Sector Insight: Car retailing

LONDON - Few sectors are escaping the turmoil affecting the global economy, but some are being hit harder than others. The combination of rising fuel prices, increased car tax and road-payment schemes - at a time when many are delaying big-ticket purchases - is making selling cars a particularly fraught business.

Motoring has also become a political minefield as the requirement to cut CO2 emissions means measures are having to be introduced, but higher vehicle excise duty or additional road pricing schemes cause uproar from the motoring lobby and opponents.

New- and used-car sales have slipped in 2008, although they increased 4% between 2003 and 2007 to £37.5bn, according to the Office for National Statistics. So far this year, volume sales of second-hand cars have fallen and new-car registrations have also dropped, down 1.6% in the first half of the year, according to the Society of Motor Manufacturers and Traders.

In 2003 the Block Exemption came into force, shaking up the sector. The regulation, designed to boost competition in car sales and repair and make new car prices comparable across Europe, appears to have favoured the bigger dealer multiples. There has been consolidation in the sector, which looks set to continue as fewer cars are being sold. In the past 10 years, 15% of UK franchised dealerships have closed.

Consumers remain interested in buying cars, despite the economy: GfK NOP research shows that one in four plans to buy a new or used car in the next two years. Most claim the credit crunch will not affect their plans.

Car dealerships are often the first port of call for those looking for a new car, and many have a loyal clientele. Customers trust their levels of support and reputation, and are prepared to pay extra for the reassurance they offer, in stark contrast with the persistent image of dodgy second-hand car dealers.

Online sales have had an impact on this market and several companies have established an online presence, but, in the main, consumers use the web to research rather than to buy. Many dealers offer online search tools.

The leading car dealers in the UK are Pendragon, Inchcape and Lookers, all of which have been acquisitive in the past couple of years. Tight margins mean dealers operating on a bigger scale are best placed to make a profit.

Pendragon, the biggest group, took over Reg Vardy in 2006. This expanded its position in the used-car market, and broadened its geographic presence. Its retail brands are Stratstone, at the luxury end, and Evans Halshaw.

Inchcape bought European Motor Holdings in February 2007, expanding its regional presence. It has about 150 dealerships covering a range of brands, but it focuses on the premium end.

Lookers has a similar number of dealerships and operates a decentralised model. It bought Dutton Forshaw last year, adding seven Ford dealerships.

The company also has two car supermarkets, a format developed as a way to offer multiple brands of nearly-new cars at lower prices in one location. The leading brands in this area are Carcraft, Car Giant and Motorpoint.

Mercedes-Benz, Ford, Renault and Peugeot also own and operate networks in the UK; online, and are popular.

The 25-34 and 45-54 age groups are set to grow over the next five years, but there will also be a decline in the number of 35- to 44-year-olds during this period, so, overall, the key car-buying demographic will stagnate.

By 2013, used cars sales are forecast to have grown by 14% to reach £40.5bn, while new car sales are expected to decline by 17% to £27.4bn at current prices, according to Mintel.

UK franchised dealer networks   by marque and outlets
% change
Source: Sewells/Mintel

Manufacturer shares   of new-car registrations
Source: SMMT/Mintel


Top UK car dealers   by outlets, turnover and share
£m share %£m share %
3Sytner Group1351978.72.7901569.2*2.4
4Arnold Clark1361873.42.91381669.82.6
7Jardine Motors61937.61.450953.11.5
8Camden Group78091.2n/an/an/a
Source: Mintel


Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Brand Republic Jobs

subscribe now


Social Brands 100 Youth: Pizza Hut most social youth brand in UK
Cheryl Cole is wild and arresting in new L'Oreal work
Morrisons told not to show alcohol ads during YouTube nursery rhymes
O2 head of brand Shadi Halliwell departs after 23 years at company in restructure
Tesco hit by further sales decline as it turns to digital Clubcard and social network
Branding guru Wally Olins dies aged 83
Duracell short film captures epic Transatlantic voyage
Ash runs Tinder experiment to show smokers are less desirable to opposite sex
British Airways teams up with Gerry Cottle Jnr for summer of rooftop film screenings
Arklu says 'girls can be superheroes too' with doll design competition
Coke enters squash market with Oasis Mighty Drops
Virgin Galactic signs up Land Rover as space flight sponsor
Motorola marketer Andrew Morley departs as Google gears up for sale to Lenovo
US Airways apologises after tweeting obscene image at a customer
Mumsnet admits users' emails and passwords accessed via Heartbleed bug backs 'rubbish' mobile app with TV ad
Powerade launches global World Cup campaign
Burberry's flagship Shanghai store facade responds to weather changes
Subway considers taking fast food to fast lane with F1 sponsorship
Ikea splurges 'grey' Belgium with colour
Grim outlook for Tesco boss Philip Clarke ahead of expected profits fall
Thomson to create first crowd-sourced wedding decided by Facebook fans
Currency wars meets origami in Alpari FX trading ad campaign
Amazon rumoured to launch 3D smartphone in September
Facebook to allow European users to store and transfer money on site, claims report
Unilever pilots multi-brand advertising with YouTube beauty channel
Lego, Coca-Cola, Net-a-Porter, Bitcoin and AOL: the digitally creative brands
Dove tries to tell women their beauty is innate through placebo patches
Wonga faces social media storm after forcing Twitter to remove satirical material
Spotify tells the stories of relationships with music