Britain to save Euro car market
LONDON, England - Britain was the ray of light in the gloomy 17-year low of Europe’s car sales in 2012.
During the past few years, automakers have been offering incentives to try and entice more customers on to their showroom floors. To maintain any growth, they will have to keep it up while taking a serious knock to their remaining profits.
Britain saw a 5.3 percent growth in sales at just over 2 million vehicles sold, but sales were still 15% below the market peak in 2007.
In 2013, dealers are pushing cheap loans and special offers while launching heavy sales pushes on fuel efficiency and stronger online tools to help persuade people to buy, despite the on-going stagnation in the economy.
So far, their approach seems to be working. In January, registrations rose 11.5% year-on-year while in Germany and France they fell 8.6% and 15.1% respectively, according to the European industry group ACEA.
Derek Jarvis, a car dealer in Bromley said: "In 2012 punters seemed to have loosened the purse strings a bit, maybe after a few years of not splashing out and because the economic doom and gloom wasn't as bad as it was."
Auto industry body SMMT forecasts a 0.6% rise in 2013 and 2.6% in 2014, with the pace of growth dependent on how quickly consumer confidence recovers.
Ford is offering many of its new models at more than a 12 percent discount, while GM's British Opel unit is offering interest-free finance for up to 5 years and a deposit contribution on some models.
More and more vehicles were redirected to British dealers in 2012 by European carmakers, convinced they had a better chance of selling them in the UK.
CARMAKERS DOING GOOD
Trevor Finn, Britain's chief executive at Pendragon, said: "That's why volumes have gone up. Nothing to do with Britain booming. It's to do with car manufacturers doing better deals because they can."
A stronger pound increases the margin on European-made cars sold in Britain and gives car companies more room to cut prices.
However, if the pound drops, as it has in recent months, that will change. In mainland Europe, offers have become so aggressive in order to shift stock that many cars are sold at a loss.
Peugeot said it loses about R4000 per car.
Britain's figures are also flattered by a practice known as self-registration, whereby carmakers offer hefty discounts to persuade dealers to buy cars they know they won't be able to sell, register them themselves, and then sell them on later as nearly-new cars.
John Leech, head of accountancy firm KPMG's UK automotive group, estimated about half of 2012's growth could be due to self-registration.
Carmakers and dealers are also luring Internet-savvy British buyers by investing in social media buzz, websites and online tools to compare fuel and financing deals.
AutoTrader data shows that 10 years ago the average British consumer visited at least five dealerships before buying a car. With more research online, they now visit an average of two.
For all the pitches, car sales could skid off course if the UK economy continues to bump along the border of recession and knocks consumer confidence, which hit a 12-month high in January in terms of people's expectations about making a big purchase.
Already, Britons are stretching their average car ownership to four-and-a-half years from three-and-a-half years, according to sales group Auto Trader.
"If the UK falls back into recession, the doom and gloom surrounding that could really put a spanner in the works," Jarvis said.