automotive messenger – november 2016 · november 2016 tarun mistry t +44 (0)20 7728 2404 m +44...

Automotive MessengerNovember 2016

Tarun MistryT +44 (0)20 7728 2404M +44 (0)7966 432 299E [email protected]

Neil BarrellT +44 (0)20 7865 2700M +44 (0)7976 550 312E [email protected]

Bill Parfitt CBET +44 (0)20 7385 5100M +44 (0)7528 870 341E [email protected]

Paul BurrowsT +44 (0)1908 359 554M +44 (0)7850 538 309E [email protected]

Owen EdwardsT +44 (0)20 7865 2291M +44 (0)7811 991 128E [email protected]

The third quarter news flow again focused on registrations, Brexit, the weak pound and the strongly performing stock market.

September 2016 saw a 2% uplift for new car registrations; however, pre-registered vehicles may have been used to reach this number; some pundits in the market suggest that this element is increasing and presents a real challenge. We may be heading for a market with an excess of 2.6 million units registered, but what about 2017? Amid uncertainties over Brexit, next year appears less clear and the SMMT has suggested that new car registrations could fall to 2.5 million units by year end.

Brexit remains a topic of interest and is unlikely to disappear anytime soon. Prime Minister Theresa May has said that Article 50 will be triggered by the end of March 2017, and has indicated that she would like the UK to continue with its free-trade agreements with the EU. Nevertheless, the terms of the UK’s exit from the

EU remain a mystery, and continuing speculation will only stoke future uncertainty, raising additional questions over the outlook for the UK’s economy and the £ sterling.

Whilst sterling weakened substantially on Monday 3 October following Mrs May’s announcement at the Tory Party Conference that the UK would invoke Article 50 by the end of March 2017, there has been a rebound. Sterling fell close to a 31-year low against the US dollar ($1.28) and reached a three-year low against the euro (€1.13) on that date and has fallen and risen since. Much of the UK press is focusing on comparisons against the dollar and euro; however, the Japanese yen has also been affected. Sterling has declined against the yen since the beginning of 2016, reaching its lowest point in October 2016. Clearly, sterling’s weakness against the yen will impact. We would expect that manufacturers will have hedged against this negative exchange rate.

Once the hedging has come to an end, the UK economy and automotive market will feel any effect of sterling’s potential weakness.

However......this industry in this country copes

really well in all situations and thus there is a good reason to be positive if only for the old adage "survival of the fittest". The right product, sold at the right monthly price point, by the best retailers, with the right support, remains a winning formula.

Contents

03 Registrations are strong, but Brexit is still in the back of our minds

05 Pitfalls of negative equity VAT06 McLaren Automotive09 News snippets from the automotive

industry

14 UK new car registrations

16 Registration of new commercial vehicle

17 EU and EFTA passenger car registrations

Automotive Messenger

2

As sterling has continued to remain weaker and is expected to remain weak for some time, the stock market has performed strongly. The London Stock Exchange nearly exceeded its all-time highs on 3 October, up by 20% from its yearly low of February 2016.

Several factors have driven share prices. FTSE 100 companies have continued to perform and the weak pound has provided support for corporate earnings. Many investors believe that the Bank of England could cut interest rates even further, generating even lower returns for savers and bond investors. Dividends from the stock market look relatively

appealing, and other non-traditional asset classes – such as classic cars, jewellery, and fine wines – are growing in popularity. Nevertheless, it is worth remembering that the benefits generated by dividend payouts and favourable currency effects are only a short-term substitute for sustainable corporate earnings growth and strong share price performance.

Following the recent US election and the unexpected result of Donald Trump voted in as President-elect, the impact remains unclear and in furious debate. Further commentary will feature in the next edition of Automotive Messenger.

To conclude, in this edition of Automotive Messenger we have two articles of interest – a strategic piece on an automotive manufacturer, its distribution and retail network in the eyes of McLaren; and one of our tax colleagues providing insight on the pit falls of negative equity, and how this can result in HMRC demanding more VAT than is due.

This industry in this country copes really well in all situations and thus there is a good reason to be positive if only for the old adage "survival of the fittest". The rigth product, sold at the right monthly price point, by the best retailers with the right support remains a winning formula.


Automotive Messenger November 2016 3

Registrations are strong, Brexit is still in the back of our minds but positivity remains

September's new car registrations were eagerly awaited to see whether 2016 had exceeded 2015. New vehicle registrations were the highest on record with 469,696 new vehicles registered.

New vehicle registration analysis

For the month of September, new vehicle registrations represented an annualised increase of 1.55% and over the year to September, new vehicle registrations increased by 2.56% year on year (YoY). This was a strong result, particularly in the light of the disruption created by Brexit and weak sterling. The actual number of vehicles that were sold to an end customer and/or the level of preregistered vehicles remain something we will never know.

New vehicle registrations for September showed strong growth in the fleet market: units registered year to date (YTD) increased by 5.4% in 2016 versus 2015, while private registrations YTD only increased by 0.4%. YTD Fleet and Business accounted for 54.2% of total number of vehicles registered in 2016, compared with 53.3% in 2015. Fleet is taking an increasingly large proportion of vehicle registrations.

The premium brands continued to grow strongly: total market share for the three main German brands (Mercedes Benz, Audi and BMW) YTD was 19.25%, up from 17.84% in the same period in 2015. Putting this into context, the combined market share for Ford and Vauxhall for YTD 2016 was 21.26% – a decline from 22.91% in the same period in 2015. This serves to reinforce the strength of the German premium brands and their "push" for market share. Jaguar posted a strong performance and YTD new vehicle registrations rose by 47% YoY, boosted by the launch of new vehicles and percentage growth from a low base; and Land Rover also had an impressive September month with a YoY increase of 49.14%.

The volume brands had a difficult time in September with year to date market share declining. Ford vehicle registrations declined by 5.3% YTD, Vauxhall declined by 4.3% and

Volkswagen fell by 10.6%. Negative press coverage has suggested that Volkswagen could pay up to US$16.5 billion in settlement for its diesel emissions scandal, not surprisingly this has not benefited this brand.

The best-selling model was the Ford Fiesta, underpinned by the 20th anniversary of the model. The Vauxhall Corsa and the Ford Focus were the second and third most-sold vehicles in the UK YTD. Surprisingly, in the top-ten best-selling models, the Mercedes Benz C Class reached number nine YTD, while the Audi A3 was ranked in tenth place, suggesting that both these models are more volume models rather than premium – so premium in nature but not in registrations!


4

Light commercial vehicles The light commercial vehicle

market (for commercial vehicles less than 3.5t) continued to grow, rising in September 2016 at an annualised rate of 1.89%. Over the YTD, the LCV (< 3.5t) grew YOY by 2.7%. Ford continues to dominate the market with an increase in market share from 26.6% in YTD September 2015 to 30.9% in YTD September 2016. Over the year to September 2016, Volkswagen’s registrations were still lower than at the start of its emissions scandal. Nevertheless, Volkswagen seems to be starting to experience a rebound in its market share, which rose by 2.71 percentage points from the month of September 2015 to 2016.

The commercial vehicle market between 3.5t and 6.0t increased at an annualised rate of 18.2% in September month; however, this followed a large percentage decline in August and means YTD September 2016 remains lower YoY. Ford continued to dominate this market with market share of 34.3% YTD September 2016.

FLA statistics FLA motor finance providers reported

an annualised rise of 13% in new business volumes – business and consumer – during August 2016 to 192,989. The corresponding value of new business was 16% higher than in August 2015 at £2.5 billion. New consumer vehicle purchases with car financing (FLA statistics) increased by a total of 10% in the year to August 2016 and PCP growth rose by 15% over the same period. Growth in used consumer finance for vehicles was robust, PCP used consumer car finance increased at an annualised rate of 23% in August 2016.



Pitfalls of negative equity VAT

Are you at risk of paying more VAT than necessary?

Our automotive tax specialists examine the potential risk of the phenomenon of negative equity and how this can result in HMRC demanding more VAT than is due.

The phenomenon of negative equity as it applies to the vehicle market, has increased in recent years. The combination of ultra-low interest rates, the extension of loan periods and consumers changing vehicles earlier in the loan period has led to consumers sometimes facing negative equity when they look to refinance the purchase of a new car. When consumers refinance their loans, they effectively roll over the negative equity into a single finance package for a new vehicle.

The risk for dealers comes during the documentation of the transaction (with the documents sometimes exchanged electronically between dealer, finance house and consumer), the selling price of the new car is sometimes overstated. In effect, the documentation may suggest that the car has been sold for a value including the rolled over negative equity. HMRC will then demand VAT on the inflated value, unless the documentation clearly identifies the negative equity as separate to the vehicle selling price.

HMRC has quickly established a project team tasked with interrogating dealers’ finance systems to identify where they think VAT has been understated. Even for relatively smaller dealers the exposure could run into the tens of thousands of pounds. It is apparent that HMRC are forearmed with specific market intelligence that gives them a heads up on which finance house transactions could be vulnerable to a tax assessment.

A similar challenge has historically been made where dealers ‘bump’ the value of vehicles taken in as part exchange, possibly as a way to incentivise the sale of a new car. The selling price of the new vehicle is potentially overstated with HMRC seeking the VAT on the higher value. Similar to negative equity, the cost of change for the customer, the profit for the dealer and loan provided by the finance house remains the same – this only affects the dealer’s VAT bill.

Dealers are encouraged to regularly review their VAT accounting on ‘negative equity’ and ‘part ex’ deals to ensure they are not needlessly giving away profit to the ‘VAT man’.

If dealers are in any doubt or subject to challenge by HMRC,

the dealer should seek professional advice. For some dealers there may be a counter claim available where there is outstanding litigation on the stocks relating to overpaid VAT on demonstrator cars.

In certain limited circumstances, Grant Thornton has successfully negotiated additional settlements for dealers where appeals to the Tax Tribunal have been lodged.

For further information, please contact:

Morgan MontgomeryAutomotive VAT

T +44 (121) 2325 126E [email protected]

McLaren Technology Group – includes the Formula One team: McLaren Racing, McLaren Marketing, and McLaren Applied Technology, a consultancy company that applies the racing technology and know-

how to other third party companies.

McLaren Automotive – the road car production company and operations that are associated with the manufacturing,

distribution and servicing of its road going cars.


6

A brief historyBefore his untimely death in 1970 in

a racing car accident at the Goodwood Motor Circuit, Bruce McLaren had started to manufacture a very small number of road-going cars which hint towards a possible longer term strategy to manufacturer road sports cars.

In the mid-1990s, McLaren Cars was established to build a limited number of McLaren F1 road cars. 64 road cars were built and 42 racing vehicles, including the McLaren F1 GTR - the first GT car to achieve an outright win Le Mans at its first outing. Following this, in 2003, Mercedes Benz commissioned McLaren Cars to build the McLaren Mercedes SLR.

In 2010, McLaren Automotive (McLaren) was created to focus solely on the design and manufacture of road-going vehicles. To facilitate this, in 2011, the McLaren Production Centre was opened, adjacent to the McLaren Technology Centre, as the sole assembly facility for the new McLaren road cars.

The first road car from McLaren, the MP4-12C, rolled out of the McLaren Production Centre in 2011 at the same time as it opened its first showroom at 1 Hyde Park in London with the promise that it would launch at least one new car or derivative every year.

Company structure There are two main companies in

McLaren:

The businesses are operated as separate companies and have separate management boards.

McLaren Automotive A focus to build the world's best two-seater super car

McLaren Automotive and McLaren Technology Group started life as Bruce McLaren Motor Racing, established in 1963 by racing driver Bruce McLaren



Strategy

Historical strategyIn 2011, McLaren introduced its first

strategy for building road cars. The aim was to launch at least one vehicle every year. This strategy proved successful and McLaren sold 1,649 vehicles in 2014. These formed a range of cars including the MP4-12C that became the 650S Coupe and Spider (now referred to as the Super Series), and the now-iconic McLaren P1TM (that sits in the Ultimate Series). The sales of cars increased slightly in 2015, with an additional five vehicles being sold between 2014 and 2015. The next phase of the strategy was to maintain the company's focus on the production of the world’s best two-seater mid-engine sports cars, but building cars that catered to a broader customer base who could use these cars on a daily basis. This included the launch of the Sports Series cars, including the 570S, 540C and 570GT.

The next six yearsMarch 2016 saw the introduction of a new business plan named "Track 22". This strategy builds on the original plan and at its core is McLaren’s commitment to invest between 25-30% of the business' revenue in research and development (R&D), accounting for about £1 billion of capital expenditure over the six-year period. McLaren generated revenue of £475m in 2014, which is expected to increase by 50% in the next two years and to double by 2022. In each year, between 2016 and 2022, the group plans to be profitable (operating profit). The number of car sales is expected to increase from 1,654 units sold in 2015 to approximately 3,000 units in 2016, rising to between 4,000 in 2017 and 4,500 to 5,000 cars in 2018, by which time the McLaren Production Centre will be at full capacity.

Future innovations McLaren is also considering new

technology and new developments. Senior management knows that they have to continue to expand into their niche area of the market, "high-value two-seater sports cars": • New engine architecture - this will

be a key part of this development over the next six years, with a new powertrain to be launched before the end of 2022

• Hybrid technology - McLaren already has exposure to hybrid technology with the manufacturing of the P1. Hybridisation has clear benefits for McLaren, 50 % of production cars are expected to benefit from hybrid technology by 2022

• Electric vehicles - there are plans in the pipeline to design and evaluate a one-off prototype electric sports car. This will require an extensive amount of planning – not only because of the technology involved, but also in order to create a car that meets their customers’ expectation in terms of noise, vibration and passion of driving. McLaren's

McLaren 570S Coupé Source: McLaren


8

customers are accustomed to the feel and sound of a combustion engine, so it will be interesting to see how the company meets this challenge. Long into the future, McLaren believes that electric vehicles will prove core to their car portfolio of vehicles.

The Retail and Distribution network

The retail network business started off with one showroom at 1 Hyde Park in London in 2011. This has increased to 80 retail outlets across 31 countries, including six facilities in the UK. As sales are expected to grow, the retail network will also need to expand. The target is to reach 100 retailers globally, and potential scope for a slightly larger UK network in the longer term. However, this will depend on demand and the throughput of vehicles for each of the current dealers. The majority of UK retail outlets are

owned by either Plc. companies or larger automotive dealer groups. Once the target of 100 dealers on a global basis has been achieved, McLaren will have a sufficiently robust retail network with good car parc of vehicles, and the ability to sell and service vehicles to a high manufacturer standard.

Although McLaren is a small UK car manufacturer, it continues to "punch above its weight" relative to its larger global competitors, not only in its new vehicle launches, but

also its technological development. Management has a clear strategy to take the business through a period of strong growth, tripling the volume of vehicles manufactured annually and increasing the global retail network by a quarter. Despite McLaren Automotive’s relatively small size, it retains its strong focus on its high-net-worth niche customers, who continue to support the brand and business.

McLaren car launchesVehicle name Launch year

F1 1992

Mercedes Benz SLR McLaren 2003

Mercedes Benz McLaren SLR 722 2006

Mercedes Benz SLR McLaren Convertible 2007

12C 2011

12c spyder 2012

P1 2013

650S 2014

675LT, 675LT Spider, P1GTR, 570S, 540C 2015

570GT, 570SGT4, 570S Sprint 2016



News snippets from the automotive industry

Electric revolution sparks activity

Electric Vehicles (‘EV’) give rise to a lot of speculation, analysis and arguments/counter arguments. The real excitement is that the final outcome is unknown, so everyone can be right and wrong at the same time.

Tesla created the case for electric (see later) – they sell only electric vehicles and appear to be doing very well. Most mainstream automotive manufacturers have gone half way, pushing hybrid technology – a mixture of the old and the new.

The latest focus of attention is the oil industry – and with the issues around excess production – does this mean a disaster is looming?

A well-balanced article recently suggested that by 2040 electric cars could make up one quarter of the world’s automobiles. The same article noted that by the end of 2015, globally there were 1.2 million electric vehicles on the roads. This is very short of the 25 million (which one quarter of the world’s vehicles could represent in the future) and a big step up from zero!

Unsurprisingly the view from within the oil industry is less concerning. Exxon Mobil believes that in 2040

the total for EV will be at best 10%, so an estimated 10 million, less than half of predicted 25 million. The oil producers’ cartel, OPEC, was even more conservative with a prediction of 6%, so potentially around six million.

Who knows best? As mentioned earlier in this snippet – the answer remains unknown and the end result is likely outside the traditional industry’s hands. Automotive manufacturers and oil companies are going to be more driven by environmental issues than ever before.

There are still issues around range anxiety, battery production and disposal, and government subsidies. Battery technology seems to be as big an issue as oil production. Recently the FTSE 100 chemicals group Johnson Matthey, announced it expected its battery division to make its first profit this year. It is a tiny step but commentators see this as preparing for an eventual shift in its principal end-market.

Again we comment that all facets of the industry need to adapt for the future – the further away from production it seems the less is happening. Can this remain the case?

Can fixed wheels show the way?

There are many new terms doing the rounds these days – two of them are ‘big data’ and ‘predictive maintenance’. We recently enjoyed a piece on German railways – incredibly way less punctual on average than in the UK! The Germans do not just sit back and accept, they have started a project around sensors collating big data and using the information to change functional parts before they break down.

This concept is not new (ie telematics). It raises some interesting opportunities for automotive downstream – if you receive a notification when your customer may need parts changing – and this could apply to used and new markets – could you offer a service that pushes mobility to the front of the queue?

Audi is trialling predictive maintenance to maximise the lifespan of parts, an interesting concept with two opposite cause and effects. Evidently a brake pad set at 70% wear is changed during a routine service and switching to predictive could allow for extra wear and have the customer return at a later stage. On the plus side, the customer

The new Bentley SUV’s bumper

travels a staggering 2,200 miles and

crosses the English Channel three times

before it becomes part of the car

which leaves the showroom.


10

gets extra wear resulting in lower cost over time and the dealer gets to see the customer again and engage visual health checks. On the down side, if your vehicle keeps advising you to visit a dealer for x and y, you may decide it isn’t the brand for you and go for a less ‘intrusive’ product. Trains are different but perhaps the technology of change is getting closer to the motor vehicle and making research more cost effective with multi-use sales options?

Dare we use the ‘Brexit’ word? We have considered some of the

latest thoughts about the UK exiting the European Union following the 23 June vote and what seems to be a slow and somewhat painful process to work out how we leave.

Brexit can be hard, soft or anywhere in-between. The current (if turning)run of the £ sterling is making the OEMs quite nervous around their cost base importing cars to the UK and some have raised prices to counteract. Not quite the epic ‘marmite war’, but potentially enough to either squeeze dealer margin or impact PCP offerings.

One story caught our eye which just about sums up some of the issues automotive manufacturers will continue to face – it relates to Bentley in the VW Group stable. The published story runs

that the new Bentley SUV’s bumper travels a staggering 2,200 miles and crosses the English Channel three times before it becomes part of the car which leaves the showroom.

The concern? - Brexit has a lot to answer for and will soon be replaced by the ‘tariff’ word. The story begs the question as to how many times the bumper component may end up paying an EU tariff if the UK fails to win any free trade agreements. There are other examples quoted, the best being a Delphi fuel injector for a heavy truck which has been mapped as potentially entering and exiting the UK five times before the truck reaches a customer, so tariffs could have a profound impact.

Nissan and Jaguar Land Rover in the UK are reputed to hold certain parts for only two hours, an incredible example of ‘just-in-time’ – tariffs alone may not have any impact but what about border customs delays? The future is very unclear but Brexit will have a big influence on lots of areas in automotive.

Technology, changing technology and Uber

A bit of a mixed bag of technology updates. Whilst Uber appears to go from strength to strength and some, PSA boss Carlos Tavares has gone down his own route citing detachment from his customers as the main reason to ‘shun’ Uber. It seems around s€100 million has been set aside by PSA for investment in start-up companies working on transport innovations, ranging from car sharing and hailing to car-ownership clubs. Maybe the connection to customers will be won by sub-contractors and not the OEMs.

We also read about the influence from Israel around advances in technology. Not a widely-known fact, but Israel used to manufacture cars



– names such as Sussita and Carmel. Now the high-tech prowess born out of cyber security and artificial intelligence is coming to the fore. The words Tel Aviv and Silicon Valley are becoming mutually inclusive – examples include Ford acquiring a ‘computer vision’ company, General Motors having an advanced technology centre in the country and more obviously VW investing in Gett, the Uber rival based in Israel. In addition is MobilEye, the pioneer of autonomous driving technology.

All-in-all, the car is becoming more a computer science conundrum than a piece of engineering. Not sure how Henry Ford would see all this, but whatever this may be, we should heed the quoted words ‘Automotive is no longer metal on wheels, it’s computers on wheels’ by Ziva Eger, head of foreign and industrial co-operation with Israel’s economy ministry.

Technology again – and Uber!New wave technologies seem to have

all the glory at the moment as the race to replace the driver has infiltrated the big truck market, something that might make you uneasy next time you get sandwiched between 56 tonners on the M1!

You may also think our fixation with Uber is boundless – well only in the sense that they are trailblazers,

they are very much disruptors and they do cut the mustard when developing new transport solutions. Recently Uber acquired Otto, a ninety person start-up focused on the truck market and self-driving technology. Some commentators see the return on investment in truck technology to be quicker than passenger cars.

Evidently Volvo have a self-driving lorry operating deep underground. There aren’t pictures but it seems entirely feasible provided the internet doesn’t crash – what would happen to a buffering vehicle? Now there’s a conundrum.

You may recall in the previous edition of Automotive Messenger we mentioned truck “platooning” which meant trucks could travel very close together reducing wind resistance, fuel usage and cutting costs. There are essential money-saving technologies like these already available to the commercial world, and commercial technology can be tested away from public glare and danger.

The VW emissions progressThe emissions issue has proved

challenging for Wolfsburg. Getting a hard time from the US and paying the price was a given, but the EU has increased the pressure and Brussels is getting involved. VW has moved to bolster the recalls by saying that they

should be completed by autumn 2017 and all customers will have received communication by the end of this calendar year.

VW also faces the issue of how to reduce costs, mainly labour costs, in negotiation with their German Works Council. The strategic future direction is electric – or that’s the new mantra to offset the emissions scandal. The VW CEO recently made a telling statement after a major worker meeting – ‘VW’s brand is the heart of the company, but that heart must beat powerfully again’.

Carlos Ghosn and the Nissan X-Trail to Outlander

Mr Ghosn is attracting a lot of attention by taking on the role of Mitsubishi’s chairman, an astute investment this year following the issues Mitsubishi were facing. As chairman of both Nissan and Renault as well, he has a serious portfolio of brands to drive forward and overcome the challenges of variable global demand and fierce competition from premium brands landing in his space with cost-effective PCP solutions.

The UK’s vote of 23 June has given Mr Ghosn plenty of food for thought. Sunderland factory is a major success story and turns out more than half a million cars each year. They have taken on board investment to enable the Infiniti Q30 and derivatives production in the same facilities. His new issue is


12

News snippets continued...

tariffs – will there be any and at what amount? This could have a major impact on future model production given Sunderland is a big net exporter. The UK government has probably had an email reminding them that around 7,000 people work in Sunderland and it is suggested a further 20,000 in local supply chain. Add this to the JLR business case in the West Midlands and you have some pressure. Nissan’s new model Qashqai and X Trail will now be built in the UK, but it has evidently been a close call.

Whatever happens next, Nissan is a big success story in the SUV market, where it continues to trail-blaze around with the now iconic Qashqai. It remains to be seen how Mr Ghosn develops the Outlander, already a recognisable leader in hybrid products, not least because it looks like a regular model and pulls the strengths of Mitsubishi. We suspect this man, above all, can succeed.

US towns use lateral thinking – and revert modern technology to clunky solutions

We always appreciate the chance to quote a new phrase coined somewhere in the world, and this edition’s offering is ‘last mile’. Some US towns have been using ride-share offerings such as Lyft and Uber to address issues that are perceived to be solvable at a better cost. Some examples include Summit in New Jersey where commuters are offered free rides to and from the train station – hence the term last mile – which solves a serious ‘downtown’ parking problem and Boston subsidising rides for disabled passengers.

These are transport solutions; technology is providing the means to clunky solutions such as public transport, building car parks etc. Overall it is a cross-over between technology and infrastructure.

Smartphone Apps create the tool then you back-fill with services. Interestingly, the mayor of Summit is quoted as saying their solution is one of parking and not transportation. You can see the ride-sharers becoming mainstream and part of infrastructure very quickly in the right circumstances and geography.

Geely sets out its stallWe have commented previously that

there are a large number of Chinese Automotive manufacturers, yet very few have a full presence in Europe and the UK. Some have operations – SAIC and MG plus Great Wall – but now we read that Geely are bringing a new SUV to the region, the Lynk. The roll out plan is China in 2017 and then Europe in 2018, followed by saloon and hatchback models.



One commentator believes this is just the start – the Chinese have learned the technology and have raised quality. The dream team is high quality with low cost.

We understand that the price bracket will be under Volvo, which is also owned by Geely, and will be sold via social media rather than the traditional dealer route. They will target the younger market, anecdotally adding to the argument that the current high teens are going to do more on their smartphone than we have experienced. The sales pitch is massive connectivity power and not massive horsepower. All very trendy and relevant, but cynics abound that it will be beaten off by its traditional and well-established competitors. No-one stands back and takes competition on the chin!

One strictly for the dealersThe latest European motor retail

group league table makes interesting reading, and says a lot about the way business is transacted here in the UK. The data is based on 2015 financial data and is thus a little dated, nonetheless the UK effectively occupies six of the top ten slots, if you count Penske Automotive as Sytner!

The US Penske empire now sits at number one having displaced Pendragon – and these are turnover

tables. In the top fifty no less than 21 UK companies are included, allowing for the fact that a number of the continental groups act as distributors as well as retailers. The UK vehicle market is very well served by bigger retail groups who enjoy fleet opportunities alongside retail new and used. They are simply not comparable to other countries but groups like Penske can find cross-over synergies even if they are not immediately obvious. France and Germany have sixteen groups between them in the top 50, so retail sales-per-outlet has to be considered differently.

The last words are autonomous vehicles

We have mentioned this concept, but where are the main protagonists in terms of progress? Tesla continues to push fully autonomous and sees end 2017 as the target date for the capability. That would be huge and will really start to spook its traditional rivals. The vision is no human intervention.

LeEco was mentioned in a previous edition of this newsletter. It is a Chinese technology company who want to offer fully autonomous electric vehicles. They had a big blip to a publicity exercise in the US recently, but the vehicle in question “Le SEE” car, has adjustable seating and a steering wheel that disappears in to its dashboard. Its

strategic partner is Faraday Future who are from the same mould, an electric car start-up.

LeEco is a consumer electronics group at heart and is trying to provide a consistent experience across its “ecosystem” of devices (HD TV, Smartphone, online video service etc). Try picking the intention from this sentence attributed to LeEco’s chief R&D officer in the USA – “we are ‘reconstructing the value chain’ of electronics and media, while providing a more ‘elegant and intuitive bridge’ that will ‘solve the problem of a fragmented user experience’” There you have it then! Sounds a bit like...Apple?


14

UK new car registrations

New car registrations in the UK grew by 2.56% YTD 2016, with a record of 2,150,495 registrations between January and September. New vehicle registrations for the month of September were the highest on record at 469,696 vehicles, a 1.55% increase on September 2015.

Electric and alternative vehicle registrations which include hybrid and plug-in-vehicles, increased in the month of September up 59.1% on the previous year to 6,011 vehicles. Electric and alternative vehicles accounted for 1.2% market share. YTD to September 2016, 28,035 electric and alternative vehicles have been registered, up 40.7% on the prior year if only 1.3% of the total new vehicle registered market.

In the premium segment Audi, BMW, Jaguar Land Rover and Mercedes-Benz saw significant increase in market share YTD to 6.4%, 6.4%, 4.3%, and 6.4% respectively. Ford once again led the market with market share of 11.8%, although this was

down on the YTD September figures of 2015's share of 12.8%. Vauxhall and Volkswagen – the next two volume players in order of vehicles registered – experienced a decline in market share, and also a decline in the absolute number of vehicle registered. Respective market shares were down YTD to 9.4% for Vauxhall and 7.6% for Volkswagen.



UK new car registrations YTD 2016

YTD2016 YTD2015 2016/2015 FY15 FY14 Share (%) FY13 Share (%)

Brand Units Share (%) Units Share (%) % Change Units Share (%) Units Units

Ford 254,220 11.8% 268,328 12.8% (5.3)% 335,267 12.7% 326,643 13.2% 310,865 13.7%

Vauxhall 202,956 9.4% 212,100 10.1% (4.3)% 269,766 10.2% 269,177 10.9% 259,444 11.5%

Volkswagen 163,020 7.6% 182,441 8.7% (10.6)% 223,784 8.5% 214,828 8.7% 194,085 8.6%

BMW 138,656 6.4% 124,309 5.9% 11.5% 167,391 6.4% 148,878 6.0% 135,583 6.0%

Audi 138,411 6.4% 133,300 6.4% 3.8% 166,709 6.3% 158,987 6.4% 142,040 6.3%

Mercedes-Benz 136,892 6.4% 116,509 5.6% 17.5% 145,254 5.5% 124,419 5.0% 109,456 4.8%

Nissan 119,836 5.6% 124,967 6.0% (4.1)% 153,937 5.8% 138,338 5.6% 117,967 5.2%

Peugeot 80,986 3.8% 84,593 4.0% (4.3)% 104,249 4.0% 103,566 4.2% 105,435 4.7%

Toyota 80,918 3.8% 81,604 3.9% (0.8)% 98,709 3.7% 94,012 3.8% 88,648 3.9%

Hyundai 73,649 3.4% 70,623 3.4% 4.3% 88,117 3.3% 81,986 3.3% 76,918 3.4%

Kia 72,949 3.4% 64,208 3.1% 13.6% 78,489 3.0% 77,525 3.1% 72,090 3.2%

Renault 68,112 3.2% 59,221 2.8% 15.0% 75,618 2.9% 66,334 2.7% 46,173 2.0%

Citroen 67,560 3.1% 70,887 3.4% (4.7)% 88,626 3.4% 83,397 3.4% 78,358 3.5%

Land Rover 63,644 3.0% 49,881 2.4% 27.6% 66,574 2.5% 56,200 2.3% 54,699 2.4%

Skoda 63,310 2.9% 60,144 2.9% 5.3% 74,692 2.8% 75,488 3.0% 66,081 2.9%

MINI 51,716 2.4% 47,182 2.3% 9.6% 63,581 2.4% 53,661 2.2% 51,933 2.3%

Fiat 49,868 2.3% 51,867 2.5% (3.9)% 64,257 2.4% 67,162 2.7% 60,198 2.7%

Honda 49,656 2.3% 43,563 2.1% 14.0% 53,417 2.0% 53,544 2.2% 55,660 2.5%

Mazda 39,764 1.8% 37,923 1.8% 4.9% 45,504 1.7% 37,784 1.5% 31,228 1.4%

SEAT 36,912 1.7% 40,520 1.9% (8.9)% 47,654 1.8% 53,512 2.2% 45,312 2.0%

Volvo 34,861 1.6% 32,391 1.5% 7.6% 43,432 1.6% 41,066 1.7% 32,666 1.4%

Suzuki 31,593 1.5% 28,706 1.4% 10.1% 34,437 1.3% 37,395 1.5% 33,088 1.5%

Jaguar 26,416 1.2% 17,966 0.9% 47.0% 23,954 0.9% 18,401 0.7% 16,210 0.7%

Dacia 20,923 1.0% 20,386 1.0% 2.6% 26,228 1.0% 23,862 1.0% 17,146 0.8%

Other 83,667 3.9% 73,267 3.5% 14.2% 93,857 3.6% 70,270 2.8% 63,454 2.8%

Total 2,150,495 2,096,886 2.56% 2,633,503 2,476,435 2,264,737

Source: SMMT


16

Registration of new commercial vehicles

The commercial vehicle market experienced a moderate increase in vehicles registered in September 2016.

The commercial vehicle market (<3.5t) for September YoY increased by 1.89%. The commercial vehicles registered (>3,5t and <6.0t) for September 2016 increased up 18.21%.

The pick-up market continued to grow, September 2016 increase YoY 16.4%, while the 4x4s declined by 93.80%, which can be attributed to the decline in Land Rover which include YoY September 2016 down by 97.93% as the Defender was no longer being registered.

Ford (<3.5t) once again was dominant this quarter with a market share of 30.90% up from 26.60% at the same point in 2015 YTD. Volkswagen was the second largest register of under 3.5t vehicles with a decline in market share, from 12.30% in 2015 to 11.62% in 2016 (YTD), Vauxhall is also losing market share, with the 2016 September YTD being marginally down at 10.78% versus the previous year of 10.92%. Nissan and Renault continued to perform well gaining market share and growing the number of units registered YTD 2016, 28.37% and 11.40% respectively.

Registrations of new commercial vehicles YTD 2016 <3.5tYTD Sept

2016

YTD Sept

2015

2016/ 2015 FY2015 FY2014 FY2013

Country Units Share % Units Share % % Change Units Share % Units Share % Units Share %

Ford 90,141 30.9% 75,601 26.6% 19.2% 100,262 27.0% 82,519 25.7% 68,054 25.1%

Volkswagen 33,889 11.6% 34,963 12.3% (3.1)% 43,091 11.6% 40,238 12.5% 36,925 13.6%

Vauxhall 31,438 10.8% 31,038 10.9% 1.3% 41,736 11.2% 32,619 10.1% 29,736 11.0%

Peugeot 25,698 8.8% 26,390 9.3% (2.6)% 33,695 9.1% 31,867 9.9% 21,230 7.8%

Citroen 22,588 7.7% 23,996 8.4% (5.9)% 30,119 8.1% 27,228 8.5% 22,989 8.5%

Mercedes 22,346 7.7% 22,689 8.0% (1.5)% 31,887 8.6% 30,464 9.5% 25,667 9.5%

Renault 19,581 6.7% 17,577 6.2% 11.4% 25,371 6.8% 18,170 5.6% 12,978 4.8%

Nissan 12,462 4.3% 9,708 3.4% 28.4% 11,621 3.1% 10,270 3.2% 10,619 3.9%

Fiat 7,822 2.7% 9,456 3.3% (17.3)% 11,704 3.1% 12,629 3.9% 12,019 4.4%

Mitsubishi 6,833 2.3% 6,992 2.5% (2.3)% 9,006 2.4% 6,946 2.2% 5,927 2.2%

Toyota 5,093 1.7% 8,118 2.9% (37.3)% 10,266 2.8% 8,344 2.6% 8,063 3.0%

Isuzu 4,453 1.5% 4,649 1.6% (4.2)% 6,220 1.7% 5,502 1.7% 4,112 1.5%

Land Rover 3,916 1.3% 8,019 2.8% (51.2)% 10,124 2.7% 9,611 3.0% 6,644 2.5%

Iveco 3,303 1.1% 3,097 1.1% 6.7% 4,326 1.2% 2,769 0.9% 3,275 1.2%

Other 2,151 0.7% 1,868 0.7% 15.1% 2,402 0.6% 2,510 0.8% 2,835 1.0%

Total light CV 291,714 284,161 2.7% 371,830 321,686 271,073

Source : SMMT

Registrations of new commercial vehicles YTD 2016 >3.5t and <6.0tYTD Sept

2016

YTD Sept

2015

2016/ 2015 FY2015 FY2014 FY2013

Country Units Share % Units Share % % Change Units Share % Units Share % Units Share %

Ford 2,003 34.3% 2,196 34.5% (8.8)% 2,722 34.0% 1,852 27.2% 2,767 40.8%

Fiat 1,446 24.8% 1,580 24.8% (8.5)% 1,954 24.4% 1,313 19.3% 1,231 18.1%

Mercedes 1,143 19.6% 1,461 23.0% (21.8)% 1,858 23.2% 1,889 27.8% 1,485 21.9%

Peugeot 472 8.1% 531 8.3% (11.1)% 673 8.4% 401 5.9% 200 2.9%

Iveco 341 5.8% 230 3.6% 48.3% 316 3.9% 402 5.9% 420 6.2%

Volkswagen 210 3.6% 160 2.5% 31.3% 195 2.4% 386 5.7% 342 5.0%

Vauxhall 139 2.4% 104 1.6% 33.7% 140 1.7% 135 2.0% 99 1.5%

Renault 53 0.9% 59 0.9% (10.2)% 87 1.1% 74 1.1% 117 1.7%

Other 35 0.6% 43 0.7% (18.6)% 56 0.7% 345 5.1% 127 1.9%

Total heavy CV 5,842 6,364 (8.2)% 8,001 6,797 6,788

Source : SMMT



EU and EFTA passenger car registrations

In the YTD of September 2016 new passenger car registrations in the EU continued to grow, up 7.7% to a total volume of 11,607,266 units.

In YTD September 2016 new passenger car registrations in the EU continued to grow up 7.7% a total volume of 11,607,266 units. This was the highest September on record. All the major markets in Europe posted growth. The strongest growth YTD came from Italy (+17.4%) and Spain (+11.5%). The smaller Eastern European countries performed strongly, exceeding Western European markets, with the strongest coming from: Romania, Hungary and Latvia. These countries have enjoyed strong percentage growth, but account for far less volume than the major markets.

The three largest countries in the EU and EFTA passenger car registrations increased at a rate lower than the total EU Market (+7.7%). France was up by

EU and EFTA passenger car registrations September 2016YTD2016 YTD2015 2016/2015 FY2015 FY2014 FY2013 FY2012

Country Units Units % Change Units Units Units Units

Germany 2,555,783 2,407,938 6.1% 3,206,042 3,036,773 2,952,431 3,082,504

United Kingdom 2,150,495 2,096,886 2.6% 2,633,503 2,476,435 2,264,737 2,044,609

France 1,502,450 1,421,435 5.7% 1,917,226 1,795,885 1,790,456 1,898,760

Italy 1,406,035 1,197,274 17.4% 1,574,872 1,360,578 1,304,648 1,403,010

Spain 874,220 783,918 11.5% 1,034,232 855,308 722,689 699,589

Belgium 424,382 392,522 8.1% 501,066 482,939 486,065 486,737

Netherlands 285,355 300,985 -5.2% 449,393 387,565 416,730 502,479

Others 2,044,543 1,812,787 12.8% 2,397,192 2,155,721 1,941,817 1,936,369

Total EU 11,243,263 10,413,745 8.0% 13,713,526 12,551,204 11,879,573 12,054,057

EFTA 364,003 362,995 0.3% 488,498 455,681 457,310 474,036

Total EU + EFTA 11,607,266 10,776,740 7.7% 14,202,024 13,006,885 12,336,883 12,528,093

Source : ACEA

5.7%, while the UK lower at 2.6%, but the performance of the UK market has been strong over the last 12 months, while the EU continues to play catch up. The only countries which saw a decline in the month of September 2016

registrations were, the Netherlands (-4.2%), Greece (-10.3%) and Ireland (-1.6%); however the total contribution of these countries is only 2.9% of the total EU registrations.

Contact usAutomotive contactsTarun MistryPartnerT +44 (0)20 7728 2404M +44 (0)7966 432 299E [email protected]

Neil BarrellPartnerT +44 (0)20 7865 2700M +44 (0)7976 550 312E [email protected]

Paul BurrowsDirectorT +44 (0)19 0835 9554M +44 (0)7850 538 309E [email protected]

David DunckleyPartnerT +44 (0)20 7728 2408M +44 (0)7977 586 324E [email protected]

Bill Parfitt CBEConsultantM +44 (0)7528 870 341E [email protected]

Mark AlmondDirectorT +44 (0)20 7865 2115M +44 (0)7976 614 999E [email protected]

Charles TooseyAssociate DirectorT +44 (0)20 7865 2650M +44 (0)7836 218 911E [email protected]

Richard ParkinAssociate DirectorT +44 (0)20 7865 2164 M +44 (0)7776 225 844E [email protected]

Owen EdwardsAssociate DirectorT +44 (0)20 7865 2291M +44 (0)7811 991 128E [email protected]

Regional contacts

If you would like to be added to the Automotive Messenger mailing list please send your contact details to Ben Timmins at [email protected]

Eddie WilliamsBirminghamT +44 (0)12 1232 5268M +44 (0)7808 574 841E [email protected]

Nigel MorrisonBristolT +44 (0)11 7305 7811M +44 (0)7976 854 440E [email protected]

Darren BearCambridgeT +44 (0)12 2322 5673M +44 (0)7977 147 108E [email protected]

Alistair WardellCardiffT +44 (0)29 2034 7520M +44 (0)7815 062 698E [email protected]

Hazel PlattCorporation Tax PartnerT +44 (0)19 0835 9519M +44 (0)7827 876 468E [email protected]

Chris PettsLeeds/NewcastleT +44 (0)19 1203 7787M +44 (0)7973 714 191E [email protected]

Malcolm GomersallMilton KeynesT +44 (0)19 0835 9563M +44 (0)7815 143 361E [email protected]

Joe McLeanLeeds/NewcastleT +44 (0)11 3200 1506M +44 (0)7970 471 894E [email protected]

Richard LewisReadingT +44 (0)11 8983 9651M +44 (0)7538 551 468E [email protected]

Rob CavenScotlandT +44 (0)14 1223 0629M +44 (0)7774 191 272E [email protected]

Steve WhiteMilton KeynesT +44 (0)19 0835 9667M +44 (0)7710 748 532E [email protected]

Antony WatkinsAssociate DirectorT +44 (0)20 7728 2082M +44 (0)7795 220 331E [email protected]

Adam FurrerAssistant ManagerT +44 (0)20 7865 2541M +44 (0) 7941 628 058E [email protected]

© 2016 Grant Thornton UK LLP. All rights reserved.

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires.

Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions.

This publication has been prepared only as a guide. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication.

grantthornton.co.uk

GRT104636

automotive messenger – november 2016 · november 2016 tarun mistry t +44 (0)20 7728 2404 m +44...

Documents