                          • Vertu
                                                                                                                            • Car supermarket operators
                                                                                                                              • Carcraft
                                                                                                                                • Cargiant
                                                                                                                                  • Motorpoint
                                                                                                                                    • Factory-owned dealer groups
                                                                                                                                      • Mercedes-Benz Retail
                                                                                                                                        • Ford Retail Group
                                                                                                                                          • Renault Retail Group
                                                                                                                                            • Robins & Day
                                                                                                                                              • Other dealer groups
                                                                                                                                                • Marshall Motor Group
                                                                                                                                                  • Listers Group
                                                                                                                                                    • JCT600
                                                                                                                                                      • Perrys
                                                                                                                                                        • Online sellers
                                                                                                                                                          • eBay Motors
                                                                                                                                                          • Advertising and Promotion

                                                                                                                                                            • Key points
                                                                                                                                                              • Promotional expenditure is increasing
                                                                                                                                                                • Figure 44: Main media advertising expenditure by car retailers, 2009-11
                                                                                                                                                              • New entrants shaking up the shape of the market
                                                                                                                                                                • Figure 45: Main media advertising expenditure by car retailers, top 20 companies, 2009-11
                                                                                                                                                              • Webuyanycar.com invests heavily
                                                                                                                                                                • Market supports a number of consistent advertisers
                                                                                                                                                                  • Dealer promotion is focus of activity
                                                                                                                                                                    • Figure 46: Main media advertising expenditure by car dealers, top 20 brands, 2011
                                                                                                                                                                  • Radio increasingly dominates advertising spend
                                                                                                                                                                    • Figure 47: Main media advertising expenditure by car retailers, % share, by media type, 2009-11
                                                                                                                                                                  • Direct mail and press suffer as radio grows share
                                                                                                                                                                    • Are new media ready to challenge?
                                                                                                                                                                    • The Consumer – Car Ownership

                                                                                                                                                                      • Key points
                                                                                                                                                                        • Most households have access to a car
                                                                                                                                                                            • Figure 48: Number of cars in household, March 2012
                                                                                                                                                                          • A third of households have access to more than one car
                                                                                                                                                                            • Numerous factors impact on car ownership
                                                                                                                                                                              • Second-hand cars dominate the market
                                                                                                                                                                                  • Figure 49: Car ownership, March 2012
                                                                                                                                                                                • Men more likely to have bought a new car recently
                                                                                                                                                                                  • Young adults more likely to be changing their cars
                                                                                                                                                                                    • Rural drivers hold on to their cars for longer
                                                                                                                                                                                      • Three quarters of cars are over three years old
                                                                                                                                                                                          • Figure 50: Age of main car, March 2012
                                                                                                                                                                                        • Older vehicles account for three quarters of those on the road
                                                                                                                                                                                          • Income is an important factor in owning a new car
                                                                                                                                                                                            • Oldest cars are likely to be driven by older drivers
                                                                                                                                                                                            • The Consumer – Brand Preferences

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                • Ford and Vauxhall dominate the market
                                                                                                                                                                                                    • Figure 51: Description of main car, March 2012
                                                                                                                                                                                                  • UK and European mass-market brands dominate
                                                                                                                                                                                                    • Low prices please
                                                                                                                                                                                                      • Hatchbacks win over saloons
                                                                                                                                                                                                        • Petrol dominates over diesel
                                                                                                                                                                                                          • Automatic for the elderly
                                                                                                                                                                                                          • The Consumer – Car Purchase Behaviour

                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                              • Sizeable minority are planning to buy a car soon
                                                                                                                                                                                                                  • Figure 52: Car buying in the next 12 months, March 2012
                                                                                                                                                                                                                • Recent upturn in planned purchases?
                                                                                                                                                                                                                  • Figure 53: Intention to buy a car in the next 12 months, 2008-12
                                                                                                                                                                                                                • Young adults and men are most likely to buy in the coming 12 months
                                                                                                                                                                                                                  • Wealthy and urban dwellers likely to purchase new
                                                                                                                                                                                                                    • Used vehicles popular with a cross-section of adults
                                                                                                                                                                                                                      • Older adults and less wealthy least likely to purchase a car soon
                                                                                                                                                                                                                        • Personal contact important when looking for a car
                                                                                                                                                                                                                            • Figure 54: Resources used to research which vehicle you last bought, March 2012
                                                                                                                                                                                                                          • Keeping it personal
                                                                                                                                                                                                                            • Dealers and family/friends appeal to different age groups
                                                                                                                                                                                                                              • Younger buyers find other sources important
                                                                                                                                                                                                                                • Wealthier individuals show greatest interest in seeking out information
                                                                                                                                                                                                                                  • Drivers of new vehicles are most likely to buy new
                                                                                                                                                                                                                                    • Figure 55: Car buying in the next 12 months, by age of main car, March 2012
                                                                                                                                                                                                                                  • Over a third of those with the newest cars plan to buy new again in the next 12 months
                                                                                                                                                                                                                                    • Mixed fortunes for manufacturers of new cars
                                                                                                                                                                                                                                      • Figure 56: Car buying in the next 12 months, by brand of car, March 2012
                                                                                                                                                                                                                                    • Ford owners are more likely to purchase new than Vauxhall owners
                                                                                                                                                                                                                                      • Car value impacts on choice to buy new or used
                                                                                                                                                                                                                                        • Figure 57: Car buying in the next 12 months, by purchase price of car, March 2012
                                                                                                                                                                                                                                      • New cars are more important for those with more expensive cars
                                                                                                                                                                                                                                        • Owners of automatic cars look a more attractive new car proposition
                                                                                                                                                                                                                                          • Figure 58: Car buying in the next 12 months, by transmission type, March 2012
                                                                                                                                                                                                                                        • A quarter of drivers of automatic cars are set to buy new
                                                                                                                                                                                                                                          • Buyers rely on a few key sources for information
                                                                                                                                                                                                                                            • Figure 59: Resources used to research which vehicle you last bought, by car buying in the next 12 months, March 2012
                                                                                                                                                                                                                                          • Dealers and friends/family are both important research tools
                                                                                                                                                                                                                                            • Internet and printed media are notable second-tier research tools
                                                                                                                                                                                                                                            • The Consumer – Car Dealerships

                                                                                                                                                                                                                                              • Key points
                                                                                                                                                                                                                                                • Dealers are viewed with caution by many buyers
                                                                                                                                                                                                                                                    • Figure 60: Attitudes towards car dealerships, March 2012
                                                                                                                                                                                                                                                  • Significant minority of consumers have concerns about dealers
                                                                                                                                                                                                                                                    • Improvements are seen as necessary by some consumers
                                                                                                                                                                                                                                                      • Desire for value can affect how consumers interact with a dealer
                                                                                                                                                                                                                                                        • Men are demanding
                                                                                                                                                                                                                                                          • Dealers have strong connection with older drivers
                                                                                                                                                                                                                                                            • Wealthier drivers have strong opinions on dealers
                                                                                                                                                                                                                                                              • New car buyers hold more positive views towards dealers
                                                                                                                                                                                                                                                                • Figure 61: Attitudes towards car dealerships, by car ownership, March 2012
                                                                                                                                                                                                                                                              • Owners of recently purchased new vehicles are more positive
                                                                                                                                                                                                                                                                • Used buyers hold a number of concerns
                                                                                                                                                                                                                                                                  • New buyers with older vehicles have mixed views
                                                                                                                                                                                                                                                                  • Appendix – The Consumer: Car Ownership

                                                                                                                                                                                                                                                                      • Figure 62: Number of cars in household, by demographics, March 2012
                                                                                                                                                                                                                                                                      • Figure 63: Car ownership, by demographics, March 2012
                                                                                                                                                                                                                                                                      • Figure 64: Age of main car, by demographics, March 2012
                                                                                                                                                                                                                                                                  • Appendix – The Consumer: Brand Preferences

                                                                                                                                                                                                                                                                      • Figure 65: Brand, by demographics, March 2012
                                                                                                                                                                                                                                                                      • Figure 66: Purchase price, by demographics, March 2012
                                                                                                                                                                                                                                                                      • Figure 67: Most popular body type, by demographics, March 2012
                                                                                                                                                                                                                                                                      • Figure 68: Next most popular body type, by demographics, March 2012
                                                                                                                                                                                                                                                                      • Figure 69: Fuel type, by demographics, March 2012
                                                                                                                                                                                                                                                                      • Figure 70: Transmission type, by demographics, March 2012
                                                                                                                                                                                                                                                                  • Appendix – The Consumer: Car Purchase Behaviour

                                                                                                                                                                                                                                                                      • Figure 71: Car buying in the next 12 months, by demographics, March 2012
                                                                                                                                                                                                                                                                      • Figure 72: Most popular resources used to research which vehicle you last bought, by demographics, March 2012
                                                                                                                                                                                                                                                                      • Figure 73: Next most popular resources used to research which vehicle you last bought, by demographics, March 2012
                                                                                                                                                                                                                                                                  • Appendix – The Consumer: Car Dealerships

                                                                                                                                                                                                                                                                      • Figure 74: Most popular attitudes towards car dealerships, by demographics, March 2012
                                                                                                                                                                                                                                                                      • Figure 75: Next most popular attitudes towards car dealerships, by demographics, March 2012

                                                                                                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                                                                                                  • AB Volvo
                                                                                                                                                                                                                                                                  • Alfa Romeo
                                                                                                                                                                                                                                                                  • Appleyard Vehicle Contracts
                                                                                                                                                                                                                                                                  • Aston Martin Lagonda Limited
                                                                                                                                                                                                                                                                  • Audi United Kingdom
                                                                                                                                                                                                                                                                  • Auto Trader
                                                                                                                                                                                                                                                                  • Bank of England
                                                                                                                                                                                                                                                                  • Black Horse Ltd
                                                                                                                                                                                                                                                                  • BMW (GB) Ltd
                                                                                                                                                                                                                                                                  • Bristol Street Group Ltd
                                                                                                                                                                                                                                                                  • Carcraft
                                                                                                                                                                                                                                                                  • Cargiant
                                                                                                                                                                                                                                                                  • Facebook, Inc.
                                                                                                                                                                                                                                                                  • Ferrari S.p.A.
                                                                                                                                                                                                                                                                  • Fiat Auto
                                                                                                                                                                                                                                                                  • Ford Motor Company Limited (UK)
                                                                                                                                                                                                                                                                  • General Motors Corporation
                                                                                                                                                                                                                                                                  • Greenhous Group
                                                                                                                                                                                                                                                                  • Honda Motor Co. Ltd (UK)
                                                                                                                                                                                                                                                                  • HPI Ltd
                                                                                                                                                                                                                                                                  • Hyundai Car (UK) Ltd
                                                                                                                                                                                                                                                                  • Inchcape Retail Ltd
                                                                                                                                                                                                                                                                  • Jaguar Cars Limited
                                                                                                                                                                                                                                                                  • Jardine Matheson Holdings Ltd
                                                                                                                                                                                                                                                                  • Jardine Motor Group plc
                                                                                                                                                                                                                                                                  • JCT600
                                                                                                                                                                                                                                                                  • Kia Motors UK Ltd
                                                                                                                                                                                                                                                                  • Land Rover UK
                                                                                                                                                                                                                                                                  • Listers Group
                                                                                                                                                                                                                                                                  • Lookers plc
                                                                                                                                                                                                                                                                  • Marshall Motor Group Ltd
                                                                                                                                                                                                                                                                  • Maserati S. p. A.
                                                                                                                                                                                                                                                                  • Mazda Motors UK Ltd
                                                                                                                                                                                                                                                                  • Mercedes-Benz UK
                                                                                                                                                                                                                                                                  • Motability
                                                                                                                                                                                                                                                                  • Motorpoint
                                                                                                                                                                                                                                                                  • Nissan Motor (GB) Ltd
                                                                                                                                                                                                                                                                  • Pendragon plc
                                                                                                                                                                                                                                                                  • Penske Automotive Group, Inc.
                                                                                                                                                                                                                                                                  • Peugeot Motor Company Plc
                                                                                                                                                                                                                                                                  • Porsche Cars Great Britain Ltd
                                                                                                                                                                                                                                                                  • Renault (UK) Ltd
                                                                                                                                                                                                                                                                  • Rolls-Royce Motor Cars Ltd
                                                                                                                                                                                                                                                                  • Royal Automobile Club
                                                                                                                                                                                                                                                                  • Saab Automobile AB
                                                                                                                                                                                                                                                                  • SEAT SA
                                                                                                                                                                                                                                                                  • Skoda Auto a.s.
                                                                                                                                                                                                                                                                  • Suzuki GB PLC
                                                                                                                                                                                                                                                                  • Sytner Group plc
                                                                                                                                                                                                                                                                  • Toyota (GB) PLC
                                                                                                                                                                                                                                                                  • Twitter, Inc.
                                                                                                                                                                                                                                                                  • Vauxhall Motors Ltd
                                                                                                                                                                                                                                                                  • Vertu Motors
                                                                                                                                                                                                                                                                  • Volkswagen UK
                                                                                                                                                                                                                                                                  • YouTube, Inc.

                                                                                                                                                                                                                                                                  Car Retailing - UK - July 2012

                                                                                                                                                                                                                                                                  £1,995.00 (Excl.Tax)