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KEY NOTE MOTOR INDUSTRY (UK) : April 2002

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This report covers: motor industry,cars,commercial vehicles,motorcycles,mopeds,scooters,

Companies covered include: General Motors,Ford Motor Company,DaimlerChrysler ,BM ,Renault ,PSA,Volkswagen ,Fiat Auto,Toyota,Nissan Motor,Honda Motor,MG Rover,The Mayflower Corporation

EXECUTIVE SUMMARY

This Key Note market review analyses the UK motor industry, divided into three sectors — new cars, commercial vehicles, and motorcycles, mopeds and scooters. The manufacture of motor components is also considered. In 2001, the total apparent UK market (which includes manufacturers' sales plus imports, less exports) had an estimated value of £46.06bn.

During the period 1997 to 2001, domestic production of cars increased marginally by 2.2 percent — from 1.7 million to an estimated 1.74 million — and the production of commercial vehicles declined from 237,706 to an estimated 130,661. 73.9 percent of the cars of the new registrations are imported, primarily from other European countries, Japan and the US. The motorcycle, moped and scooter sector is also dominated by imports, which account for around 95 percent of UK sales. These imports are obtained mainly from continental Europe, Japan and the US, but Taiwan and China are increasingly becoming a major source of imports of low-priced scooters. Most of the motor components currently used by vehicle assemblers in the UK are made in the UK, but some fundamental changes are taking place in the industry. This is due to several of the major car manufacturers having stated that it is their intention to greatly increase their future supplies of components and assemblies from lower cost countries in Europe and the Far East.

There is a heavy demand for cars, commercial vehicles, and motorcycles, mopeds and scooters because of the relative buoyancy of the economy, high levels of employment, high expenditure on consumer durables, low interest finance, and a drop in prices for cars and powered two-wheel vehicles. Nevertheless, despite the apparent growth in demand for cars, both Ford and Vauxhall have closed manufacturing plants in the UK to reduce their surplus capacity. Conversely, the Ford subsidiaries of Jaguar and Land Rover are expanding production facilities in the UK for the launch of their new models, as are Honda, Nissan, Toyota, Peugeot and BMW.

Commercial vehicle production in the UK is almost entirely controlled by foreign manufacturers, which own most of the main manufacturers. The greatest concentration of output is in light and medium heavy vans, which is dominated by Ford. Leyland DAF, owned by a Canadian company, is the principal manufacturer of heavyweight trucks, but its output is small when compared with its continental European counterparts. Dennis and Volvo make a large number of buses and coaches for the British market and for overseas public transport companies. Sales of buses and coaches are increasing, with occasional setbacks, because local authorities in towns and cities are giving the improvement and expansion of public road services absolute priority over all other traffic.

The EU block exemption regulations that allow manufacturers to impose restrictions on their franchised dealers are due for renewal in September 2002. However, the existing exemptions are likely to be heavily modified because they are perceived to favour manufacturers' interests over those of consumers. Independent car traders have been encouraged by high manufacturers' and franchised dealers' prices to set up rival trading organisations that bring in parallel imports of identical vehicles that are then sold at much lower cost to private buyers in the UK. Internet trading over the past 5 years (since 1997) has become a very significant new alternative in the method of selling of cars, and this development is likely to be followed by other innovations, which could bypass the existing dealership structure.

Sales of new cars are increasing year-on-year, but the rate of disposals of old cars is relatively slow. Thus, road congestion and air pollution is a worsening problem. Many old cars have no monetary value but, as the cost of disposal is increasing because fewer scrap metal merchants are prepared to take them unless payment is made, they are being abandoned. The problem of what to do with old vehicles is being compounded by an EU directive that will shortly make it compulsory for vehicle manufacturers to reclaim and recycle their old vehicles. The directive is expected to result in considerable confusion as to how this reclaimation can be done and who will pay for the service.

The UK's motor component industry, which supplies the original equipment and replacement parts markets, is currently under heavy pressure from vehicle assemblers, which want cheaper prices and are prepared to go to other overseas suppliers if this cannot be achieved. The replacement parts market is also highly competitive, reflecting the longevity of the original parts as well as severe competition from imports. The value of sales by the industry is declining, with a number of formerly important companies in this motor industry sector having either withdrawn from, or having sold their interests in vehicle parts manufacture.

Future prospects for the motor industry are reasonably good, despite strong opposition to its growth from environmental groups, politicians, transport experts, local authorities and other organisations that have vested interests. It is of fundamental importance to the economy — and therefore is indispensable for generating revenues for the Government — giving employment and incomes to those who work directly or indirectly in the industry, and in supporting large numbers of people who work in other industries. Furthermore, the majority of individuals want to own their own personal transport and most would not tolerate major inconveniences to their lifestyle caused by restrictions on their movements.

It is expected that the value of total apparent demand for the industry will increase over the next 5 years (to 2006). The sale of cars will continue to make the most important contribution to the industry, followed by motor components, commercial vehicles, and then motorcycles, mopeds and scooters.

Private buyers of cars will grow in importance as price levels fall and the discount structures are made more transparent. Sales of small commercial vehicles are expected to grow because retail traders and industrial enterprises intend to make more frequent express deliveries of goods both to their premises and to their customers. This is partly to reduce stock levels and partly to reduce the risk of delays to goods in transit that are transported in a few large vehicles.

Motorcycle, moped and scooter sales are expected to increase steeply because they can be used for leisure activities. In addition, their ability to manoeuvre in heavy traffic and ease of parking at their riders' destinations are key strengths. Demand for motor components in original equipment is expected to increase because of the high production targets that have been set after the successful launch of a batch of new models by the major manufacturers. If the present imbalance in sterling/euro exchange rates can be resolved, it is likely that British manufacturers will recover most of the market share that they are now losing.

TABLE OF CONTENTS

Executive Summary

1. Market Overview

DEFINITION

INTRODUCTION

MARKET SECTORS

Cars

Commercial Vehicles

Motorcycles, Mopeds and Scooters

INDUSTRY STRUCTURE

Background to Industry Supply

Level of Foreign Ownership

Domestic Manufacture

Table 1.1: Production of Commercial Vehicles in the UK by Volume of Output (number of vehicles and percent), 1999 and 2000

Foreign Manufacture

By Market Sector

Cars

Commercial Vehicles

Motorcycles, Mopeds and Scooters

Table 1.2: Number of New Moped, Scooter and Motorcycle Registrations in the UK (000), 1997-2001

Bestselling Motorcycles, Mopeds and Scooters

Table 1.3: Bestselling Motorcycles, Mopeds and Scooters by Sector and Engine Capacity, 1999

Employment

Table 1.4: Employment in Transport Equipment, Motor Vehicles and Parts (000 employees), 1997-2001

Trade Associations

MARKET SEGMENTATION

Cars

Table 1.5: Number of New Car Registrations in the UK by Origin (000 and percent), 1997-2001

Customer Profile

Table 1.6: Company Cars as a percentage of New Registrations in the UK ( percent), 1997-2001

Commercial Vehicles

Motorcycles, Mopeds and Scooters

MARKET SIZE

New and Used Motor Vehicles and Motorcycles by Value

New Vehicles

Table 1.7: The Apparent UK Motor Industry by Sector by Value (£m), 1997-2001

Used Vehicles

Cars

Table 1.8: International Trade in Cars and Commercial Vehicles by Value and Volume (£m and 000), 1997-2001

International Trade

Exports

Imports

Diesel Cars

Table 1.9: Bestselling Diesel Cars in the UK (number of registrations and percent), 2000 and 2001

Automatic Cars

Table 1.10: Bestselling Automatic Cars in the UK (number of registrations and percent), 2000 and 2001

Leading Suppliers of Cars

Table 1.11: Leading Suppliers of Cars to the UK Market by Volume (number of registrations and percent), 1997 and 2000

Registrations by Model Range

Table 1.12: Top Ten Registrations by Model Range (number of registrations and percent), 2000 and 2001

Cars for the Disabled

Table 1.13: Cars Modified for Disabled Drivers by Number of Cars Modified, 1997 and 2001

Commercial Vehicles

International Trade

Exports

Imports

Suppliers of Commercial Vehicles

Table 1.14: Leading Suppliers of Commercial Vehicles to the UK Market (number of registrations), 2000 and 2001

Motorcycles, Mopeds and Scooters

Table 1.15: Motorcycle Production in the UK by Volume (000), 1997-2001

International Trade

Table 1.16: The Apparent UK Market in Motorcycles and Scooters by Value (£m at msp), 1997-2001

Exports

Imports

Motor Vehicle Production in the UK

Table 1.17: Car and Commercial Vehicle Production in the UK by Volume (number of units), 1997-2001

Motor Components

International Trade

Exports

Imports

Table 1.18: International Trade in Motor Components by Value (£m), 1997-2001

KEY TRENDS AND PROSPECTS

PEST ANALYSIS

Political Factors

Economic Factors

Social Factors

Technological Factors

EUROPEAN/GLOBAL PERSPECTIVE

World Production

Leading World Producers

Cars

Commercial Vehicles

Table 1.19: Selected Leading World Producers of Cars and Commercial Vehicles by Volume (number of vehicles produced), 1999

European Perspective

New Car Registrations in Western Europe

Table 1.20: New Car Registrations in Western Europe by Volume (number of cars registered), 2000

UK Demand

Table 1.21: UK Gross Domestic Product by Value at Constant 1995 Market Prices (£m), 1997-2001

Vehicles in Use in the UK

Table 1.22: Number of Vehicles in Use in the UK by Volume (000 units), 1997-2001

Vehicles Licensed in Great Britain

Table 1.23: Number of Licensed Vehicles in Great Britain by Volume (000 units), 1997-2000

New Vehicle Registrations in Great Britain

Table 1.24: New Motor Vehicle Registrations in Great Britain by Volume (000 units), 1997-2001

2. Key Note Field Research

CONSUMER RESEARCH

Car Ownership

Table 2.1: Penetration of Most Recently Obtained Car by Year of Registration by Volume (000 adults and percent), 2001

Users of Self-Drive Car Hire

Table 2.2: Penetration of Self-Drive Car Hire for Personal and Business Purposes by Age ( percent), 2001

Consumer Preferences in Purchasing a New Car

Table 2.3: Consumer Preferences in Purchasing a New Car by Social Grade (number of adults), 2001

Ownership of Motorcycles, Mopeds and Scooters

Table 2.4: Motorcycles and Scooters Bought New or Second-Hand by Age by Engine Capacity (index=100), 2001

3. Competitor Analysis

LEADING SUPPLIERS

Table 3.1: Leading Suppliers of Cars by Turnover (£m), 1999/2000/2001

LEADING FRANCHISED DEALERS

Franchised Dealers

Car and Commercial Vehicle Distributors

Table 3.2: Selected Leading Distributors of Cars and Commercial Vehicles by Turnover (£m), 2000/2001

LEADING MOTOR COMPONENT MANUFACTURERS AND DISTRIBUTORS

Introduction

Manufacturers and Distributors

Table 3.3: Selected Leading Manufacturers and Distributors of Autoparts by Turnover (£m), 1998/1999/2000/2001

Major Manufacturing Groups and Their Marques

General Motors (US)