2017 sees the largest fall in years for franchised outlet numbers
The total number of new car sales points fell by 216 from 5,071 to 4,832 between January 2017 and January 2018, the largest fall in recent years. This is one of the key findings of the 2018 Franchising Report, produced by Auto Retail Network in association with MSX International.
Many of the reductions are the result of volume manufacturers slimming their networks, though it should also be noted that companies exiting the market, such as Chevrolet, Saab and Chrysler, have contributed to the total fall over the past decade. The top 15 OEMs by number of sales points collectively relinquished 71 dealerships in the past year, while Kia was the only national sales company in the top 15 to record an increase, adding four outlets, and has increased its number of sites by more than any manufacturer this decade, having added 40 since 2010.
The manufacturers with the biggest UK presence and more than 200 sales points continued to cut their numbers in 2016. Ford, Vauxhall and Peugeot each shed dealerships, while Citroen/DS, Hyundai and Dacia also trimmed their outlet numbers. This continues the trend of large manufacturers retailers since 2006, with Ford, Renault, Peugeot and Vauxhall seeing the greatest losses.
Return on sales
The usual array of premium brands – Porsche, Land Rover, Mercedes and Smart – were the most profitable in 2017, with return on sales percentages north of 2.0%. Overall return on sale figures declined though, as the spectrum across the top 15 fell from 1.4% to 3.5% in 2016 to between 1.1% and 3.0% in 2017.
BMW and Mini no longer count themselves among the most valuable national sales companies, while Citroen, DS, Infiniti and Jaguar had the lowest RoS of 0.1% of less.
Other absentees from the 2017 top 15 are Renault and Dacia, which saw return on sales drop from 1.5% to 0.6% in the space of a year, Skoda, which fell from 1.5% to 1.0% and Ssangyong, which tumbled from 2.0% in 2016 to 0.3% due to falling sales and issues at management level.
Outlook for 2018
New car sales are not expected to bounce back in 2018, and a continued, gradual reduction seems likely, which has caused many retailers to turn their focus to used car sales. However, events such as the past year’s general election and VED upheaval are not on this year’s agenda. While the outlook for the market in isolation is not rosy, barring unforeseen events, 2018 could be the political and economic calm before the storm of March 2019’s proposed exit from the European Union.
That said, the build up to Brexit is unlikely to continue without turbulence, and uncertain conditions could see buyers putting off purchases until 2019 or later. “2017 [was] a very volatile year and the lackluster economic growth means that we expect a further weakening in the market for 2018,” said SMMT chief executive, Mike Hawes.
“Falling business and consumer confidence is undoubtedly taking a toll, however, and confusing anti-diesel messages have caused many to hesitate before buying a new low emission diesel car… Consumers should be encouraged to buy the right car for their lifestyle and driving needs, irrespective of fuel type – whether that be petrol, electric, hybrid or diesel.”
The most recent SMMT figures prior to the publication of this report put the 2018 UK new car market down 5.1% on 2017, with registrations for business, private and fleet buyers down 29.8%, 7.1% and 2.1% respectively. Petrol cars had a huge lead at 59.3%, while diesels accounted for 35.6% and alternative fuel vehicles for 5.1%, which led the SMMT to suggest that diesel car owners were keeping their existing vehicles for longer.
Elsewhere in the UK, Vauxhall’s restructure, enforced by new parent PSA, may continue to have an impact. This year has already heralded a new managing director – Stephen Norman, appointed 1 February – and a meeting between PSA boss Carlos Tavares and Unite Union general secretary Len McCluskey, to discuss the brand’s future in the UK.
Speaking at the 2018 Geneva motor show, Tavares also warned that PSA could not guarantee further work for Vauxhall’s Ellesmere Port factory after 2021 unless the UK confirmed Brexit related trading conditions.
IHS Markit has provided Auto Retail Bulletin with forecasts for car sales by brand in the UK for 2018 and 2019, with predictions of an overall drop in the market of 4.0% this year and a further 2.3% next year. Among the mainstream brands, IHS foresees a challenging 2018 for the likes of Audi, BMW, Ford, Honda, Land Rover, Lexus, Mazda, Mercedes-Benz, Nissan, Renault, Seat, Smart, Ssangyong, Toyota and Volkswagen, with all of them seeing big reductions in sales. And for many, that decline continues into 2019.
Vauxhall is anticipated to see some growth through 2018, but then fall back heavily in 2019 to below its 2017 registrations – the only brand expected to see a big rise followed by such a dramatic fall.
However, IHS predicts that some brands will see a strong couple of years, including Bentley, Hyundai, Kia, MG, Mini, Peugeot and Volvo seeing incremental growth in both 2018 and 2019. And while Jaguar is expected to fall back slightly in 2019, that will come off the back of significant growth this year, and will still leave it well ahead of its 2017 sales.
Sales per outlet set to fall
So what does all this mean for the UK’s franchised dealerships? Auto Retail Network’s 2018 Franchising Report details how the average number of sales per outlet is expected to reduce from 472 in 2017 to 444 in 2018. This is down from a high of 482 in 2016 where we saw a 46-point.
The top 15 manufacturers in terms of sales per outlet remained static during the past year with the exception of Renault, which dropped out to be replaced by Kia. Seven of those – Mercedes, Volkswagen, BMW, Skoda, Hyundai, Mini and Kia – increased sales per outlet on 2017’s figure, while volume premium manufacturers clearly have the advantage in this area.
All but one of the manufacturers listed now sells more cars per outlet than in 2010. The overall reduction of sales points and increasing efficiency measures in the wake of the financial crisis have resulted in a generally leaner industry. Couple that with a new car market approximately half a million sales to the better than the start of the decade, and the longterm rise is apparent.
Vauxhall is the only company that is not expected to have a greater sales per outlet figure in 2018 than that of 2010.
- Extract from the Franchising Report 2018. Read more and order your copy here.