Why March means more
13 April 2014
What to make of the March sales figures? I dont know about you, but my reaction when the numbers popped into my mail box on Friday morning was: how much?.
Of course we knew it was going to be a good month. Car makers were more bullish than usual at the Geneva Motor Show at the start of March and retailers we spoke to during the period said they were seeing record numbers of buyers. Even so, close on 465,000 units was surely well ahead of most peoples expectations. Even the SMMT seemed to be taken by surprise.
Comparisons with March last year (up 17.7%) are relatively meaningless; the fact to focus on is that this was the second highest March total in ten years and only a couple of thousand units short of March 2004. To put that into context, if half the dealerships in the country had sold one extra car it would have been an outright record.
It seems to be pretty clear that this is genuine demand, too not false registrations just to get the numbers up. The market is being stimulated by low-rate finance, yes; but not forced. Which raises the question: how long this boom period can go on. Interest rates seem likely to remain low for some time to come. With inflation now below the Bank of England target of 2% and unemployment at 7.2% (slightly above target) we appear to be entering a benign economic period.
The great unknown is demand. Latest figures from the AA (they interviewed almost 24,000 members, so its a fair poll) suggest 71% expect to change their car within the next three years thats a dramatic change from last year, when only 55% said that they expected to swap. If that is so, the implications for the franchised sector are enormous.
Since 2004 weve got better are selling PCPs and weve introduced service plans; both are key retention tools. We know 75% of all new car sales to retail customers were on finance in February and good dealerships are achieving more than 60% (higher with some franchises) penetration on new-car service plans. Put into that context and I believe the March sales rate was not just about the numbers; it was about future-proofing the business.