• GRANT CUTS MAKE ULEVs `UNVIABLE’ FOR FLEETS
• SHARES RECOVER AS PDG TURNS Q3 PROFIT
• SPIKE IN RECALL WORK FOR BMW AND TOYOTA
• CLICK DEALER TAKES F&I DIGITAL AWARD
• VOLUME BONUS POLICY HURTS VAUXHALL RETAILER
• WORLD NEWS – JLR opens new Slovakia plant
• STOCKWATCH – slide continues for Inchcape
• COMING UP – BoE interest rates decision
• LAUNCH DIARY – Volvo V60 Cross Country
• MONEY MATTERS – banks need Brexit `war chest’
• OUR BLOG – will the Budget be a trick or treat?

Fleet specialist Meridian Vehicle Solutions says the government’s move to scrap or cut the green car grants makes them unviable for fleet business.

Announcing its decision to freeze an expansion of its ULEV fleet and saying the cuts effectively add an average of £2,500 per vehicle, Meridian managing director Phil Jerome was quoted as adding: “This is really disappointing. There is rapidly growing demand from fleets for plug-in hybrids and we made a strategic decision earlier this year to meet that need.

“Really, we are trying to establish these vehicles as the mainstream, even the obvious, fleet choice. However, the truth is that the maths no longer stacks up. Our hires generally run from three months to a year and the cut puts hundreds of pounds every month on every vehicle, meaning that the pricing is no longer commercially viable.”

https://bit.ly/2O8s8hE

Shares recover as PDG turns Q3 profit

Shares in Pendragon ended last week almost 10% up as investors ploughed back into the auto retail group after the previous week’s profit warning. The confidence seemed justified as Pendragon followed up its warning with a Q3 trading statement confirming like-for-like margin improvements in new and used sales against a background of falling revenues.

Used car gross profit was up 13.7% and used gross margin up to 6.9% (5.7%) while new car gross profit was flat but gross margin up to 7.1% from 6.5%. However, the figures are comparative on Q3 2017 which was a poor one for the group and also saw a profit warning issued.

Pendragon said it made an underlying pre-tax profit of £1.1m for the quarter, up £3.0m on the £1.9m loss in 2017. But it didn’t say whether the profit came from the motor division or from software or leasing.

Spike in recall work for BMW and Toyota

BMW and Toyota retailers are facing a huge spike in workshop demand after the manufacturers issued recalls affecting more than 300,000 cars.

BMW says there is a fire risk from fluid leaks in its four and six cylinder diesels built between 2011 and 2017 and 268,000 cars should be taken back to the retailer. Toyota says 55,000 Prius, Prius+ and Auris Hybrid built between October 2008 to November 2014 need a software fix after it was found they could go into `limp mode’, lose power and stall.

Click Dealer takes F&I digital award

DMS provider Click Dealer took the Digital Award, sponsored by Findandfundmycar.com, at the F&I Conference and Awards for its online car retailing product, ClickEngage. The award, which is open to dealers or service providers, `recognises the digitisation and omni-channel changes that are affecting the F&I sector.’

Click Dealer founder and director, Gerry Moxham, said: “ClickEngage was created because we believed there was a more efficient and convenient way to buy and sell cars for dealers and customers alike. We pictured a system which allowed individuals to take control of their own deal, structuring it as they please with a part-exchange, finance agreement and add-on products all from the comfort of their own home, and that is what we developed.”

Volume bonus policy hurts Vauxhall retailer

Vauxhall retailer Icebroom Motors saw a 2016 pre-tax profit of £52,000 turn into a net loss of more than £210,000 last year amid the car maker’s collapsing market share and shift in bonus policy.

The retailer which has sites in Rugby and Daventry saw turnover from new and used car sales rise slightly from £10.2 million in 2016 to £10.9m. Aftersales dropped slightly from £3.7m to £3.4m.

It said: `The directors report that the results for 2017 are disappointing as the company had struggled to maintain turnover. The new vehicle market has seen a decline of 5.7% and Vauxhall’s market share of new vehicle sales nationally declined by 22%.  During 2017 the company changed strategy to target the volume bonuses offered by Vauxhall which has resulted in lower Gross Profit this year.’

WORLD NEWS

JLR opens new Slovakia plant

JLR expects its newly opened factory in Slovakia to build 100,000 cars a year by 2020. The £1.2 billion facility will take over production of the Discovery model but could take a second model if Brexit forces a switch to overseas production. It has also agreed with unions to delay talks on pay until there is more clarity on Brexit and global markets.

Volvo to avoid US tariffs in production switch

Volvo is shifting production of American-bound XC60 SUVs from China back to Europe to avoid higher tariffs in the American-Sino trade war. Reporting a 50% fall in quarterly operating income to around £230 million caused by car launch costs and the impact of tariffs, the car maker said year on year Q3 sales in Europe are up 8%.

CEO Hakan Samuelsson said: “The best way forward should be open, balanced trade with no car import duties for EU, US and China.”

https://bit.ly/2JlAVvW

STOCKWATCH

Closing prices at October 26 and weekly movement

BCA 193.6p (+0.4p)

Cambria 50.5p (-2.5p)

Caffyns 402.0p (-13.0p)

Inchcape 499.0p (-17.0p)

Lookers 95.0p (no change)

Marshall Motor Holdings 122.5p (-6.0p)

Motorpoint 210.0p (-9.0p)

Pendragon 26.3p (+2.0p)

Vertu 37.0p (+1.6p)

COMING UP

November 1. Bank of England Monetary Policy Committee’s decision on base rate.

November 6. Auto Retail Q4 Live Briefing, sponsored by Auto Trader. To register click here: http://bit.ly/ARLive18Q4

November 16. Auto Retail Economic Forum 2018, (London). For more details visit: http://bit.ly/2PSTCKb

LAUNCH DIARY

Q1 2019. Volvo V60 Cross Country premium estate car. From £38,270.

MONEY MATTERS

Banks need Brexit war chest – BoE

Banks must build up a war chest of cash to withstand any post-Brexit problems, the Bank of England has said. Royal Bank of Scotland has already set aside £100 million.

Deputy Governor, Sam Woods, said: “Just in case things go badly we have been working with firms to ensure they have in place liquidity sufficient to accommodate a severe dislocation in financial markets. We all need to be ready for a range of outcomes.”

https://reut.rs/2Atx2ly

Wages below recession level

Wages are still below their pre-crash level when adjusted for inflation despite recent growth, official data shows. The ONS said earnings adjusted for inflation remained 3.7 percent lower than in 2008, before the financial crisis.

OUR BLOG

Will the Budget be a trick or treat?

Car manufacturers want to see some help in today’s Budget after being hit by the diesel issue, Brexit, the slump in the Chinese market, green car grant cuts, WLTP and all the other headwinds which saw output from our factories drop nearly 17% last month, adding to a downward trend.

Meanwhile auto retailers are struggling from a distinct conservatism in domestic spending and from a lack of the models to sell that many buyers want to buy.

There is not much Mr. Hammond can do about external factors and a U-turn on diesel just isn’t going to happen any more than it will for hybrid/EV grants; but he can help manufacturers by giving consumers a reason to buy the products they make – and a quick way to do that is boost demand in the company car and fleet sectors.

The financial case for many corporate sector purchases isn’t as attractive as it once was. Indeed, a recent study by cap hpi said that in the past decade the list price of a sector favourite, the BMW 320d SE, has gone up by 23% but the BiK by nearly five times that, 105%.

Factor in the impact WLTP is now having on the CO2 figures on which the tax is based and you can see why so many purchase decisions are being put on ice. Indeed, it’s being said that short term rentals are growing as a temporary stopgap solution until the picture is a bit clearer and – hopefully – the climate a bit more favourable.

There is a strong case for saying Hammond should be proactive and do something to help the industry. Lost sales from delayed orders are costing the Treasury the VAT receipts and any job losses among the factories, supply chains and retailers from a sustained downturn will give economic confidence a hard knock, hardly something we need with Brexit just around the corner.

The auto industry is not just crying wolf here. It is a major source of employment, investment and tax revenue but at the moment it is struggling and not seeing much cause for optimism in the short term.

Mr Hammond begins talking at 3.30….

John Swift

Editor
Auto Retail Agenda