15 July 2018

• HONDA PLANS FOR WLTP DEROGATION
• MERCEDES MULLS RETAIL OPTIONS FOR EQ BRAND
• DONNELLY BOOSTS USED CARS AND AFTERSALES
• HERITAGE ADDS FROM PENDRAGON
• FCA COMPLIANCE WARNING AFTER RETAILER INFRINGEMENT
• USED CAR SECTOR SEES RECORD LEVELS
• WORLD NEWS – Fiat workers strike
• STOCKWATCH – Rise for Inchcape
• LAUNCH DIARY – Vauxhall Corsa GSi, Jeep Wrangler
• MONEY MATTERS – Equity release up
• COMING UP – Q3 Auto Retail Briefing
• OUR BLOG – DS shows the risk of sub-brands

Honda is confident it can clear its full level of non-WLTP compliant vehicles by the time the ultimate deadline passes but warns that volume brands might struggle.

Manufacturers can derogate the equivalent of 10% of their 2017 sales figures and with Honda registering 53,901 cars in 2017, it can defer the deadline for 5,390 cars to the end of August 2019 although all other NEDC tested vehicles must be sold by the end of this August.

Honda’s Head of cars, Phil Webb, told Auto Retail Agenda that he is confident of being able to clear the backlog in plenty of time, saying: “Our stock levels are very healthy.  We will derogate some cars, which means you get an extra 12 months to sell the car.”

In terms of the number of vehicles for which he expects to have to apply for an extension, he said: “We will be under 5,000 and will clear that in 12 months” but warned that some volume brands could struggle, adding: “We are not a big player in volume terms so you can imagine that some of the bigger ones have quite a job to do.”

He also said that the brand is aiming to improve its renewal rates, with the hope being to replicate the Jazz’s loyal customer base across the range.

“It differs from model to model, but the renewal rate ranges from about 35 to 45% so we are about average.  I don’t want to be average. We would like to be on 45% across the board to start with. If you think of the PCP journey that we are now at, there is no reason that in the next 18 months we shouldn’t start looking at that.”

Mercedes is currently reviewing several retail options for its EQ electric sub-brand.  Speaking to Auto Retail Agenda last week, Implementation manager, Andrew Dean said: “We are a year away from the EQ-C going on sale and we are looking at options for how we retail the car.  It’s possible all outlets will sell it, but it’s also possible there will be one outlet per market area.

“Mercedes currently has 30 market areas in the UK.  The EQ range will kick-off in mid-2019 with the EQ-C, a fully electric SUV that will rival cars such as the Jaguar I-Pace and Tesla Model X.  Mercedes will then add another nine EQ models by 2022.  Fitting an additional 10 cars into Mercedes showrooms could put pressure on space and force further investment in network property.”

Industry analysts PA Consulting recently forecast that Mercedes will be the EV market leader by 2021.

Donnelly boosts used cars and aftersales

Strong growth in used cars and aftersales business saw Northern Ireland’s biggest retail group increase revenue by 16% to more than £330 million last year.

Family run Donnelly Group sold 8,868 used cars in 2017 against 7,461 the previous year but registrations of new slipped from 8,313 to 7,711 in the same period.

The business’s financial statements reflect 14 months of operations as it changed its reporting period to 31 December but normalised revenue was £331 million. Pre-tax profit remained almost static with 2016, at £1.9m.

Heritage adds from Pendragon

VW, Audi and Skoda retailer, Heritage Automotive, has bought the JLR dealerships in Cheltenham from Stratstone for an undisclosed sum.

Stratstone’s parent company, Pendragon, is selling off some of its premium brand sites as part of a strategic review announced last Christmas following a profit warning and which should help liberate £100 million.

Heritage was bought by Richard Neulaender and John Walsh in 2016. The pair were the former owners of Colborne Garages which they sold to Lookers in 2014.

No one was available to comment from the company but its website says: “The Heritage Jaguar franchise is a very recent acquisition from Stratstone Jaguar Cheltenham and will continue to serve the region with the highest level of Jaguar main dealer customer service.” It has a similar message about Land Rover.

Retailers have been warned it is easy for the Financial Conduct Authority to check if they are licensed to provide finance following a warning about a used car dealer this week.

On Tuesday the FCA highlighted David Charles Cars, of Armstrong Road, Manor Trading Estate, Benfleet, Essex, and said: “We believe this firm has been providing financial services or products in the UK without our authorisation. This firm is not authorised by us and is targeting people in the UK. Based upon information we hold, we believe it is carrying on regulated activities which require authorisation.

“Businesses dealing with finance have to be authorised by us and it is very easy for us to be alerted about firms and companies which are not. We would advise any business dealing finance to make sure they are authorised to do so.”

Used car average values continued to rise with record levels seen for fleet/lease and dealer part-exchange cars, according to the latest BCA figures. The headline average value improved to £9,641 – the third highest value on record.  Year-on-year, average values rose by £846, a 9.6% rise over the 12-month period, despite average age rising slightly.

Fiat workers strike

A small union is striking at a Fiat plant in protest at the £88 million paid by Italian football team, Juventus, to Real Madrid to secure striker Christiano Ronaldo for four years. Exor, the investment arm of the Agnelli family, owns nearly 30% of Fiat Chrysler (FCA) and 64% of Juventus.

Closing prices at Friday July 13 and weekly movement.

BCA 231.0p (+6.0p)

Cambria 60.0p (-1.5p)

Caffyns 425.0p (no change)

Inchcape 795.0p (+14.5)

Lookers 107.0 (+1.0)

Marshall Motor Holdings 161.0p (no change)

Motorpoint 242.0p (+6.0p)

Pendragon 24.1p (+0.2p)

Vertu 50.2p (+0.2p)

September: Vauxhall Corsa GSi, from £18,995. Order books open now.

Jeep Wrangler 4×4. Prices tbc.

Equity release stats revealed

Retired home owners took out an average of £9.5 million per day of their equity in the first half of 2018. Figures from Key Retirement show a total for the six months of £1.71 billion, an increase of 37% on the previous year. It works out at an average of £78,000 each for the over-55 home owners. Home and garden improvements and holidays were the main spends.

https://bit.ly/2md5itv

Monday. Ford opens five-car showroom in the Next store in Manchester’s Arndale shopping centre.  Test drives and hand overs can be done there.

Thursday. Auto Trader annual Retailer Awards

7 August. Auto Retail Live Q3 Briefing in partnership with Auto Trader. 30 minute programme from our London studios to your PC or mobile. Guests are Andy Bruce, CEO of Lookers, Dale Wyatt, Director of Automobile at Suzuki, Naomi Hahn, Audience and Brand Director at Auto Trader. Register at https://bit.ly/2LbpGGs

11 September:  Zero Emissions Vehicle Summit, industry experts and policy makers from around the world meet at Birmingham International Conference Centre.

DS shows the risk of sub-brands

Tough call, isn’t it, when a manufacturer for which you hold a franchise says it plans to set up a new brand and expects you to get fully behind it and invest.

The trade is littered with cases where these have failed and valuable showroom space and sales staff which could otherwise have been profitably used selling cars that buyers actually want has instead been squandered on chasing a dream.

Lancia, Daewoo and Chevrolet are three of the recent failures which spring to mind where manufacturers believed all they had to do was bung on a different badge, price and spec the car up from the base model (Lancia from Fiat) or try to rebadge some old stock (Daewoo/Chevrolet with Vauxhall) and expect people to sign the order form.

Some have worked brilliantly. Lexus is a text book case, as is Dacia. They were immediate successes because they were distinctly different from the parent company’s usual cars and had a very strong brand message and identity; luxury from Lexus, ultra budget motoring from Dacia.

Abarth seems on the fringes of success, Infiniti is questionable at best and I know of at least one Ford retailer wondering about the cost/benefit relationship of the Vignale sub-brand to the business.

And now it is the turn of DS, the name Citroen uses for sportier or more luxurious versions of its own-badged cars. It said this week that production has stopped on one model and another will follow by year’s end, effectively removing the mid-range of what retailers can sell, while it sorts out a way of giving DS a stronger identity instead of looking what they are, rebadged Citroens.

I was in a DS dealership earlier this summer and all I could see was windscreen stickers displaying the huge discounts on its unregistered cars. It was a multi-franchise operation and one entire showroom was filled with cars shouting about how much cheaper they had to be to sell.

Distressing the product and the retailer. It’s not the first time it’s happened…

John Swift
Editor
Auto Retail Agenda

Tags: Donnelly, DS, EQ, FCA, Fiat, Heritage Auto, Honda, Inchcape, Jeep, Pendragon, Vauxhall, WLTP