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The industry reaction to the strong new car sales performance in 2016 was positive but commentators were pragmatic on the challenges ahead in 2017. The SMMT said sales in 2016 rose 2.3% to 2.69m but warned of a slowdown in 2017.
Mike Allen, analyst with Zeus Capital, said it was a good performance but did add a few caveats for the year ahead.
“While 2016 will go down as a record year for the industry, the true impact of Brexit has yet to play out. Carmaker behavior over the coming months is likely to be foreign exchange driven, and we are monitoring consumer confidence trends carefully.
“New car price inflation will also play a major role in the outcome of 2017 and beyond. We also note the change in tax rules that come into force in April. This could bring forward demand in Q1 2017.”
Richard Jones, managing director car finance provider Black Horse said: “Overall, it was an encouraging year for new car registrations with sales above industry forecasts, although dealers now need to focus on what’s expected to be a more challenging 2017.
“With the prospect of rising import prices and greater uncertainty in underlying consumer demand, added to a lack of clarity as to changes in pre-registration activity, I expect 2017 to present more difficult trading conditions generally.
NFDA director Sue Robinson welcomed the strong performance in 2016 while acknowledging that sales had tapered off in the second half.
“The slowdown was expected towards the end of the year and we believe that the segments of the market that saw an increase in December and have consistently performed well throughout the year, such as alternative fuel vehicles, will continue to drive the growth in the upcoming months.
The retail automotive industry has showed its resilience in 2016 and proved its key role in the UK economy. As economic and political changes happen in the near future, we hope that economic measures will be put in place to protect consumer confidence and the interests of our industry.”
Julian Rance, head of Paragon Car Finance commented on the growing demand for leasing. “The latest figures suggest consumers are increasingly opting for leasing plans rather than purchase plans. There is logic to this as ultimately a car is a depreciating asset, and a leasing plan allows customers to pay for the depreciation, whilst at the same time owning a new and efficient car. As such cars on the UK’s roads remain more up-to-date than in comparable economies such as the EU and US.”
The Institute of Motor Industry has repeated calls for new standards for EV technicians, stating that workshop injuries could result from charges that are “worse than being plugged into the electric chair.”
In a Financial Times feature which highlighted industries facing a threat from technology – including online travel webs-sites threat to High Street travel agents and driverless cars to motor insurers – IMI chief executive Steve Nash suggested that EV cars are a threat to garages.
Low-maintenance electric cars will contain virtually no moving parts and virtually nothing mechanical to go wrong under the bonnet, the FT said, adding that a shift away from vehicles powered by diesel and petrol engines “spells trouble for the thousands of garages”.
Nash said: “because they look like cars, politicians assume that someone who works on cars will be able to adapt themselves to it,” before highlighting the differences, calling for specialist training and legislation to protect the industries against the health and safety risks posed by electric vehicles.
In the same article Philippe Houchois, an automotive analyst at Jefferies, told the FT that the effects of EV vehicles will be equally felt by the franchised dealer network, which increasingly relies on aftersales to bolster profits as margins shrink.
Cambria Automobiles plc has “maintained its momentum” following a strong showing in the last financial year, according to a statement issued ahead of the group’s AGM.
The Group reported that its trading performance in the first three months of the current financial year had been “ahead of the corresponding period in 2015/16, both on a total and like-for-like basis”, in a statement issued by the London Stock Exchange ahead of today’s meeting.
Pressure was experienced on new car margins in October and on new car volumes in November and saw new vehicle unit sales for the first quarter down 0.7% (like-for-like down 9.4%), the business revealed, but gross profit per retail unit improved in the Group’s like-for-like businesses.
Used vehicle sales continued to perform well, with unit sales 3.6% (like-for-like 2.5%) ahead of the same period in the prior year and gross profit per unit continuing to increase.
Cambria’s statement said: “This performance has again enhanced the profit from the used car segment of the business. The Group’s aftersales operations increased revenue by 13.1% (like-for-like up 2.9%), with profitability up by 6% year on year (like-for-like down 1.5%, impacted partly by a fire in October at the Welwyn Garden City Jaguar and Aston Martin workshop).”
Online car retailer BuyaCar is predicting a boost to new car sales in the first quarter as buyers anticipate car tax changes coming into effect on 1 April. BuyaCar said it had seen “a big rise” in the number of people planning to change their car within the next three months.
The government has been losing money on VED as carmakers have steadily reduced carbon dioxide emissions. The current tax scheme is based on carbon dioxide (CO2) emissions. Any car emitting an average of less than 99g of CO2 for every kilometre that it drives is currently exempt from car tax. The new rules slash that exemption which, after April 1, will only apply to vehicles with no CO2 emissions at all – mainly electric cars.
Under the new regime cars registered after April 2017 first year rates of VED will vary according to the carbon dioxide (CO2) emissions of the vehicle.
The VED for a Ford Fiesta 1.0T EcoBoost Zetec under the current system is zero over three years. Under the new regime the extra cost is £400. For a Volkswagen High up! 1.0 75PS the VED three-year bill will rise from £40 to £420, a 950% increase.
“Anyone buying a car after April next year could be in for a massive shock,” said Austin Collins, managing director of BuyaCar.co.uk.
The volume of used vehicles sold in the UK in 2016 is set to reach a record 7.7 million units, according to data specialist cap hpi. The performance beats last year’s figure of 7.2m and the previous 2004 record of 7,731,609 vehicles.
James Dower, senior editor Black Book at cap hpi, said: “Strong demand has characterised the 2016 market. It has led to stable used values and supported strong results for the industry’s retailers.
“It looks like 2016 will beat a strong 2015 and the previous record of 2004. While 2017 isn’t without its challenges, motor retail is in great shape heading into the new year.”
Cap hpi reported strong used values in December with an average decline of 1.6% at three years 60,000 miles in December. This compares favourably with the 1.8% decline in December last year. Cap hpi said that electric vehicle prices were more stable with an average reduction of 0.6%.
Ford and Toyota are heading a consortium of automakers set up to prevent Apple and Google controlling how drivers connect smartphones to their cars.
Ford and Toyota are joined by Fuji Heavy Industries, Mazda, PSA Group and Suzuki in the SmartDeviceLink Consortium, a not-for-profit group set up to promote more choice in how smartphones get connected to in-vehicle technologies like dashboard displays and voice recognition, and in other programming.
Apple has launched CarPlay while Google has Android Auto, but automakers worry that if they establish themselves as must-have options, the influence of Apple and Google over the industry will grow
Suppliers Elektrobit Automotive, Luxoft, and Xevo have also joined the consortium, while Honda was believed to have been interested in joining as well although they were not mentioned in the statement. By enlarging the consortium, the automakers hope to maintain control over how much access infotainment apps have to vehicle data.
Hyundai Motor has unveiled its ‘Mobility Vision’ concept which will connect autonomous cars to living and working environments.
The company claims its Smart House technology will blur the line between mobility and living and working space, integrating the car into the daily lives of users. The Smart House concept integrates the car with the living space when docked, before transforming it into a mobile living space when customers need to move around.
Hak Su Ha, director of Hyundai Design Center, said, “Hyundai Motor recognises the significance of connected technologies and the extent to which they could benefit our customers’ daily lives. Our Smart House concept fully integrates the car into the home, ultimately making the user’s life more comfortable and convenient. By seamlessly blending features from the car with home and work environments, the user experience is uninterrupted whether socialising, working at home, or on the move.”