KN34023

KEY NOTE MOTOR INDUSTRY REVIEW : MAY 2003

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

Companies covered include: Inchcape, Arriva, Reg Vardy, Pendragon, CD Bramall, Dixon Motors, Lookers, Ryland, Ford Motor Company, General Motors, Daimler Chrysler Group, Honda Motor Europe, Volkswagen, PSA Group, Honda Motor Europe, BMW, Toyota, Renault, MG Rover, Nissan, Fiat Auto,

TABLE OF CONTENTS

Introduction 1

Price Disparity 1

Cars 1

Commercial Vehicles 2

motorcycles, mopeds and scooters 2

Component Manufacturers 3

The Future 3

1. Market Overview 12

DEFINITION 12

INTRODUCTION 12

Market Sectors 13

Cars 13

Commercial Vehicles 14

Motorcycles, Mopeds and Scooters 15

Motor Components 16

INDUSTRY STRUCTURE 17

Background to Industry Supply 17

Domestic Manufacture 18

Table 1.1: Car and Commercial Vehicle Production in the UK by Volume (number of units), 1998-2002 19

Cars 20

Table 1.2: Production of Cars in the UK by Volume of Output (000 vehicles and percent), 1998-2002 20

Commercial Vehicles 21

Table 1.3: Production of Commercial Vehicles in the UK by Volume of Output (000 vehicles and percent), 1998-2002 21

Motorcycles, Mopeds and Scooters 22

Table 1.4: Production of Motorcycles, Mopeds and Scooters in the UK by Volume of Output (000 vehicles and percent), 1998-2002 22

Employment 22

Table 1.5: Employment in Transport Equipment, Motor Vehicles and Parts (000 employees), 1998-2002 23

Trade Associations 23

MARKET SIZE 24

UK Demand in the Motor Industry 24

Cars 24

Commercial Vehicles 24

Motorcycles, Mopeds and Scooters 25

Motor Components 25

Table 1.6: The Apparent UK Motor Industry by Sector by Value (£bn at msp), 1998-2002 26

International Trade 26

World Production 26

Leading World Producers 27

Cars 27

Commercial Vehicles 27

Table 1.7: Selected Leading World Producers of Cars and Commercial Vehicles by Volume (number of vehicles produced), 2001 28

European Production 29

New Car Registrations in Western Europe 29

Table 1.8: New Car Registrations in Western Europe by Volume (number of cars registered), 2001 and 2002 30

UK Demand 30

Table 1.9: UK Gross Domestic Product by Value at Constant 1995 Prices (£m), 1998-2002 31

Vehicles in Use in the UK 31

Table 1.10: Number of Vehicles in Use in the UK by Volume (000 units), 1998-2002 32

Vehicles Licensed in Great Britain 33

Table 1.11: Number of Licensed Vehicles in Great Britain by Volume (000 units), 1998-2002 33

New Vehicle Registrations in Great Britain 34

Table 1.12: New Motor Vehicle Registrations in Great Britain by Volume (000 units), 1998-2002 34

Cars 35

Commercial Vehicles 35

Table 1.13: International Trade in Cars and Commercial Vehicles by Value and Volume (£m and 000), 1998-2002 36

Motorcycles, Mopeds and Scooters 37

Table 1.14: International Trade in Motorcycles, Mopeds and Scooters by Value and Volume (£m and 000), 1998-2002 38

Motor Components 38

Table 1.15: International Trade in Motor Components by Value (£m), 1998-2002 39

PEST ANALYSIS 39

Political Factors 39

Economic Factors 39

Social Factors 40

Technological Factors 41

2. Key Note Field Research 42

CONSUMER RESEARCH 42

Car Ownership 42

Table 2.1: Penetration of Most Recently Obtained Car by Year of Registration by Volume (000 adults and percent), 2002 42

Users of Self-Drive Car Hire 43

Table 2.2: Penetration of Self-Drive Car Hire for Personal and Business Purposes by Age ( percent), 2002 43

Ownership of Motorcycles, Mopeds and Scooters 43

Table 2.3: Motorcycles and Scooters Bought New or Secondhand by Age of Buyer and Engine Capacity ( percent), 2002 44

3. Competitor Analysis 45

LEADING SUPPLIERS 45

Table 3.1: Leading Suppliers of Cars in the UK by Turnover (£m), 2001/2002 46

Leading Franchised Dealers 47

Car and Commercial Vehicle Distributors 47

Table 3.2: Selected Leading Distributors of Cars and Commercial Vehicles by Turnover (£m), 2000/2001/2002 47

Selected Leading Distribution Companies 48

Inchcape PLC 48

Arriva PLC 49

Reg Vardy PLC 49

Pendragon PLC 49

CD Bramall PLC 50

Dixon Motors PLC 50

Lookers PLC 50

Ryland Group PLC 51

Leading Motor Component Manufacturers and Distributors 51

Introduction 51

Manufacturers and Distributors 51

Table 3.3: Selected Leading Manufacturers and Distributors of Autoparts by Turnover (£m), 2000/2001/2002 53

MAJOR MANUFACTURING GROUPS AND THEIR MARQUES 54

Ford Motor Company (US) 54

Table 3.4: Financial Results for Ford Motor Company Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1999-2001 54

Volkswagen Group 54

Table 3.5: Financial Results for Volkswagen Group United Kingdom Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1999-2002 55

General Motors (US) 55

Table 3.6: Financial Results for General Motors Holdings (UK) by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1999-2001 55

PSA Group 56

Table 3.7: Financial Results for Peugeot Motor Company PLC and Citroën UK Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1999-2001 56

DaimlerChrysler Group 56

Table 3.8: Financial Results for DaimlerChrysler UK Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1999-2001 57

Honda Motor Europe 57

Table 3.9: Financial Results for Honda Motor Europe Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st March 1999-2002 57

BMW (GB) Ltd 58

Table 3.10: Financial Results for BMW (GB) Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1999-2001 58

Toyota (GB) PLC 58

Table 3.11: Financial Results for Toyota (GB) PLC by Turnover, Pre-tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1999-2000 and 31st March 2002 59

Renault UK Ltd 59

Table 3.12: Financial Results for Renault UK Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1999-2001 59

MG Rover Group Ltd 60

Table 3.13: Financial Results for MG Rover Group Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1999-2001 60

Nissan Motor (GB) Ltd 60

Table 3.14: Financial Results for Nissan Motor (GB) Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1999-2001 61

Fiat Auto (UK) Ltd 61

Table 3.15: Financial Results for Fiat Auto (UK) Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1999-2001 61

4. Cars 62

DEFINITION 62

Key trends 62

MARKET SIZE 63

Table 4.1: The Apparent UK Market for Cars by Value (£m at msp), 1998-2002 63

Market Structure 64

MARKET SEGMENTATION 64

Table 4.2: Number of New Car Registrations in the UK by Origin (000 and percent), 1998-2002 65

Customer Profile 65

Table 4.3: Company Cars and Private Buyers as a percentage of New Registrations in the UK ( percent), 1998-2002 66

major players 66

Manufacturers 66

Table 4.4: Main Media Advertising Expenditure on Motor Cars (£000), Years to December 2000-2002 67

Dealers 68

Table 4.5: Selected Main Media Advertising Expenditure on Motor Cars by Vehicle Dealers and Dealer Support by Manufacturers (£000), Years to December 2000-2002 68

BUYING BEHAVIOUR 70

Outright Buyers 70

Leasing and Contract Hire 70

Rental 70

Hire Purchase 70

Ownership by Social Grade 71

Table 4.6: Car Ownership in the UK by Social Grade ( percent of households), 2002 71

demand for cars 71

Table 4.7: The Car Sector by Type, Volume and Market Share (number and percent), 2001 72

Table 4.8: Bestselling Cars in the UK by Brand Volume and Market Share (number of cars and percent), 2001 and 2002 73

Diesel Cars 74

Table 4.9: Bestselling Diesel Cars in the UK by Brand, Volume and Market Share (number of cars and percent), 2001 and 2002 74

Automatic Cars 75

Table 4.10: Bestselling Automatic Cars in the UK by Brand, Volume and Market Share (number of cars and percent), 2001 and 2002 76

Leading Suppliers of Cars 77

BMW 78

DaimlerChrysler 78

Fiat 78

Honda 78

MG Rover 78

PSA Group 78

Renault Nissan 79

Toyota 79

Volkswagen 79

Korean Brands 79

Table 4.11: Suppliers of Cars to the UK Market by Volume (number of registrations and percent), 2001 and 2002 80

The Motability Scheme 82

Forecasts 2003 to 2007 82

Table 4.12: The Forecast Apparent UK Market for Cars by Value (£m at msp), 2003-2007 83

5. Commercial Vehicles 84

DEFINITION 84

Key trends 84

Light Commercial Vehicles 84

Heavy Commercial Vehicles 84

Buses and Coaches 85

MARKET SIZE 85

Table 5.1: The Apparent UK Market for Commercial Vehicles by Value (£m at msp) 1998-2002 86

Market Structure 86

market segmentation 87

Table 5.2: Number of New Commercial Vehicle Registrations in the UK by Volume (000 vehicles), 1998-2002 87

Customer Profile 87

Major Players 88

Table 5.3: Main Media Advertising Expenditure on Trucks and Vans (£000), Years to December 2000-2002 88

Buying Behaviour 89

Demand for Commercial Vehicles 90

Exports 90

Table 5.4: Exports of Commercial Vehicles by Type by Volume (number of units), 1998-2002 91

Imports 91

Table 5.5: Imports of Commercial Vehicles by Volume (number of units), 1998-2002 91

Leading Suppliers 92

Table 5.6: Leading Suppliers of Commercial Vehicles to the UK Market (number of registrations), 2001 92

Forecasts 2003 to 2007 93

Table 5.7: The Forecast Apparent UK Market for Commercial Vehicles by Value (£m at msp), 2003-2007 94

6. Motorcycles, Mopeds and Scooters 95

DEFINITION 95

Key trends 95

MARKET SIZE 96

Table 6.1: The Apparent UK Market for Motorcycles, Mopeds and Scooters (£m at msp), 1998-2002 96

Market Structure 97

Market segmentation 97

Table 6.2: Number of New Motorcycle, Moped and Scooter Registrations in Great Britain (000 vehicles), 1998-2002 97

Customer Profile 98

Major Players 98

Table 6.3: Main Media Advertising Expenditure by Dealers on Motorcycles, Mopeds and Scooters (£000), Years to December 2000-2002 99

Demand for Motorcycles, Mopeds and Scooters 99

Table 6.4: Motorcycle Production in the UK by Value and Volume (£m and 000), 1998-2002 100

Forecasts 2003 to 2007 100

Table 6.5: The Forecast Apparent UK Market for Motorcycles, Mopeds and Scooters by Value (£m at msp), 2003-2007 101

7. Motor Components 102

DEFINITION 102

Key trends 102

Market Size 102

Table 7.1: The Apparent UK Market for Motor Components by Value (£m at msp), 1998-2002 103

Market Structure 103

Major Players 104

Buying Behaviour 104

Demand for Motor Components 105

Imports and Exports 106

Forecasts 2003 to 2007 106

Table 7.2: The Forecast Apparent UK Market for Motor Components by Value (£m at msp), 2003-2007 107

8. Strengths, Weaknesses, Opportunities and Threats 108

STRENGTHS 108

Cars 108

Commercial Vehicles 108

Motorcycles, Mopeds and Scooters 108

Motor Components 109

WEAKNESSES 109

Cars 109

Commercial Vehicles 109

Motorcycles, Mopeds and Scooters 110

Motor Components 110

OPPORTUNITIES 110

Cars 110

Commercial Vehicles 110

Motorcycles, Mopeds and Scooters 111

Motor Components 111

THREATS 111

Cars 111

Commercial Vehicles 111

Motorcycles, Mopeds and Scooters 111

Motor Components 112

9. The Future 113

FUTURE PROSPECTS 113

Cars 113

Commercial Vehicles 113

Motorcycles, Mopeds and Scooters 113

Motor Components 114

Market Forecasts 2003 to 2007 114

Table 9.1: The Forecast Apparent UK Motor Industry by Sector by Value (£m at msp), 2003-2007 114

10. Further Sources 115

Associations 115

General Sources 116

Government Publications 117

EXECUTIVE SUMMARY

This Key Note survey of the UK motor industry analyses recent developments, trends and markets for new cars, commercial vehicles, motorcycles, mopeds and scooters and the manufacture of motor components. Data are studied for the period between 1998 and 2002, with the prospects and forecasts for these industries being given to 2007.

Price Disparity

The motor industry had an estimated value of £44.7bn at manufacturers' selling prices (msp) in 2002, compared with £39.5bn in 1998. Although there was strong and increasing demand for cars over the 5-year period, the cost of cars to the buyers began to drop. This was a result of private buyers becoming aware of a large disparity between UK and continental European prices for the same vehicles, and reacting accordingly. An increasing number of buyers found cheaper alternative sources to the trade controlled by manufacturers and their franchised dealers through parallel imports brought to the UK by specialist importers and car supermarkets. The trend to lower prices was reinforced by long-expected changes to the EU's block exemption rules, confirmed in 2002. This amendment removed manufacturers' legal entitlement to fix prices, thereby opening the market to greater competition. An additional factor was the considerable excess in production capacity over demand that existed in Europe for some of the most popular models, which resulted in many cars being surreptitiously offered at discounted prices, even by franchised dealers. This activity undermined the justification for raising prices, but also led to Ford closing its production plant at Dagenham and Vauxhall its plant at Luton.

Cars

Many changes have resulted from falling car prices and the end of block exemption in its old form, even though the reforms will only be gradually introduced. The franchised dealers' network is being radically overhauled, as dealers have greater freedom to operate independently in new market conditions. Car supermarkets, which are unrestricted in the brands that they buy, are now established as the popular major alternative to the franchised dealer. A side effect of cheaper prices for new cars, and consequently higher demand, is the impact on the second-hand car market, where the depreciation rate on residual values has taken a steep dive. More cars are likely to be scrapped at an earlier stage and probably most scrapyards will not be able to cope with the sudden heavy influx of unwanted vehicles.

Commercial Vehicles

Commercial vehicle sales are concentrated on light and heavy vans, as demand for the largest vehicles is less predictable. Good years are soon followed by bad, as the road haulage industry is plagued by excess capacity and the heavy costs of operation. There are only a few domestic manufacturers of commercial vehicles left in the UK, since many of the former famous brands were unable to compete in their home as well as export markets.

DAF (formerly Leyland DAF), Foden (owned by the Paccar group) and Dennis have survived the flow of heavy vehicle imports, mainly from Germany, Sweden and Italy. In the light and heavy van market, Ford and Vauxhall are market leaders, with LDV trailing. These companies compete with imports from France, Germany, Japan and Italy.

The bus and coach market has been invigorated by official encouragement given to the expansion of bus services. This reinforces existing demand by the principal national operating companies, which regularly update their fleet of vehicles. This is an industry where domestic production is high and growing, with a large export market. However, the level of imports is also rising, as there are excellent prospects in long-term demand for public service vehicles.

motorcycles, mopeds and scooters

The market for motorcycles, mopeds and scooters is dominated by imports, as there is only one major UK manufacturer of motorcycles and none for mopeds and scooters. Triumph Motorcycles makes only high-powered motorcycles, so it operates in a limited domestic market. However, because the company has a good international profile, its export trade is highly important for sales. High-powered motorcycles are bought mainly for leisure activities, as they are mostly unsuitable for commuting. They are, therefore, vulnerable to changes in attitudes. Over the past 5 years, there has been a considerable increase in demand, because they have become fashionable icons among the wealthier classes and because there is also a core of dedicated riders across all social groups. Demand for scooters has increased at a faster rate, and in greater volume than for motorcycles, as they appeal to a wider mix of potential buyers, including women who like the convenience of these easy-to-ride and economical machines. Buyers tend to be people living in cities, who want to be independent of public transport for relatively short journeys and for commuting. Japan and Italy are the main scooter suppliers to the UK market, but there are also manufacturers in France, Taiwan and China.

Component Manufacturers

Component manufacturers have experienced a decline in their share of the domestic market. This is because they have become uncompetitive in price when compared with other European and Far Eastern manufacturers which make and assemble similar products. Imports are rising rapidly, as it has become progressively easier to bring in large volumes of autoparts by road, sea and air from distant countries. Many of the domestic component manufacturers are subsidiaries of multinational companies and, if domestic market prospects do not improve, it is possible that some will close their production facilities in the UK and become importers themselves.

The Future

Future prospects appear to be quite buoyant for the motor industry, although there is considerable hostility from environmental groups to any further expansion in traffic. There is the possibility that congestion charging, now operating in London, will be extended to other cities. Furthermore, parking restrictions may be tightened, parking made more expensive and road charging (in addition to fixed road tax and fuel duties) could be introduced. None of these measures is expected to make much impact on the demand for motor vehicles, as these are now regarded as essential for modern living. As already proved, if the price of a new car is considered to be affordable then demand will soar. Currently, the ratio for car ownership in the UK is one car for two persons. This will probably soon increase to 1:1, since many individuals in families want their own personal transport.

In 2007, it is expected that cars will account for 59.9 percent of the total value of the motor industry. Motor components will take a share of 29.2 percent, commercial vehicles 10.1 percent, while motorcycles, mopeds and scooters will account for 0.8 percent.

Text © 2003 Key Note

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Last updated by Amanda Porteous July 2003