The Motor Industry - just-auto · The Motor Industry Foreword Key Note Ltd 2002 In today’s...

The Motor Industry

2002 Market Review

Eighth Edition 2002Edited by Lynsey Barker

ISBN 1-84168-328-0

The Motor Industry Foreword

Key Note Ltd 2002

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The Motor Industry

Key Note Ltd 2002

The Motor Industry

Executive Summary 1

1. Market Overview 5

DEFINITION......................................................................................................................................5

INTRODUCTION ..............................................................................................................................5

MARKET SECTORS..........................................................................................................................7

Cars............................................................................................................................................. 7

Commercial Vehicles ................................................................................................................. 8

Motorcycles, Mopeds and Scooters .......................................................................................... 9

INDUSTRY STRUCTURE..................................................................................................................9

Background to Industry Supply ................................................................................................ 9

Level of Foreign Ownership.................................................................................................... 10

Domestic Manufacture ..................................................................................................................10

Table 1.1: Production of Commercial Vehicles in the UK by Volume of Output (number of vehicles and %), 1999 and 2000 ........................................................................ 10

Foreign Manufacture .....................................................................................................................10

By Market Sector ..................................................................................................................... 11

Cars .................................................................................................................................................11Commercial Vehicles ......................................................................................................................11Motorcycles, Mopeds and Scooters ..............................................................................................12

Table 1.2: Number of New Moped, Scooter and Motorcycle Registrations in the UK (000), 1997-2001 .................................................................................................... 13

Bestselling Motorcycles, Mopeds and Scooters ...........................................................................13

Table 1.3: Bestselling Motorcycles, Mopeds and Scooters by Sector and Engine Capacity, 1999 ..................................................................................................... 13

Employment............................................................................................................................. 14

Table 1.4: Employment in Transport Equipment, Motor Vehicles and Parts (000 employees), 1997-2001 .................................................................................................. 15

Trade Associations................................................................................................................... 15

MARKET SEGMENTATION..........................................................................................................16

Cars........................................................................................................................................... 16

Table 1.5: Number of New Car Registrations in the UK by Origin (000 and %), 1997-2001 ................................................................................................................................ 16

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Title Page The Motor Industry

Customer Profile ............................................................................................................................16

Table 1.6: Company Cars as a Percentage of New Registrations in the UK (%), 1997-2001 ................................................................................................................................ 18

Commercial Vehicles ............................................................................................................... 18

Motorcycles, Mopeds and Scooters ........................................................................................ 19

MARKET SIZE ................................................................................................................................19

New and Used Motor Vehicles and Motorcycles by Value ................................................... 19

New Vehicles ..................................................................................................................................19

Table 1.7: The Apparent UK Motor Industry by Sector by Value (£m), 1997-2001 ............ 20

Used Vehicles .................................................................................................................................20

Cars........................................................................................................................................... 21

Table 1.8: International Trade in Cars and Commercial Vehicles by Value and Volume (£m and 000), 1997-2001 .................................................................................. 21

International Trade .......................................................................................................................23Exports ............................................................................................................................................23Imports ...........................................................................................................................................24Diesel Cars ......................................................................................................................................24

Table 1.9: Bestselling Diesel Cars in the UK (number of registrations and %), 2000 and 2001 ........................................................................................................................ 24

Automatic Cars ..............................................................................................................................25

Table 1.10: Bestselling Automatic Cars in the UK (number of registrations and %), 2000 and 2001 ........................................................................................................................ 26

Leading Suppliers of Cars ..............................................................................................................26

Table 1.11: Leading Suppliers of Cars to the UK Market by Volume (number of registrations and %), 1997 and 2000 ................................................................ 27

Registrations by Model Range ......................................................................................................29

Table 1.12: Top Ten Registrations by Model Range (number of registrations and %), 2000 and 2001 ........................................................................................................................ 29

Cars for the Disabled .....................................................................................................................30

Table 1.13: Cars Modified for Disabled Drivers by Number of Cars Modified, 1997 and 2001 ........................................................................................................................ 31

Commercial Vehicles ............................................................................................................... 31

International Trade .......................................................................................................................31Exports ............................................................................................................................................31Imports ...........................................................................................................................................32Suppliers of Commercial Vehicles .................................................................................................32

Table 1.14: Leading Suppliers of Commercial Vehicles to the UK Market (number of registrations), 2000 and 2001 ............................................................................ 33

Motorcycles, Mopeds and Scooters ........................................................................................ 34

Table 1.15: Motorcycle Production in the UK by Volume (000), 1997-2001 ....................... 35

International Trade .......................................................................................................................35

Table 1.16: The Apparent UK Market in Motorcycles and Scooters by Value (£m at msp), 1997-2001 .......................................................................................................... 36

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The Motor Industry Title Page

Exports ............................................................................................................................................36Imports ...........................................................................................................................................36

Motor Vehicle Production in the UK...................................................................................... 37

Table 1.17: Car and Commercial Vehicle Production in the UK by Volume (number of units), 1997-2001 ................................................................................................ 38

Motor Components ................................................................................................................. 39

International Trade .......................................................................................................................39Exports ............................................................................................................................................39Imports ...........................................................................................................................................39

Table 1.18: International Trade in Motor Components by Value (£m), 1997-2001 ............ 40

KEY TRENDS AND PROSPECTS...................................................................................................40

PEST ANALYSIS .............................................................................................................................41

Political Factors........................................................................................................................ 41

Economic Factors ..................................................................................................................... 41

Social Factors ........................................................................................................................... 42

Technological Factors.............................................................................................................. 42

EUROPEAN/GLOBAL PERSPECTIVE............................................................................................43

World Production .................................................................................................................... 43

Leading World Producers ..............................................................................................................43Cars .................................................................................................................................................43Commercial Vehicles ......................................................................................................................44

Table 1.19: Selected Leading World Producers of Cars and Commercial Vehicles by Volume (number of vehicles produced), 1999 ................................................................. 44

European Perspective.............................................................................................................. 45

New Car Registrations in Western Europe ...................................................................................45

Table 1.20: New Car Registrations in Western Europe by Volume (number of cars registered), 2000 ......................................................................................... 46

UK Demand ....................................................................................................................................46

Table 1.21: UK Gross Domestic Product by Value at Constant 1995 Market Prices (£m), 1997-2001 ...................................................................................................................... 47

Vehicles in Use in the UK ..............................................................................................................47

Table 1.22: Number of Vehicles in Use in the UK by Volume (000 units), 1997-2001 ........ 48

Vehicles Licensed in Great Britain ................................................................................................49

Table 1.23: Number of Licensed Vehicles in Great Britain by Volume (000 units), 1997-2000 ................................................................................................................................ 50

New Vehicle Registrations in Great Britain ..................................................................................50

Table 1.24: New Motor Vehicle Registrations in Great Britain by Volume (000 units), 1997-2001 ............................................................................................................ 51

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2. Key Note Field Research 53

CONSUMER RESEARCH ...............................................................................................................53

Car Ownership ......................................................................................................................... 53

Table 2.1: Penetration of Most Recently Obtained Car by Year of Registration by Volume (000 adults and %), 2001 .................................................................................... 53

Users of Self-Drive Car Hire..................................................................................................... 54

Table 2.2: Penetration of Self-Drive Car Hire for Personal and Business Purposes by Age (%), 2001 .................................................................................................................... 54

Consumer Preferences in Purchasing a New Car ................................................................... 54

Table 2.3: Consumer Preferences in Purchasing a New Car by Social Grade (number of adults), 2001 ....................................................................................................... 55

Ownership of Motorcycles, Mopeds and Scooters ................................................................ 55

Table 2.4: Motorcycles and Scooters Bought New or Second-Hand by Age by Engine Capacity (index=100), 2001 .................................................................................. 56

3. Competitor Analysis 57

LEADING SUPPLIERS.....................................................................................................................57

Table 3.1: Leading Suppliers of Cars by Turnover (£m), 1999/2000/2001 ............................ 58

LEADING FRANCHISED DEALERS ..............................................................................................59

Franchised Dealers................................................................................................................... 59

Car and Commercial Vehicle Distributors .............................................................................. 60

Table 3.2: Selected Leading Distributors of Cars and Commercial Vehicles by Turnover (£m), 2000/2001 ................................................................................................. 60

LEADING MOTOR COMPONENT MANUFACTURERS AND DISTRIBUTORS........................61

Introduction............................................................................................................................. 61

Manufacturers and Distributors ............................................................................................. 62

Table 3.3: Selected Leading Manufacturers and Distributors of Autoparts by Turnover (£m), 1998/1999/2000/2001 ............................................................................... 63

MAJOR MANUFACTURING GROUPS AND THEIR MARQUES...............................................64

General Motors (US)................................................................................................................ 64

Financial Results and Employment Details ...................................................................................65

Table 3.4: 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 1997-1999 ............................................................................... 65

Ford Motor Company (US) ...................................................................................................... 65


Table 3.5: 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 1998-2000 ............................................................................... 66

DaimlerChrysler Group (Germany/US).................................................................................... 66

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Table 3.6: Financial Results for DaimlerChrysler UK Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1998-2000 ............................................................................... 66

BMW Group (Germany) .......................................................................................................... 67


Table 3.7: Financial Results for BMW (GB) Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1998-2000 ............................................................................... 67

Renault Group (France)........................................................................................................... 67


Table 3.8: Financial Results for Renault UK Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1998-2000 ............................................................................... 68

PSA (Peugeot-Citroën) Group (France) .................................................................................. 68


Table 3.9: Financial Results for Peugeot Motor Company PLC by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1998-2000 ............................................................................... 68

Volkswagen Group (Germany) ............................................................................................... 69

Financial Results and Employment Details ..................................................................................69

Table 3.10: 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 1998-2000 ........................ 69

Fiat Auto (Italy)........................................................................................................................ 69


Table 3.11: 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 1998-2000 ............................................................................... 70

Toyota Group (Japan) ............................................................................................................. 70


Table 3.12: Financial Results for Toyota (GB) PLC by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1998-2000 ............................................................................... 71

Nissan Motor Ltd (France/Japan) ............................................................................................ 71


Table 3.13: 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 1998-2000 ............................................................................... 72

Honda Motor Europe Group (Japan) ..................................................................................... 72


Table 3.14: 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 1999-2001 ..................................................................................... 73

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MG Rover Group (UK) ............................................................................................................. 73


Table 3.15: 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 1998-2000 ............................................................................... 73

The Mayflower Corporation (UK)........................................................................................... 74


Table 3.16: Financial Results for The Mayflower Corporation PLC by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 31st December 1998-2000 ............................................................................... 74

Triumph Motor Cycles Ltd....................................................................................................... 74


Table 3.17: Financial Results for Triumph Motorcycles Ltd by Turnover, Pre-Tax Profit and Number of Employees (£m and number of employees), Years Ending 30th June 1997-1999 ....................................................................................... 75

4. Cars 77

DEFINITION....................................................................................................................................77

KEY TRENDS ..................................................................................................................................77

MARKET SIZE ................................................................................................................................78

Table 4.1: The Apparent UK Market for Cars by Value (£m at msp), 1997-2001 ................ 79

MARKET STRUCTURE...................................................................................................................79

MAJOR PLAYERS ..........................................................................................................................80

Manufacturers ......................................................................................................................... 80

Table 4.2: Main Media Advertising Expenditure on Motor Cars (£000), Years to December 2000 and 2001 ........................................................................................ 80

Dealers ..................................................................................................................................... 82

Table 4.3: Selected Main Media Advertising Expenditure on Motors by Vehicle Dealers (£000), Years to December 2000 and 2001 ........................................................................... 83

BUYING BEHAVIOUR...................................................................................................................84

Outright Buyers ....................................................................................................................... 84

Leasing and Contract Hire ...................................................................................................... 85

Rental ....................................................................................................................................... 85

Ownership by Social Grade..................................................................................................... 85

Table 4.4: Penetration of Cars in the UK by Social Grade (% of households owning), 2001 .......................................................................................... 86

FORECASTS 2002 TO 2006 ..........................................................................................................86

Table 4.5: The Forecast Apparent UK Market for Cars by Value (£m), 2002-2006 ............. 87

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5. Commercial Vehicles 89

DEFINITION....................................................................................................................................89

KEY TRENDS ..................................................................................................................................89

Light Commercial Vehicles...................................................................................................... 89

Heavy Commercial Vehicles .................................................................................................... 89

Buses and Coaches................................................................................................................... 90

MARKET SIZE ................................................................................................................................90

Table 5.1: The Apparent UK Market for Commercial Vehicles by Value (£m at msp), 1997-2001 ................................................................................................................................ 91


MAJOR PLAYERS ..........................................................................................................................92

Advertising Expenditure on Commercial Vehicles ................................................................ 92

Table 5.2: Main Media Advertising Expenditure on Trucks and Vans (£000), Years to December 2000 and 2001 ........................................................................................ 93

BUYING BEHAVIOUR...................................................................................................................93

FORECASTS 2002 TO 2006 ..........................................................................................................94

Table 5.3: The Forecast Apparent UK Market for Commercial Vehicles by Value (£m), 2002-2006 ...................................................................................................... 95

6. Motorcycles, Mopeds and Scooters 97

DEFINITION....................................................................................................................................97

KEY TRENDS ..................................................................................................................................97

MARKET SIZE ................................................................................................................................97

Table 6.1: The Apparent UK Market for Motorcycles, Mopeds and Scooters by Value (£m at msp), 1997-2001 .......................................................................................... 98


MAJOR PLAYERS ..........................................................................................................................99

Table 6.2: Main Media Advertising Expenditure by Manufacturers and Dealers of Motorcycles, Mopeds and Scooters (£000), Years to December 2000 and 2001 ............ 99

BUYING BEHAVIOUR.................................................................................................................100

FORECASTS 2002 TO 2006 ........................................................................................................101

Table 6.3: The Forecast Apparent UK Market for Motorcycles, Mopeds and Scooters by Value (£m), 2002-2006 .............................................................................. 101

7. Motor Components 103

DEFINITION..................................................................................................................................103

KEY TRENDS ................................................................................................................................103

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MARKET SIZE ..............................................................................................................................104

Table 7.1: The Apparent UK Market for Motor Vehicle Parts and Accessories by Value (£m at msp), 1997-2001 ........................................................................................ 104

MARKET STRUCTURE.................................................................................................................105

MAJOR PLAYERS ........................................................................................................................105

BUYING BEHAVIOUR.................................................................................................................106

FORECASTS 2002 TO 2006 ........................................................................................................107

Table 7.2: The Forecast Apparent UK Market for Motor Vehicle Parts and Accessories by Value (£m), 2002-2006 ......................................................................... 108

8. Strengths, Weaknesses, Opportunities and Threats 109

STRENGTHS..................................................................................................................................109

Cars......................................................................................................................................... 109

Commercial Vehicles ............................................................................................................. 109

Motorcycles, Mopeds and Scooters ...................................................................................... 109

Motor Components ............................................................................................................... 110

WEAKNESSES ..............................................................................................................................110

Cars......................................................................................................................................... 110




OPPORTUNITIES..........................................................................................................................111

Cars......................................................................................................................................... 111




THREATS ......................................................................................................................................113

Cars......................................................................................................................................... 113




9. The Future 115

FUTURE PROSPECTS...................................................................................................................115

Cars......................................................................................................................................... 115



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MARKET FORECASTS 2002 TO 2006 .......................................................................................117

Table 9.1: The Apparent UK Motor Industry by Sector by Value (£m), 2002-2006 .......... 117

10. Further Sources 119

Associations..................................................................................................................................119

Publications..................................................................................................................................121

Directories ....................................................................................................................................123

General Sources ...........................................................................................................................124

Bonnier Information Sources.....................................................................................................124

Government Publications...........................................................................................................126

Other Sources ..............................................................................................................................126

Understanding TGI Data 129

Number, Profile, Penetration ............................................................................................... 129

Social Grade ........................................................................................................................... 130

Standard Region.................................................................................................................... 130

Key Note Research 131

The Key Note Range of Reports 133

Key Note Ltd 2002 1

The Motor Industry Executive Summary

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% — 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% 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% 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.

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Executive Summary The Motor Industry

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.

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The Motor Industry Executive Summary

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.

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The Motor Industry Market Overview

1. Market Overview

DEFINITION

In this Key Note market review, the UK motor industry comprises:

• the production and value of sales of cars, commercial vehicles, and motorcycles, mopeds and scooters

• motor components and accessories

• the distribution of new vehicles by franchised dealers.

It excludes sales of agricultural tractors, earth-moving plant and other specialised self-propelled road vehicles (e.g. road rollers, tar layers and scrapers) used mainly by the construction industry.

This review also assesses market size and trends in the UK for the various vehicle categories and their future prospects. Other information includes a view of international trade, employment in the industry, advertising expenditure by manufacturers and dealers, and consumer attitudes based on BMRB International Target Group Index (TGI) surveys.

INTRODUCTION

The motor industry has a key function in the manufacturing sector of the national economy, as the production and sales of vehicles support a large number of other industries that include motor components, garage repair and maintenance services, financial services and, both directly and indirectly, various suppliers in the steel, aluminium, rubber, plastics, textiles and chemical industries.

This industry is one of the UK’s largest employers of labour, estimated at approximately 1.5 million people, and provides the most popular form of transport for people and for the movement of freight. Nevertheless, despite its vital importance to the economy, the road infrastructure is already totally inadequate in most areas for the current volume of traffic. It will be overwhelmed in the near future, according to transport analysts, unless major schemes for road expansion are implemented to cope with the expected future growth in road traffic.

Car and commercial vehicle manufacture in the UK is almost totally dominated by foreign-owned groups, with only MG Rover Group now operating as a totally independent British-owned volume car production company following its demerger from the BMW group. Specialist, low-volume car production is also predominantly foreign owned following the acquisition of the majority of the most famous British brands, such as Jaguar and Aston Martin by Ford Motor Company, Rolls-Royce by BMW, and Bentley by the Volkswagen Group. Similarly, in the commercial vehicles sector, only LDV and Dennis are independent British manufacturers.

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Market Overview The Motor Industry

Historically, the cars and commercial vehicles sectors in the UK, while still under British ownership, were unable to expand in the main overseas markets. This resulted in lower investment, lower volumes and higher unit costs, compared with their principal overseas competitors. Ultimately, the decline and the acquisition of domestic commercial vehicle manufacturers by foreign manufacturers was inevitable when they began to lose market share in their home market.

The demise of the previously world-dominant British motorcycle industry in the early 1970s gave an early indication of the future fate of the motor industry in Britain, unless it reformed to meet more demanding standards by its customers. Having failed to do so, an opportunity was given to the more successful French and German manufacturing companies to acquire existing car and commercial vehicle plants in the UK. Their leading Japanese rivals also saw opportunities to build their own car manufacturing plants on green fields to supply both the UK and other European markets from within the EU, rather than as exporters from Japan, and to overcome the quota restrictions on Japanese imports, which were imposed by several EU countries.

General Motors and Ford have been established in the UK for longer than any of their other foreign counterparts. However, both companies have recently closed their volume car manufacturing plants in the UK — Ford at Dagenham and General Motors (Vauxhall) in Luton — as both plants were making heavy losses that were not expected to become profitable in the future. They have also recently expanded into low-volume luxury car manufacturing, which can be very profitable.

The largest autopart manufacturers in the UK, such as GKN Holdings PLC and Unipart Group Ltd, have retained their independence, but are competing with many foreign manufacturers in their home markets. Some of these foreign manufacturers have either bought existing British companies or built entirely new factories to supply both components and complete assemblies for car and commercial vehicle plants.

All the participants in the autopart market are under great pressure from the motor vehicle assemblers to reduce their prices in order to compete with cheaper imports. Outsourcing of parts supply to continental European manufacturers has become fairly common, and this trend is expected to continue as long as the relative advantage of the euro against the current value of sterling remains in place.

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MARKET SECTORS

Cars

The new car market in the UK received a substantial boost in sales in 2001 following the introduction of a new system for car registration, an increase in the volume of sales of low-price parallel imports through independent Internet traders, and falling prices by franchised distributors. Although the total number of parallel car imports from continental Europe is small (around 50,000 per annum), their cheaper prices has focused the private buyers’ attention on the disparity in prices charged by manufacturers’ dealers for the equivalent models in the UK.

Parallel importers, along with highly unfavourable publicity regarding the premium prices charged for cars in the UK compared with other countries in the EU, have had a significant impact on pricing structures in Britain for almost all the models that are not in short supply, including luxury cars. Discounts are freely offered and are now more transparent to the buyer.

The spotlight on British pricing strategies could result in the EU not renewing the block exemption that permits motor vehicle manufacturers and their franchised dealers from obeying the competition rules that apply to other industries. This exemption is due for renewal in September 2002.

Oversupply and lower prices are causing heavy financial losses for many volume car manufacturers in Britain. This has resulted in the closure of both Ford’s car assembly plant in Dagenham and the Vauxhall car assembly plant in Luton. To eliminate or reduce losses, the management of all manufacturing plants are applying strong pressure on car component suppliers to reduce their prices or meet greater competition from ostensibly cheaper imported components.

MG Rover Group has emerged as a totally new and independent company following the sale of the Rover Group by BMW, for a nominal sum, to a financial consortium. The company has performed better than expected in very difficult market conditions, although its domestic market share is now relatively small compared with previous years. It has introduced more sporting models under the MG brand name to improve its image with potential customers in the younger age groups.

Other manufacturers are extending their range of new models by utilising the same platform for a number of variants that are sold under different brand names and at different prices. Development times are now much shorter, so more new models can be offered with greater frequency in order to maintain a high level of interest and sustain demand in the car-saturated major world markets.

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There is considerable uncertainty in the car distribution industry regarding how the future structure of the industry will evolve if EU block exemption is removed. Manufacturers would probably be prevented from supplying vehicles only to their franchisees, and their ability to fix selling prices for their products would be curtailed. It would also make it possible for independent traders with no experience of the car industry, and with no back-up maintenance and repair services, to enter the market and supply any make of car at prices that they choose themselves. However, without franchised dealerships there will be problems as to who could, or should, be obliged to fulfil the 3-year car warranties that manufacturers now provide with all sales of their new cars.

Company car taxation will increase steeply when the new formula for taxation purposes is introduced in April 2002. The new formula takes into account the level of carbon dioxide (CO2) emissions, as well the list price of a new vehicle. For many users, the annual increases in taxation of company cars is reducing the value of this form of remuneration. More company car users are now opting to buy their own vehicles, being encouraged to do so by the 3-year warranties, which guarantee that repair bills should be low or non-existent during the warranty period, and because of the longer term reliability of the vehicle. They can also choose whatever vehicle they like and negotiate cheaper prices with car distributors. Consequently, the importance of this market sector to car manufacturers is set to decline, but the importance of the private buyer should grow.

Fleet purchasers are very important to the car manufacturing industry, because of the high volume of cars that are bought annually by various companies and other organisations, such as the car hire groups. These bulk buyers have traditionally supplied the company car market, but changes in this sector of demand may prevent them from placing the very large orders on which the volume car manufacturers have come to depend.

Commercial Vehicles

There are many categories and configurations in commercial vehicles, ranging from light vans (which are based on car designs) to the heavyweight articulated lorries (for long-distance freight haulage), buses and coaches (for city and inter-city services), and special purpose vehicles (such as fire engines).

This diversity in vehicles is essential to meet the different demands of a large number of operators wanting to use standard vehicles that are particularly appropriate for their particular activities. Many of the heavyweight vehicles are leased to transport operators rather than bought outright, so their fleets can be updated fairly regularly if this is an essential requirement.

The market for commercial vehicles is highly competitive as there are many manufacturers supplying static or only slowly-growing demand. High gross domestic product (GDP) growth stimulates some extra demand for commercial vehicles, but this tends to occur only in the short term. Low growth in the national economy, which is a more usual occurrence, often leads to vehicles being laid up or cannibalised for spare parts because of the high cost of keeping marginally-used vehicles on the road.

Key Note Ltd 2002 9


Most of the UK’s suppliers of vans, light and heavy commercial vehicles, and bus and coach chassis, are either of foreign origin or the manufacturing plant in Britain is foreign owned. Vehicles are imported either fully completed, or in chassis form, so the bodywork can be added at a later stage in the UK.

The few manufacturing plants left in the UK make a range of vans and lorries mainly for the UK market, but there is also an active export trade in double-deck buses and coaches.

Motorcycles, Mopeds and Scooters

There has been a resurgence in demand for motorcycles, mopeds and scooters, stimulated both by the increasing interest in high-powered motorcycles used primarily for leisure purposes, and by the perceived need by an increasing number of commuters for scooters as an independent means of daily travel to work. More dealers are setting up new businesses as motorcycle, moped and scooter specialists, and so it has become easier for potential customers to buy and maintain these machines within their immediate locality.

INDUSTRY STRUCTURE

Background to Industry Supply

Major manufacturers of motor vehicles in both the UK and other countries make very few of their own components, as it is more practical and cheaper to buy from specialist suppliers. These suppliers have to produce good products and be very efficient in meeting high quality standards. They achieve this by investing heavily in research and development (R&D) and in production facilities. Even the largest companies (such as General Motors and Ford), which could easily spread the cost of the overheads for researching and making advanced motor components and assemblies over their production plants worldwide, have disposed of their former component manufacturing interests — Delphi (General Motors) and Videon (Ford) — and now buy from the same recognised speciality suppliers that are used by competitors. Their former component manufacturing subsidiaries, which had become the largest component manufacturers in the world, are now totally independent manufacturing units. They are suppliers to all the car and commercial vehicle manufacturing groups in North America and compete internationally.

Not being tied to in-house production of motor components has liberated vehicle assemblers from expensive R&D and production costs. They have a wide choice of suppliers whose prices can be squeezed to reflect real market conditions for their products — an option not so possible with in-house production.

10 Key Note Ltd 2002


Level of Foreign Ownership

Domestic Manufacture

There has been a steep decline in the output of all the categories of commercial vehicles made by UK manufacturers since the peak years of 1996 and 1997. As Table 1.1 shows, the drop in output was particularly acute between 1999 and 2000, when production reached its lowest level since 1994.

Foreign Manufacture

Market penetration by foreign manufacturers, and their subsidiaries, which operate production plants in the UK, is around 90% of total sales. IBC (General Motors/Vauxhall) and Ford are the principal domestic manufacturers and are among the largest importers of light and mediumweight goods vehicles. In the heavyweight subsector, the Leyland DAF, ERF, Foden, and Atkinson brands which manufacture in the UK are all under foreign control.

Among the major overseas companies that supply the British market with commercial vehicles are Mercedes-Benz, Renault, Citroën, Peugeot, Iveco/Fiat, Iveco Ford, Toyota, Volvo, Scania, Nissan, Volkswagen/MAN, Mazda, Suzuki, Daihatsu, and Mitsubishi.

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

% Change1999 2000 Year-on-Year

Volume of Output

Light commercial vehicles 162,176 104,730 -35.4

Under 7.5 tonnes 4,107 3,026 -26.3

Over 7.5 tonnes 6,443 3,854 -40.2

Motive units 2,739 1,569 -42.7

Buses, coaches and mini-buses 10,440 10,305 -1.3

Total 185,905 123,484 -33.6

Source: National Statistics

Key Note Ltd 2002 11


By Market Sector

Cars

Approximately three-quarters of all new cars registered each year in the UK are imported, mainly from continental Europe, Japan, South Korea and Malaysia, but increasingly from the US, which is currently producing some models suitable for this market. Apart from MG Rover, now under British control, volume car sales in the UK are divided principally among Ford and its subsidiaries — including Jaguar, Volvo and Land Rover, General Motors/Vauxhall, Renault, Peugeot-Citroën, DaimlerChrysler Group, Volkswagen Group, BMW, Nissan, and the Fiat Group. Other brands include Mitsubishi, Mazda, Suzuki, Daihatsu and Proton.

Commercial Vehicles

Commercial vehicles dominate the movement of goods in the UK, while buses and coaches account for the transport of large numbers of passengers in towns and cities, on inter-city routes and in rural areas. The rail network has proved to be almost totally inadequate in supplying the reliability and quality of service that customers want and expect, leaving road transport as the often preferred method of delivery. Providing a comprehensive service to clients depends on the availability of a large variety of vehicles of different capacities and capabilities. Non-standard road vehicles can often easily be built on the chassis of most standard vehicles, so that custom-made bodies made by specialist companies are available to buyers who need them for their businesses.

There is a strong correlation in demand for commercial vehicles and growth in GDP because road transport is vital to the national economy. Weak growth soon results in weak demand and, conversely, strong growth is soon reflected in high demand. However, despite the commercial vehicle’s crucial importance at the centre of the transport industry, the road network is only slowly being improved at local and national levels. Consequently, the considerable technical advances made to reduce noxious exhaust emissions and noise, and to enhance their fuel economy and safety, are being largely nullified by strong opposition to their presence on the roads by various activists and environmental groups, road congestion, restrictions on their movements, heavy taxation and high fuel prices.




The UK market for motorcycles, mopeds and scooters has grown rapidly over the past 3 to 4 years, as these machines are highly regarded for leisure activities and as a practical alternative to the car and public transport for daily commuting. Large engine capacity motorcycles have become fashionable for the wealthier classes, who are able to pay the high prices demanded for high performance machines, and the range of essential accessories (e.g. crash helmet, clothing, etc., which are needed for all weather use). Some car dealers have begun to take a serious interest in supplying this comparatively new market as a potentially very profitable bolt-on business that can be added to their existing core business.

Triumph is the only British volume producer supplying the domestic and export markets, but there are two other smaller manufacturers in the market which produce off-road and bespoke motorcycles for UK and overseas customers. However, most of the new registrations of large motorcycles are imports, as are those of mopeds and scooters.

In general, scooters are equipped with small engines as they are used primarily for travelling short distances and for commuting in towns and cities. However, there is a growing demand for larger capacity engines of around 500cc (cubic capacity), a type currently being supplied by Yamaha. Other leading scooter manufacturers in Japan and Italy are expected to develop similar, or even larger, capacity machines for this new market.

There is no domestic moped or scooter manufacturer, so all the sales in the UK are imports. Customers are offered a wide choice in the type of machines from a number of companies. The cheapest machines are made by several manufacturers in China (Jianshe, Kangda and Easy Rider), Taiwan (Sym, Adly, TGB, CPI, Aeon, Kamco and Rovigo), and South Korea (Hyosung and Daelim).

The more familiar and more expensive scooters are made by Honda, Yamaha and Suzuki (Japan), Piaggio, Aprilia, Malaguti, Benelli, Italjet, Betamotor (Italy), Peugeot and MBK (France). The popular BMW C1 model is also produced in Italy.

London is the largest market for scooters in the UK, as it accounts for approximately half of total UK sales. Sales in this market are expected to grow substantially when the new congestion tax is introduced, possibly in 2003, as riders are expecting to be exempt from paying this tax.



• Bestselling Motorcycles, Mopeds and Scooters

The market for motorcycles, mopeds and scooters is dominated by imports from Japan, Italy and France, but market penetration by the Taiwan manufacturer Sym has recently become noticeable among the bestsellers.

Peugeot heads the lists for small mopeds and scooters up to 100cc. Japanese and Italian makes dominate the next categories of up to both 125cc and 500cc. The three Japanese manufacturers of Honda, Suzuki and Kawasaki are pre-eminent in the large engine category of over 700cc, but are meeting strong competition from Triumph and Ducati in terms of popular demand.

Although BMW and Harley-Davidson do not feature among the bestselling brands, they both have a very strong following in the motorcycling fraternity.

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

1997 1998 1999 2000 e2001

Registrations 121.3 143.3 168.4 182.9 190.0

% change year-on-year - 18.1 17.5 8.6 3.9

e — Key Note estimates

Source: Department of Transport, Local Government and the Regions (DTLR)/Key Note

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

Motorcycles Motorcycles

and Scooters and Scooters Motorcycles

Mopeds (up to 100cc) (101-125cc) (126-500cc)

Peugeot Peugeot Gilera Kawasaki

Gilera Honda Piaggio Gilera Honda

Piaggio Sym Aprilia Suzuki

Suzuki Malaguti Honda

Honda Yamaha Piaggio

Yamaha Suzuki Yamaha

Table continues...



Employment

In 2001, 1.5 million people were employed by the motor industry in the manufacturing of vehicles and motor components, and the wholesale and retail sale and repair of motor vehicles. The closure of Ford and Vauxhall plants, along with the difficulties experienced by the motor components manufacturing sector, will probably cause a further decline in employment levels in the assembly factories. However, the trend to employ fewer people in this capacity had already started before these events took place. New techniques in working methods, with the emphasis on pre-assembly of complete units outside the assembly plant and the increasing use of robots, has made the production plant less labour-intensive.

The service sector, directly and indirectly employed by the motor industry, continues to grow and this has offset the decline of employment in the manufacturing sector. It is considerably larger than the manufacturing sector, and is more widespread within the economy, so all the regions benefit from providing motor-related services.

...table continued

Motorcycles Motorcycles Motorcycles

(501-700cc) (701-900cc) (901cc and over)

Honda Kawasaki Yamaha

Yamaha Honda Honda

Kawasaki Suzuki Suzuki

Suzuki Triumph Triumph

Ducati

Source: MotorCycle Industry Association Ltd/Key Note

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



Trade Associations

There are many trade associations which represent almost every conceivable area of the motor industry. The following list gives an indication of just some of these associations and their activities.

• The Society of Motor Manufacturers and Traders Ltd (SMMT) — the interests of the entire industry

• British Rubber Manufacturers’ Association Ltd — all aspects of the rubber industry, but especially tyre manufacture

• National Tyre Distributors’ Association — wholesale and retail sales of tyres

• Retread Manufacturers’ Association — producers of retreaded tyres

• Retail Motor Industry Federation — franchised car dealers and service sectors

• British Vehicle Rental and Leasing Association — vehicle rental and leasing companies

• Freight Transport Association — own account road hauliers

• Institute of British Carriage and Automobile Manufacturers (IBCAM) — improvements in design, materials, method of manufacture and the safety of commercial vehicles.

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

1997 1998 1999 2000 †2001

Wholesale, retail, sale and

repair of motor vehicles 942.4 1,030.5 1,034.6 1,257.5 1,263.3

Motor manufacturing 223.2 226.3 218.9 222.8 213.6

Total 1,165.6 1,256.8 1,253.5 1,480.3 1,476.9

† — figures to September

Source: Labour Market Trends, National Statistics



MARKET SEGMENTATION

Cars

There has been a steady decline for more than a decade in the registration of home-produced cars, now estimated to account for just over a quarter of total new registrations in the UK. The present fall in domestic demand for home-produced vehicles may, however, have reached the end of its downward trend — there are plans to greatly increase the output of recently introduced new models (e.g. the Mini, Jaguar and the products of the Japanese-owned plants) and these are expected to appeal to more British buyers.

Volume car production in the UK could be less affected by the closure of the Dagenham and Luton car manufacturing plants because of the increased output from their competitors. Nevertheless, it will take time to improve the image of British-manufactured cars in the home market — an image that has been tarnished by the UK motor industry’s many problems in labour relations, the reliability of its products and uninspiring designs.

Customer Profile

The fleet and business sectors of the motor industry are of fundamental importance to the volume car manufacturers as they are regular buyers of vehicles in large numbers, albeit at relatively low prices compared with the private buyer. In 2000, the fleet market and business users jointly accounted

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

1997 1998 1999 e2000 e2001

Home-produced 736.1 727.6 648.1 608.5 587.0

% change year-on-year - -1.2 -10.9 -6.1 -3.5

Imported 1,434.9 1,519.8 1,549.5 1,606.5 1,663.0


Total 2,171.0 2,247.4 2,197.6 2,215.0 2,250.0

% change year-on-year - 3.5 -2.2 0.8 1.6


Source: Society of Motor Manufacturers and Traders (SMMT)/Key Note



for a volume of 1,227,757 cars, while private buyers accounted for 993,890 vehicles out of a total market comprising 2,221,647 newly registered motors.

A high proportion of the fleet market is company-orientated in some way (as short- and long-term rental, contract hire, lease, etc.) and the prices charged to companies for this service are related usually to the theoretical residual selling price of the cars when the cars are eventually sold to the general public. These were once fairly predictable, but there has been a profound change in the market for these used cars and residual prices have fallen drastically.

Until recently, most private buyers accepted the higher prices charged for individual purchases of cars. However, as they have become more aware of the unfavourable comparisons made with prices for identical vehicles in continental Europe, they have begun to take advantage of the availability of new cars at much cheaper prices through non-franchised sources. Heavy pressure has also been applied at all levels to slant the car pricing structure more in favour of the private buyer. There is now a strong possibility that unfavourable publicity will result in the removal of block exemption as a restraint on trade when it is due for renewal in September 2002.

The importance of the fleet buyer is being eroded by the need by manufacturers to take more account of the private buyer, as the price disparity between the two sectors is highlighted in a more transparent market. An alternative supply route is now an established factor in car pricing, and the franchised dealer will be given more opportunity to buy in bulk (with a view to passing on savings in the form of large discounts to the private buyer).

Company car users are increasingly heavily taxed and so, for many users, there is an advantage in buying their own cars and charging for the mileage covered on business to the company. Comprehensive 3-year warranties, cheaper prices and a wider choice of new cars make this move economically feasible, and so it is expected that the present attraction of company cars will gradually fade away.



Commercial Vehicles

Users of commercial vehicles can choose from a similar range of options that are available to car users, varying from outright purchase to rental and leasing. At the light van end of the market, it is more common for the user to buy a vehicle either for a cash payment or by hire purchase than it is to rent or lease. However, as the vehicle becomes more expensive, the capital cost becomes prohibitive and renting or leasing is often the preferred option.

Ownership of commercial vehicles varies from an individual running a small business (such as painting, decorating, plumbing or electrical contracting) to the fleets run by specialised road haulage companies (either for spot hire or under longer-term contract on behalf of other firms). Many of the large retail chains now prefer to hire rather than own their vehicles, because of the complicated regulations that affect the transport industry, and because it is more efficient to put their transport requirements in the hands of the specialist operator which can provide a dedicated service.

The British Vehicle Rental and Leasing Association has reported a large increase in demand for rented and leased vehicles but, paradoxically, as the fleets have become larger, the number of operators has fallen due to rationalisation and amalgamations. Leasing contracts enable users to change and update vehicles more frequently than would be possible if the vehicles were bought. Consequently, the possibility of breakdowns is much reduced so the reliability of the service to customers can be guaranteed.

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

Company Cars as a % of New Registrations

1997 1998 1999 2000 e2001Fleet and Business

Fleet 46.9 46.9 46.3 45.8 45.0

Business 6.9 7.3 8.5 9.5 9.8

Total fleet and business 53.8 54.2 54.8 55.3 54.8

Private buyers 46.2 45.8 45.2 44.7 45.2

Total 100.0 100.0 100.0 100.0 100.0






Demand for the powered two-wheel vehicle is growing mainly because of its convenience, but also because the range of machines offer a variety of options in speed, comfort and economy to both sexes in all the social categories. They are used for work purposes (e.g. courier services), for commuting, and for recreation.

Powerful motorcycles have become very popular with middle-aged and older riders who can afford to buy them, and are used primarily for recreational purposes. Younger riders also buy powerful motorcycles, but use them more extensively both for recreation and for travelling to work. To some riders they are prestige symbols, and so the name of the marque is an important consideration when buying a machine.

Mopeds and scooters have a more pragmatic value and advances in technology have made them very easy to ride. However, the restricted power of mopeds that is allowable for the 16 year-old and for those riding on car licences limits their appeal, so the higher-powered scooter is preferred.

New riders have to be prepared to undergo training and pass tests before they are qualified to ride the higher-powered motorcycles. This can act as a major deterrent to less-than-enthusiastic prospective buyers.

MARKET SIZE

New and Used Motor Vehicles and Motorcycles by Value

New Vehicles

Discounting has affected the sales value of some new cars, but the drop in value has been largely offset by growth in the volume of sales. Changes to manufacturers’ and distributors’ pricing policies for new cars over the past 2 years have benefited the private buyer, but the largest impact has been on residual values for used vehicles.

Commercial vehicle sales were less affected by these changes as the terms of sale and prices have always been more negotiable between manufacturer, distributor and the buyer.



Used Vehicles

Residual values in the used car market for nearly new vehicles have been damaged by the fall in new car prices to the private buyer — this has affected the resale value of the fleets owned by rental, leasing and hire and other companies that buy and sell vehicles in bulk. The size of the discounts expected by bulk purchasers of new cars has greatly reduced the profitability of sales to this market sector for the volume manufacturers and, consequently, more attention is being given to the more profitable private buyer whose expectations are not quite so high. The larger discounts that are now offered to the private buyer by some manufacturers has encouraged many former buyers of good-quality used vehicles to buy new vehicles rather than second-hand, and the effect has been to depress the resale value of almost every make of used car.

A side-effect of this trend is that car breakers and scrap-metal merchants cannot cope with the growing influx of old vehicles that have little or no value. Many are refusing to take them without a charge being made for their disposal. As many owners refuse to pay the fee, old cars are being dumped on the street in ever-increasing numbers.

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

1997 1998 1999 e2000 e2001

Cars 23,205 23,934 25,298 27,443 29,566

Commercial vehicles 3,496 4,146 4,449 4,704 4,860

Motorcycles, mopeds

and scooters 277 315 399 441 466

Motor components 12,095 11,584 10,478 10,598 11,168

Total 39,073 39,979 40,624 43,186 46,060


Source: National Statistics/Key Note



Cars

Physical and official limitations on parking spaces in cities and towns have not prevented the growth in market size as new car registrations are increasing at a faster rate than cars are being officially scrapped, thus the total number on the roads is constantly growing. As there are no restrictions on the number of cars that can circulate on the roads, the only deterrent is their immobility in the traffic jams which occur daily in most cities, on trunk roads and on motorways. Building new roads to carry the vast increase in traffic does not appear to be an option that is favoured by central government and local highways authorities. Ultimately, then, users will be facing more penalties for continuous growth, such as the proposed congestion tax on cars and commercial vehicles in central London.

Paradoxically, the durability and reliability of older cars is a major contributor to the problem of too many cars on the road and prevents them from being scrapped at a faster rate. Some governments in the EU have tried to induce owners of old cars to scrap them in return for a financial reward, and this has given a short-term boost to sales of new cars in their respective countries. This initiative has not been tried in the UK, so the problem will continue until more radical steps are taken to restrict growth or more roads are built.

The motor industry is too important to the economy for the Government to place restrictions on growth in demand. Any major change in policies on this issue also has to meet public approval or the Government will suffer the consequences electorally. Since there is no consensus on what restrictions should apply, it is not likely that any action will be taken that may possibly ameliorate the problem.

Table 1.8: International Trade in Cars and Commercial Vehicles by Value and Volume

(£m and 000), 1997-2001

1997 1998 1999 e2000 e2001

By Value (£m)

Exports

Cars 8,474.0 8,499.1 9,494.4 9,684.3 10,071.7

Commercial

vehicles 1,018.8 960.2 655.7 642.5 610.3

Total 9,492.8 9,459.3 10,150.1 10,326.8 10,682.0

Table continues...



...table continued

1997 1998 1999 e2000 e2001By Value (£m)

Imports

Cars 13,432.1 13,873.3 14,737.2 15,326.7 17,165.9

Commercial

vehicles 1,844.9 2,295.6 2,232.9 2,344.5 2,461.7

Total 15,277.0 16,168.9 16,970.1 17,671.2 19,627.6

Trade Balance

Cars -4,958.1 -5,374.2 -5,242.8 -5,642.4 -7,094.2

Commercial

vehicles -826.1 -1,335.4 -1,577.2 -1,702.0 -1,851.4

Total -5,784.2 -6,709.6 -6,820.0 -7,344.4 -8,945.6

By Volume (000)

Exports

Cars 1,025.5 1,058.8 1,159.3 1,182.5 1,206.1

Commercial

vehicles 150.0 116.2 70.6 69.7 66.2

Total 1,175.5 1,175.0 1,229.9 1,252.2 1,272.3

Imports

Cars 1,542.0 1,553.7 1,671.3 1,754.9 1,899.7

Commercial vehicles 111.5 152.6 144.6 148.9 154.9

Total 1,653.5 1,706.3 1,815.9 1,903.8 2,054.6

Table continues...


(£m and 000), 1997-2001



International Trade

Although the UK is a net importer on a large and growing scale, the domestic motor industry is heavily dependent on a strong export performance. Japanese manufacturers have introduced new models that are designed to appeal to European buyers — BMW is rapidly expanding production of its new Mini, which will be sold through its worldwide distributors, and Ford is expanding production of new-look compact Jaguars and the Land Rover, which are being sold through its worldwide distributors. MG Rover is not expected to make a significant contribution to exports until its new name has become more established in international markets and the model range is better known.

The market for imports continues to grow. This is partly because manufacturing capacity has been closed in the UK and the popular models are now made in other countries, and partly because of the ready availability of a wide range of marques that are available from foreign manufacturers, which comprehensively cover all the market sectors.

• Exports

The export of cars by both volume and value is increasing. It is likely to continue increasing as the products made by the industry are accepted internationally and there is a good distribution network in place. Japanese manufacturers in the UK are committed to exporting a large proportion (over 70%) of their output to other countries, including Japan. Ford is rapidly expanding production of its premium Jaguar and Land Rover ranges, which are distributed through its worldwide networks with the emphasis on sales to the North American markets. BMW has recently started production of its new Mini and the intention is to sell the bulk of output to overseas markets.

...table continued

1997 1998 1999 e2000 e2001By Volume (000)

Trade Balance

Cars -516.5 -494.9 -512.0 -572.4 -693.6

Commercial vehicles 38.5 -36.4 -74.0 -79.2 -88.7

Total -478.0 -531.3 -586.0 -651.6 -782.3


Source: HM Customs & Excise/Society of Motor Manufacturers and Traders (SMMT)/Key Note


(£m and 000), 1997-2001



• Imports

Around three-quarters of the new cars registered in the UK in 2001 are of foreign origin. However, this degree of market penetration may be near its peak, as the home producers have become more resilient and are producing models which have a wide appeal to buyers. Both importers and domestic producers will be affected if ’block exemption’ is eliminated by the EU, because of the profound impact this will have on pricing strategies. There is uncertainty as to what effect the removal of ’block exemption’, if this occurs, will have on the domestic market in terms of pricing strategies. It could be a handicap for importers that have long been accustomed to charging premium prices in the British market.

Diesel Cars

There is a growing demand for diesel-powered cars in the UK, but sales are still relatively low compared with demand in continental Europe, where there are tax concessions in diesel fuel prices. Fuel economy is the main selling point for diesel-engined cars, but the comparable petrol-engined cars are now almost as fuel efficient. Peugeot, Ford, Citroën and Vauxhall are popular brands purchased in this market.

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

2000 2001

Number of % of Number of % ofBestselling Registrations Total Registrations Total

Diesel Cars

Ford Focus 18,325 5.9 21,782 5.0

Volkswagen Golf 14,541 4.6 21,678 5.0

Peugeot 406 - - 20,332 4.7

Citroën Xsara - - 20,286 4.6

Volkswagen Passat 11,464 3.7 20,214 4.6

Ford Mondeo 9,137 2.9 19,093 4.4

Vauxhall Astra 15,226 4.9 18,274 4.2

Peugeot 206 14,110 4.5 17,724 4.1

Vauxhall Vectra 10,199 3.3 14,437 3.3

Peugeot 306 20,255 6.5 11,792 2.7

Peugeot 404 21,562 6.9 - -

Land Rover Discovery 8,899 2.8 - -

Total bestselling

diesel cars 143,718 †45.9 185,612 †42.5

Table continues...



Automatic Cars

Demand for automatic cars in the UK is lower than for diesel-engined cars, although they are generally considered to be more convenient in congested traffic than manually-operated gear boxes. Heavier fuel consumption, compared with manual change, may have contributed to the image that automatic cars are expensive to run.

In the UK in 2001, the bestselling automatic car was the Mercedes C Class, followed by the BMW 3 series, which has overtaken the Vauxhall Astra (the leading British brand). Renault and Honda were newcomers to the top ten list in this category in 2001.

...table continued2000 2001

Number of % of Number of % ofRegistrations Total Registrations Total

Other 169,474 54.1 250,979 57.5

Total 313,192 100.0 436,591 100.0

† — does not sum due to rounding

Source: Society of Motor Manufacturers and Traders (SMMT)

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



Leading Suppliers of Cars

The Ford Group is the largest supplier of cars, by number of registrations, to the UK market, but its lead over other brands has been cut since 1997 (from 22% to 19.8% in 2000). General Motors’ subsidiaries have also lost some of their former market share over these 5 years, but this was a relatively small change compared with Ford.

BMW sales have actually increased, but the high market share of the company in the domestic market in 1997 was due to the Rover Group, which was then part of the organisation. This dropped steeply after the disposal of Rover.

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

2000 2001


Bestselling

Automatic Cars

Mercedes C Class 12,930 4.2 19,667 5.7

BMW 3 Series 11,111 3.6 14,478 4.2

Mercedes E Class 12,088 4.0 12,069 3.5

Ford Focus 7,590 2.5 11,253 3.2

Vauxhall Astra 11,293 3.7 9,679 2.8

BMW 5 Series 8,235 2.7 9,615 2.8

Renault Megane - - 8,969 2.6

Honda Civic - - 8,535 2.5

Vauxhall Omega 7,413 2.4 6,729 1.9

Honda Accord 8,950 2.9 - -

Jaguar S Type 8,374 2.7 - -

Total bestselling

automatic cars 87,984 †28.9 100,994 †29.1

Other models 216,613 71.1 245,654 70.9

Total 304,597 100.0 346,648 100.0





The PSA group of companies, Renault-Nissan Group and Volkswagen Group are the other leading suppliers to the British market, each with between an 11% to 12% market share.

Other significant increases in market share were recorded by DaimlerChrysler, Toyota and the Korean makes.

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

2000 2001


Ford Group

Ford 396,353 368,954

Volvo 40,485 36,943

Mazda 31,293 20,041

Jaguar 9,507 15,033

Total Ford Group 477,638 22.0 440,971 19.8

General Motors

Vauxhall (GM Opel) 294,550 296,519

Saab 16,688 16,374

Total General Motors 311,238 14.3 312,893 14.1

BMW Group

BMW 63,724 67,676

Rover 217,262 -

Total BMW Group 280,986 12.9 67,676 3.0

PSA Group

Peugeot 167,472 189,145

Citroën 79,527 84,491

Total Peugeot Group 246,999 11.4 273,636 12.3

Table continues...





Volkswagen Group

Volkswagen 119,767 155,657

Audi 35,524 43,168

Skoda 15,750 29,255

Seat 16,753 19,972

Total

Volkswagen Group 187,794 8.7 248,052 11.2

Renault-Nissan Group

Renault 159,235 161,142

Nissan 96,172 84,947

Total

Renault-Nissan Group 255,407 11.8 246,089 11.1

Fiat Group

Fiat 88,328 83,224

Alfa Romeo 5,896 9,845

Total Fiat Group 94,224 4.3 93,069 4.2

DaimlerChrysler

Group

Mercedes-Benz 42,530 63,754

Chrysler - 16,427

Total

DaimlerChrysler

Group 42,530 2.0 80,181 3.6

Table continues...




Registrations by Model Range

The most successful car model is the Ford Focus, which occupied the leading place in the list of top ten registrations in both 2000 and 2001. A surge in Peugeot sales in 2001 raised the brand’s profile, and pushed the Vauxhall Corsa into fifth place.



Rover Group - - 103,663 4.7

Toyota 72,465 3.3 92,555 4.2

Korean brands 53,927 2.5 72,463 3.3

Honda 55,612 2.6 68,718 3.1

Other 91,725 4.2 121,681 5.5

Total 2,170,545 100.0 2,221,647 †100.0




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

Number of Registrations

% of 2000 % of 20012000 Market 2001 Market

Top Ten Models

Ford Focus 114,512 5.2 137,074 5.6

Vauxhall Astra 93,263 4.2 98,999 4.0

Ford Fiesta 91,783 4.1 98,221 4.0

Peugeot 206 80,991 3.6 97,887 4.0

Vauxhall Corsa 84,514 3.8 93,792 3.8

Ford Mondeo 69,377 3.1 86,559 3.5

Table continues...



Cars for the Disabled

Sales of modified cars under the Motability scheme for helping disabled people has grown by 44.6% in volume terms between 1997 and 2001. Motability is a non-profit-making voluntary organisation, which operates a hire-purchase scheme for cars, pavement vehicles and powered wheelchairs for the disabled who qualify for pensioners mobility supplement. It adapts cars and vans for the disabled and, in its relatively short life, has become one of the largest fleet buyers of motor vehicles in the UK. Motability is, therefore, of great importance to the motor industry. The turnover of the company is around £750m per annum.

...table continuedNumber of Registrations

% of 2000 % of 20012000 Market 2001 Market

Top Ten Models (cont.)

Renault Clio 61,209 2.8 79,843 3.2

Renault Megane 64,666 2.9 73,577 3.0

Volkswagen Golf 57,359 2.6 67,099 2.7

Citroën Xsara - - 65,681 2.7

Vauxhall Vectra 70,704 3.2 - -

Total top ten models 788,378 35.5 898,732 †36.5

Other 1,433,269 64.5 1,560,037 63.5

Total 2,221,647 100.0 2,458,769 100.0



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



Commercial Vehicles

Commercial vehicles include microvans, light vans, vans and pick-ups to 3.5 tonnes, trucks under 7.5 tonnes, trucks over 7.5 tonnes, tractor units for articulated vehicles and heavy multiwheel trucks up to 44 tonnes, buses, coaches and minibuses. Small and medium-sized vans of up to 3.5 tonnes capacity are principally made in the UK, but most of the heavier vehicles are imported from other European countries.

The UK is overwhelmingly dependent on goods transported by road because this provides the greatest flexibility in making deliveries door-to-door, without having the inconvenience of transferring to another form of transport. Even over longer distances, road transport can be more cost-effective than the rail network in the speed and reliability of its service and economy in the manhandling of goods in transit.

International Trade

Light- and mediumweight vans are made in large numbers in the UK, primarily for the domestic market. However, the output of heavy commercial rigid and articulated trucks is low, with ERF and Volvo making the largest contribution to sales in this category. From former leadership in the manufacture of heavy vehicles, Leyland is now a small-scale producer. It is, however, closely involved with DAF in the development and manufacture of heavy vehicles, a relationship that has survived the crisis of DAF’s near bankruptcy in the mid-1990s.

• Exports

The outlook for exports of commercial vehicles is poor. This is because none of the local producers dominate the markets in their home territory, so it is unlikely that they will be more successful as exporters. All the manufacturers are under heavy pressure from imported vehicles in every capacity. Some joint ventures are in place (e.g Leyland/DAF), or are progressing (e.g. Vauxhall/Renault), but the proposed LDV joint venture with a South Korean manufacturer for the development of a new van has been halted.

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

Number of Cars

1997 151,472

2001 219,000

Source: Department of the Environment, Transport and the Regions (DETR)/Motability



• Imports

Imports of commercial vehicles are as high proportionately as for cars, and this applies to all the ranges and categories of goods carriers. Germany, France, Sweden and Italy are the volume producers of commercial vehicles that have most successfully penetrated the UK market. These have been joined by Japan, which is essentially a major supplier of light vans.

Bus and coach chassis are also imported in large numbers. They are then equipped with locally-made bodies, which are designed and made specifically for the British market. The internal market for these vehicles is not as open-ended for imports because, in the goods carrying sector, there is strong competition from the Mayflower/Henlys Corporation’s bus and coach company operating as Transbus International.

Suppliers of Commercial Vehicles

Light commercial vehicles are made in fairly large volumes in the UK, primarily by Ford, Vauxhall, LDV and Land Rover. These account for a large proportion of home registrations, but market share by all British manufacturers (including heavy vehicles) dropped by 7.8% to reach 30.5% in 2001, compared with 34.7% in the previous year. New registrations of imports from mainly Germany, France and Japan increased by 11.7% over the same period.

Most of the small vans are derived from cars, but the mediumweight vans are purpose-built for carrying heavier loads. The heavier categories of vehicles are supplied either in complete form or with engine and chassis only (which can be adapted to receive purpose-built bodies for the short- and long-haul transport of goods).

Ford and Mercedes are the most popular of the imported brands of light vans, closely followed by Renault, Citroën and Peugeot Talbot. In the medium to heavy vehicle market, the most popular brands are Iveco Ford, MAN, DAF Trucks, Volvo and Scania.



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

2000 2001

British Manufacturers

Ford 57,854 50,478

GM Vauxhall 11,495 12,806

LDV 13,150 11,179

DAF Trucks 5,708 5,899

Land Rover 5,661 5,854

ERF 2,522 2,900

Dennis 2,020 2,019

Peugeot Talbot 1,015 1,285

Foden 981 886

Seddon Atkinson 641 585

Volvo 1,183 545

Iveco Ford 132 24

Others 871 748

Total British manufacturers 103,233 95,208

Leading Imported Marques

Ford 17,145 30,172

Mercedes 27,312 28,757

Citroën 18,459 22,586

Renault 16,676 20,100

Iveco Ford 13,187 14,380

Peugeot Talbot 12,030 13,150

GM Vauxhall 14,509 11,855

Volvo 7,647 7,760

MAN/Volkswagen 5,103 6,151

Toyota 6,316 5,774

Nissan 4,862 4,819

DAF Trucks 4,359 4,297

Scania 3,720 2,954

Daihatsu 2,298 1,661

Table continues...




The popularity of motorcycles with engines of over 500cc capacity has grown rapidly, as they have widened their appeal from being primarily a utility workhorse (e.g. as used by express courier riders), to include the affluent and fashionable young and middle-aged of both sexes, who use these bikes mainly for recreation and sometimes for commuting. To some extent they have become substitutes for a second or third car, which are of comparable cost.

Scooters are used regularly for leisure purposes and for commuting to work. As they have been made very easy to ride, they are regarded as highly practical for threading through heavily congested city traffic. There are no manufacturers of scooters in the UK, but buyers have a wide choice of machines from Italy, France and Germany and from the Far East, principally Japan, Taiwan and China.

London accounts for around half of the total sales of scooters in the UK. This market dominance is expected to grow because of unreliable and expensive public transport services in the capital, the imminent introduction of congestion charges for four-wheel vehicles, the greater availability of mostly free local parking spaces, and the prospect that two-wheel powered machines will be allowed to use bus lanes.


Leading Imported Marques (cont.)

Mazda 2,437 1,601

DAF Bus 201 267

Others 38,187 40,958

Total leading imported marques 194,448 217,242

Total 297,681 312,450


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



International Trade

Triumph, based in Hinckley in Leicestershire, is the principal UK motorcycle manufacturer and has an annual output of around 30,000 large engine capacity road bikes. The company builds most of its own components in-house. Its latest superbike is the 900cc 3-cylinder Daytona with a top speed of 170mph (miles per hour).

The next largest UK manufacturer, based in Bolton in Lancashire, is CCM, which makes motorcycles for off-road use. Its annual output is around 2,000 products. The power unit is a 650cc single cylinder Rotax engine made in Austria.

The third British motorcycle manufacturer is BSA Regal, based in Southampton in Hampshire. The company has been in business for around 3 years and makes only bespoke machines to order. The power unit is a 500cc Yamaha twin-cylinder engine. Total production is around 250 motorcycles. Around half of the components used in the manufacture of these bikes are made in-house, including the frames.

Major price reductions of around 20% in UK dealers’ list prices have occurred over the past year because of the growth in parallel imports of cheaper new machines from Europe and Japan (and the inability of manufacturers to stop these imports). There has also been significant growth in ’grey’ imports of used motorcycles from other countries, particularly of the most desirable models from Japan.

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

Volume (000)

1997 15.1

1998 16.9

1999 20.8

2000e 25.0

2001e 32.0


Source: MotorCycle Industry Association/Key Note



• Exports

Triumph is the principal exporter of motorcycles, with around 80% of its annual output sold in world markets. Exports are also very important for the other British manufacturers which produce highly specialised machines that need buyers for their products in several countries (as the volume of their domestic sales is too small to sustain their current level of activity). Demand from buyers in Europe, the US and Japan has been growing as the reputation of these manufacturers for performance vehicles is disseminated by motorcycling magazines in their respective countries. In addition to the export sales of complete motorcycles, there is also a substantial trade in spare parts for both new machines and the older British classics (once sold in large numbers around the world and still being used).

• Imports

Major price reductions of around 20% in UK dealers’ list prices has occurred over the past year because of the growth in parallel imports of cheaper new machines from Europe and Japan, along with the inability of manufacturers to stop these imports. There has also been a significant growth in ‘grey’ imports of used motorcycles from other countries, particularly of the most desirable models from Japan. The principal sources of imports of new motorcycles, mopeds and scooters are Japan, Italy, France, Germany and the US. Other countries supplying the UK are Taiwan, China and Spain.

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

1997 1998 1999 2000 2001

UK manufacturers’ sales 68.2 75.0 90.7 111.2 132.2

Less exports 84.4 85.8 94.8 90.1 93.6

Plus imports 293.3 325.7 402.9 419.7 427.3

Apparent UK market 277.1 314.9 398.8 440.8 465.9

msp — manufacturers’ selling prices

Source: ICC Juniper database/HM Customs & Excise/Key Note



Motor Vehicle Production in the UK

There is considerable production overcapacity in all the major motor vehicle manufacturing countries in the world, so that plants that are surplus to requirements or operate at a high cost are being closed. In 2002, car manufacturing plants were closed by Ford and Vauxhall in the UK and the production of new models switched to Germany or Spain. In the 1990s, the Iveco Ford plant in the UK, which manufactured a popular mediumweight truck, was closed and production switched to Italy.

Conversely, Honda is to expand production facilities at its Swindon plant, as will Toyota at its plant near Derby, and Nissan has announced plans to build a new model at its Sunderland plant. A new Rolls-Royce manufacturing facility is to be built in Oxfordshire by its BMW parent company. Jaguar is also expanding production as it begins to introduce new models that are destined for the higher-value sectors in the mass market.

There was a temporary reduction in the production of cars in 2000 as the industry was re-organised and restructured (e.g. the formation of MG Rover as a new company), and the disruption caused to output by the installation of new assembly lines for new models by other companies.

Total output is expected to grow because of the buoyancy of demand in the home market and higher sales in export markets (as the new models are introduced to luxury and standard car buyers worldwide). The Japanese manufacturers are concentrating on expanding their sales in the European markets, despite the problems caused by imbalance in the sterling/euro exchange rate. To minimise the effect of the cost disadvantage of high-value sterling, they are increasingly buying a large proportion (between 60% and 90%) of their requirements for motor components from continental European sources.



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

1997 1998 1999 2000 e2001

Cars

1,000cc

and under 119,894 112,044 113,204 96,043 91,240

1,001cc to

1,599cc 829,079 814,595 776,111 676,438 710,259

1,600cc to

2,499cc 653,147 720,556 758,478 723,294 781,157

Over 2,500cc 95,881 101,063 138,830 145,677 152,960

Total 1,698,001 1,748,258 1,786,623 1,641,452 1,735,616

Commercial Vehicles

Light

commercial 210,942 203,629 162,176 104,730 112,061

Under

7.5 tonnes 6,254 5,006 4,107 3,026 2,874

Over

7.5 tonnes 7,932 7,002 6,443 3,854 3,776

Motive units 2,574 2,492 2,739 1,569 1,600

Buses,

coaches and

mini-buses 10,004 9,250 10,440 10,305 10,350

Total 237,706 227,379 185,905 123,484 130,661


cc — cubic capacity




Motor Components

UK manufacturers’ sales of motor components are threatened by the rising trend to buy autoparts from non-UK sources, and particularly from EU countries, with the less technically-advanced parts and assemblies imported from Eastern Europe, the Far East and Latin America. Meanwhile, vehicle assemblers who continue to buy from British manufacturers are pressurising their home suppliers to reduce prices to a level that would enable them to compete more effectively with their continental European counterparts.

International Trade

By normal business standards, the output of motor vehicles made in the UK would be sufficiently high to support a major components industry, but the value of sterling is regarded by many buyers in the motor assembly industry to be uncompetitive against the euro. Motor vehicle assemblers in Britain have, therefore, openly stated that in future they will buy the majority of their requirements for parts from EU suppliers (in some cases, up to 80% of their needs) until the two currencies are approximately equal in value.

• Exports

Notwithstanding the apparent difficulties for manufacturers in Britain caused by the imbalance in euro/sterling values, the UK autoparts industry is still one of the largest manufacturers and exporters of motor components in the world. Nevertheless, there are indications that this position will not last unless there are radical changes in the market structure, which would make UK manufactured autoparts more price competitive with other major outside suppliers.

• Imports

The value and volume of imports is set to increase steeply if contracts with British suppliers are cut, or are not renewed. Unipart Group, one of the largest manufacturers of autoparts in the UK, comments in its latest annual report on the activities of its manufacturing group:

’The division has experienced a very difficult year in line with almost every other component manufacturing business. Many factories in the UK have failed, particularly where they were heavily reliant on customers who experienced severe volume reductions. The combination of the weak euro, low UK vehicle production levels and intense price down pressure has made this a difficult sector’.



KEY TRENDS AND PROSPECTS

Road transport is indispensable both to the individual user and for commercial purposes, but its popularity over other forms of transport is choking road networks in cities, towns and rural areas. There is strong opposition to more road building, with the alternatives to new construction being the restriction of traffic flow. However, this is likely to be increasingly unacceptable to the majority of users because it will inevitably have to discriminate against some sectors of the population. The rail network is in almost total disarray, and the long delays in arranging the amount of investment needed to modernise and improve the efficiency of the rail system, so that it becomes competitive with road transport, will probably mean that it will take at least one decade (probably two decades) of sustained effort to achieve this objective.

Some parts of the canal network are being rebuilt, but investment in this form of internal transport seems to be primarily for leisure and not commercial purposes. More use could be made of air freight over shorter distances if this is economically feasible, but then collection and delivery of freight still has to be made by road. Consequently, it is expected that the road transport industry will remain at the centre of freight transport well into this new century. As road freight traffic seems destined to increase, there will be pressure to comprehensively modernise and extend the road infrastructure so that the movement of freight can be quicker, cheaper and safer.

The number and variety of commercial vehicles required for the movement of consignments is, therefore, expected to grow because of the national dependence on road transport. New developments in commercial vehicle design, and improvements in tracking technology, will enhance the ability of commercial vehicle operators to offer better, and possibly cheaper, services to their customers.

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

1997 1998 1999 2000 e2001

Exports 7,448.5 7,242.3 7,082.1 6,869.6 6,182.0

Imports 7,056.1 6,990.8 7,869.2 8,262.7 9,253.4

Trade balance 392.4 251.5 -787.1 -1,393.1 -3,071.4


Source: HM Customs & Excise/Society of Motor Manufacturers and Traders (SMMT)/Key Note



Prospects for the commercial vehicle industry will obviously depend on the variations in the rate of growth in the national economy. Private car ownership and use is unlikely to diminish, despite congestion and increasing restrictions which are placed on their owners’ freedom to circulate at will. Public transport services will be improved in an effort to break the general dependency on the car, but the requirement for heavy subsidies to provide an acceptable and cheap level of service in urban and rural areas will not be universally popular.

PEST ANALYSIS

Political Factors

The problems caused by an overloaded road network needs strong political resolve to provide even a moderate solution. This may involve building more roads or restricting traffic flow by imposing additional taxation on the use of the road network. An alternative favoured by politicians is to encourage car owners to use the public transport network of trains and buses more frequently. However, this possible solution has been undermined by years of under-investment in the rail and road infrastructure, which has made these services both unreliable and expensive for its customers. When demand has increased, these public services are often unable to cope with the increased load, causing discomfort and inconvenience to users and forcing them back into their cars.

Bus lanes are being extended by local authorities to cover more areas, in an attempt to increase the speed of city buses and thereby make them more attractive to bus passengers. This may have some effect, but the frequency of the bus service is probably of more importance to customers and this problem is not being addressed. There is also the question as to what level of subsidy will be authorised and paid by central government and local authorities to compensate the bus companies that are expected to run uneconomic city and rural services.

Economic Factors

The economic costs of operating a poor transport infrastructure are incalculable, although this is frequently tried, as time wasted by transport delays can only be theoretically measured. However, it is obvious that there are very large costs which are unnecessarily incurred by all transport operators because the infrastructure is inadequate.

Improving the transport network to a higher standard will require vast expenditure in the short, medium and long term, and this is probably unacceptable to any government, both now and in the future. Some measures will be taken to remove the worst bottlenecks in rail and road systems, but it is unlikely that the financial resources will be provided on the scale necessary to modernise networks when there are so many claims by other sectors of the economy, such as the NHS and education, which are receiving priority in the allocation of money.



Social Factors

Dependence on the car by all social groups covers every geographical area in the UK and is just as concentrated in cities, where there are good public transport networks, as anywhere else. The density in car ownership is growing because more individuals want to own one from an early age and the older age groups want to retain personal use of a car to ensure they have total mobility. Higher prosperity for the majority of the working population, and falling car prices, means that it has become financially easier to upgrade existing models with better specification models, which are constantly being introduced by the manufacturers in a highly competitive market.

Demand for older cars is falling and the low price of these vehicles, combined with their high servicing costs, has made it much harder to dispose of them in a satisfactory way. Car breakers are no longer interested in buying these cars, even for a nominal sum, and their owners are now having to pay the breakers to take them away. Local authorities are also reluctant to accept cars which are being scrapped because of the cost of disposal, so approximately 1 million vehicles are being dumped every year in streets, fields and other accessible areas.

The availability of the service has made public transport less attractive to many who could use it. As the cost of providing these services is constantly rising, and demand is low, there is no incentive for operators to improve. As a result, their quality deteriorates, causing more people to use their cars. Air pollution is increasing, despite the stricter control over exhaust emissions, because of the growing volume of vehicles that are now on the roads. Streets are always heavily congested, and parking is very difficult in towns and cities where the street network is narrow and parking prohibitions are strictly applied.

The high social costs of car ownership seem impossible to control, as the car fulfils an individual’s desire for total transport freedom. Even in the most congested areas where it is impractical to own a car, there is no limit to demand. Various transport experts have devised their own solutions, but none of them are politically acceptable — the key to forming a consensus on what these controls should be and where they should be implemented.

Technological Factors

Technical developments have made the modern car safer, lighter, more fuel-efficient, and faster than even its immediate predecessor. Engines, fuel, suspensions, gears, brakes, tyres, bodies, motor components, exhausts, etc., have all been transformed by new technology that is often incorporated in new designs soon after it is proved to work. Car manufacturers need this new technology as a selling point to promote the advantages of their new systems over those of their competitors, which soon copy any successful innovation.

Electronic controls, electronic systems and new materials have been at the centre of technical innovations in motor vehicle designs. Virtually every functional part can be closely monitored so that it works at maximum efficiency and can be replaced before it causes damage. Reliability has greatly improved as there is less chance that a mechanical or electrical defect will be undetected before it is too late to rectify.



Cleaner conventional and unconventional fuels, such as liquid propane gas (LPG), are now being marketed to reduce emissions and give better engine performance. Servicing intervals have greatly increased — up to 12,000 miles — because of the use of higher performance oils, filters and motor components. Therefore, nearly all car manufacturers are now confident in giving 3-year comprehensive warranties with each new car sold, whereas most, until recently, were offering only 1-year warranties to their customers.

Paradoxically, the cars now being made are better, stronger and more long lasting than the earlier models that they are replacing. However, at the same time, as the working life of these vehicles is being extended, their manufacturers would prefer to see cars replaced more frequently within a short time span. Car output needs a high volume of sales to gain the maximum benefit from economies of scale and, logically, the standards should drop to ensure a high turnover. Cars that have acquired a poor reputation for longevity are, therefore, ignored by prospective buyers, as this knowledge ruins their resale value all the way down the buying chain.

EUROPEAN/GLOBAL PERSPECTIVE

World Production

Leading World Producers

• Cars

Japan has become the leading world manufacturer of cars. This is primarily due to the heavy demand for light commercial 4x4 vehicles in the US that are used for recreational and private transport, but are still classified as commercial vehicles in the official statistics.

Germany and France are the principal European producers, followed by Spain, the UK and Italy. South Korea has established itself as the second-largest car manufacturer in the Far East and is a major exporter to world markets.

Canada has become a major producer in North America, due to the investment in car manufacturing capacity in the country by the major US automotive companies.

Brazil is the largest manufacturer in Latin America of US- and European-designed cars that are sold mainly in Brazil and other Latin American countries. The country has strongly encouraged the local use of fuel made from oilseed rape as a substitute for petrol, so engines have been modified to use this fuel in the home market.



Russia is beginning to recover from the near total collapse of its economy following the adoption of new economic structures, and the car industry is now benefiting from a strong increase in local demand. Oil exports are underpinning economic growth. This growth is likely to attract more foreign investment in manufacturing and service industries, which will increase demand for cars.

• Commercial Vehicles

The US is the largest producer of commercial vehicles in the world, followed at a considerable distance by Japan and Canada. Long-distance transport of freight by road is a major feature in North America, so large capacity articulated trucks are used heavily by the transport industry. There is also a requirement for a diversity of vehicles that are used by local distribution networks, the agricultural industry and for bulk deliveries of a wide range of goods.

Japan has a heavily congested road network that is unsuitable for heavy freight traffic, and narrow city streets, so vehicles have been developed which are comparatively small (e.g. microvans: a Japanese speciality). Demand for these, and for full-sized vehicles, is high because consumers demand quick and frequent deliveries that can only be met by operating a vast fleet of vehicles. In addition, there is a large export trade in Japanese-made commercial vehicles to other countries in the Far East, Middle East and Europe.

The UK is a relatively small producer of commercial vehicles by world standards, and its output is concentrated mainly on the manufacture of light- and mediumweight vans. Manufacturers of heavyweight trucks (i.e. ERF, Foden, Atkinson, Volvo, Iveco Ford, and Leyland DAF) are all foreign owned.

Table 1.19: Selected Leading World Producersof Cars and Commercial Vehicles by Volume

(number of vehicles produced), 1999

Number of

Vehicles Produced

Cars

Japan 8,100,169

US 5,636,744

Germany 5,309,242

France 2,784,469

South Korea 2,362,735

Spain 2,208,708

Table continues...



European Perspective

New Car Registrations in Western Europe

Western European countries collectively account for the highest number of new car registrations in the world. Germany has the largest number of registrations and accounts for 22.9% of the Western European total, followed by France, Italy, the UK and Spain. All of these countries are major producers of cars whose inter-trade with each other also makes them the major markets for exports and imports.

...table continued

Number of

Vehicles Produced

Cars (cont.)

UK 1,786,623

Canada 1,626,535

Italy 1,410,317

Brazil 1,103,460

Russia 955,000

Commercial Vehicles

US 7,388,116

Japan 1,795,307

Canada 1,422,158

Spain 643,681

South Korea 481,379

France 395,724

Germany 378,348

Italy 290,797

Brazil 242,055

Russia 224,737

UK 185,905

India 168,376

Sweden 108,632


Table 1.19: Selected Leading World Producersof Cars and Commercial Vehicles by Volume

(number of vehicles produced), 1999



Other countries within Western Europe are the principal markets for the European manufacturers. Some, such as Belgium, the Netherlands and Sweden, both make and buy vehicles that are registered in Europe.

UK Demand

The national economy has performed comparatively well between 1997 and 2001, compared to other leading countries in the EU which were obliged to deflate their economies over this period in order to meet convergence targets (that were considered to be necessary for closer economic union), and the introduction of the euro as the currency in 12 countries from January 2002.

Tight controls over public expenditure, and sustained surpluses in tax revenues, have greatly reduced the Government’s borrowing requirement. At the same time, revenues from income and sales taxes have also grown because of rising incomes, almost full employment, and the increase in consumers’ expenditure on a range of goods.

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

Number of Cars Registered % of Total

Germany 3,378,343 22.9

Italy 2,415,600 16.4

UK 2,221,647 15.1

France 2,133,884 14.5

Spain 1,381,369 9.4

The Netherlands 597,623 4.1

Belgium 515,204 3.5

Switzerland 314,482 2.1

Austria 309,427 2.1

Sweden 290,529 2.0

Greece 290,225 2.0

Portugal 257,836 1.8

Republic of Ireland 230,965 1.6

Finland 134,768 0.9

Denmark 113,119 0.8

Norway 97,378 1.5

Luxembourg 41,381 0.3

Total 14,723,780 100.0




The converse of tight controls over public expenditure is that most of the services under public ownership have deteriorated badly through lack of sustained investment. Attempts are now being made to remedy this situation by placing heavy expenditure on a wide range of activities.

Despite a worldwide recession, the UK’s economy has benefited from growth in domestic consumer expenditure. Demand for durable and non-durable consumer goods is high and, in common with some other market sectors, the sale of cars in 2001 (of which, around 75% are imported) has exceeded expectations.

• Vehicles in Use in the UK

New vehicles are being added to the number of vehicles in use at a faster rate than the number of vehicles that are either scrapped due to old age, abandoned, or written off by insurers following road accidents. Most new additions are cars that have a far better performance than their predecessors, are safer, better equipped and are environmentally more acceptable because of their lower emissions of noxious gases. The Government is encouraging the replacement of old cars through more stringent annual inspection tests and lower annual road tax on cars that have engines under 1600cc. However, the steady growth in the number of cars on the road is increasingly overloading the existing roads. This situation is expected to worsen as there are apparently no plans to extend and make major improvements to the road network in the UK.

Demand for light and heavy commercial vehicles is closely related to developments in the national economy, and in the general need for all types of road transport vehicles. Their replacement rate tends to be higher than for cars because commercial vehicles need to be continuously on the road and they cover high mileages. Furthermore, the technology is constantly being improved, so the newest models are significantly more efficient. It makes economic sense to replace older vehicles as quickly as possible before they start to incur heavy maintenance costs.

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

1997 1998 1999 2000 e2001

Gross domestic product 763,472 786,303 803,019 826,144 843,337


e — Key Note estimate




Road transport makes a vital contribution to the economy and is the most important factor in the distribution of goods in the UK, far exceeding rail transport in this respect. Nevertheless, the increase in the number of commercial vehicles is a contentious issue for environmental groups and other lobbyists who prefer to see a reduction in the number of commercial vehicles in use.

Demand for double-deck buses and coaches is growing because of their favourable image among local authorities, which regard them as efficient people movers. Dedicated bus lanes have been installed in most cities to increase average speeds, with the intention of encouraging a fuller use of local buses by the general public. Long-distance travel by coach is also very popular with passengers in the UK, as it is generally cheaper than rail transport to the same destination and passengers travel in reasonable comfort.

Since deregulation over a decade ago, most bus and coach operators which survived the intense competition that followed replaced their fleets of old vehicles with new vehicles. The largest operators have regular updates of their vehicles, which affects planned replacement and expansion. This ensures that bus and coach manufacturers can plan for a fairly consistent flow of orders from the domestic market and also be in a position to meet the expansion in demand from export markets.

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

1997 1998 1999 e2000 e2001

Great Britain

Cars 25,593 26,268 26,775 27,310 27,857

Light and heavy

commercial vehicles 3,142 3,211 3,199 3,262 3,359

Buses and coaches 79 87 93 96 99

Total 28,814 29,566 30,067 30,668 31,315

Northern Ireland

Cars 584 593 616 628 636

Light and heavy

commercial vehicles 71 72 74 75 77


Total 658 668 693 707 717

Table continues...



• Vehicles Licensed in Great Britain

A large number of vehicles in circulation on British roads are exempt from normal civilian licensing regulations (e.g. vehicles used by the armed forces, or those that have special dispensation such as wheeled construction plant that spends most of its time on-site, and vintage cars over 25 years old). The figures differ from vehicles in circulation because licences are not always renewed, and many unlicensed vehicles are still capable of being put on the road (so technically they can still remain ’in circulation’).

...table continued1997 1998 1999 e2000 e2001

UK

Cars 26,177 26,861 27,391 27,938 28,493

Light and heavy

commercial vehicles 3,213 3,283 3,273 3,337 3,436


Total 29,472 30,234 30,760 31,375 32,032



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



• New Vehicle Registrations in Great Britain

There has a steep surge in the registration of new cars and motorcycles in response to a small reduction in list prices, more generous discounts, low or no interest finance, a change in the registration system for vehicles, and generally low levels of unemployment in most regions. Commercial vehicle registrations have also increased, but on a far more modest scale compared with the car and motorcycle sectors.

Demand for new cars, and motorcycles, mopeds and scooters, increased steeply in 2001 compared with the previous year, as market conditions have been very favourable in both sectors of demand. Consumers’ expenditure has continued to grow in parallel with the growth in real incomes and, among the major beneficiaries, are the motor, and motorcycle, moped and scooter sectors. Falling prices for four- and two-wheel vehicles, low interest rates, special finance deals, and relatively full employment, have all contributed to an increase in consumer confidence and expenditure.

New vehicle registrations in other transport sectors have been almost static as market conditions have remained unchanged. There has been a deterioration in demand from the agricultural sector for powered vehicles because of the crisis in the agricultural industry, which has affected many in farming communities.

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

1997 1998 1999 2000

Private cars 21,681 22,115 22,785 23,196

Light goods 2,317 2,362 2,427 2,469

Heavy goods 414 412 415 418

Public transport 79 80 84 86

Motorcycles and scooters 626 684 760 825

Special concessions

(disabled vehicles, etc.) 249 243 241 233

Crown and exempt 1,522 1,558 1,573 1,590

Other vehicles (for construction

and agricultural use, etc.) 38 37 36 34

Total 26,926 27,491 28,321 28,851

Source: Department of Transport, Local Government and the Regions (DTLR)



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

1997 1998 1999 2000 e2001

Private and light goods 2,244 2,368 2,342 2,429 2,720

Heavy goods 42 49 48 50 51

Public transport 7 7 8 8 8

Motorcycles and scooters 121 143 168 183 203

Agricultural machines 22 15 17 17 16

Other vehicles 10 9 9 9 9

Tax exempt 151 148 172 176 178

Total 2,597 2,739 2,764 2,872 3,185


Source: Department of Transport, Local Government and the Regions (DTLR)/Key Note


The Motor Industry Key Note Field Research

2. Key Note Field Research

CONSUMER RESEARCH

Car Ownership

Nearly 30% of the cars registered in the UK are over 10 years old. Although they may be badly maintained because it is very likely that the poorest sectors of the community own them, they are still in sufficiently good condition to pass the annual MoT (Ministry of Transport) test. Many of the cars over 12 years old are likely to be scrapped, as the cost of passing the annual test increases and the value of the car drops to almost nothing. Replacement costs for a newer vehicle are probably lower by present day standards than in past years because of the fall in the cost of totally new vehicles and the collapse in the residual values of many nearly new vehicles. This has changed perceptions of the market in used vehicles.

A peak in new registrations was reached between August 1997 and July 1988 (R registration), when 3 million cars were registered. These cars are now well out of their warranty period, and many are now likely to be replaced soon before their part exchange value drops too dramatically. In addition, the recently introduced new registration system and plate will attract new buyers who refrained from purchasing a new vehicle until the new style registration plate became available.

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

000 %

Year of Registration

Before August 1991 8,598 18.4

August 1991 to July 1992 (J) 1,984 4.3

August 1992 to July 1993 (K) 1,859 4.0

August 1993 to July 1994 (L) 2,310 5.0

August 1994 to July 1995 (M) 2,522 5.4

August 1995 to July 1996 (N) 2,518 5.4

August 1996 to July 1997 (P) 2,861 6.1

August 1997 to July 1998 (R) 3,037 6.5

August 1998 to February 1999 (S) 2,120 4.5

March 1999 to February 2000 (T or V) 3,243 3.4

March 2000 to February 2001 (W or X) 2,788 3.0

Source: Target Group Index (TGI), © BMRB International Ltd, 2001


Key Note Field Research The Motor Industry

Users of Self-Drive Car Hire

There is a choice of contracts that can be arranged between the customer and car supplier for the hiring of cars (and commercial vehicles) for both personal and business use. These include basic short- and long-term rental, and variations based on the rental method chosen (such as finance leasing, limitations on mileage, responsibility for maintenance and repair, etc.).

Renting is popular because the user does not have a fixed commitment to the vehicles and because they are new, or relatively new, they can usually easily be updated when new models arrive. The cost is reasonable to hirers because the market is over supplied with rental companies and their charge rates are among the lowest in Europe.

Rental companies seek to achieve high residual values for the vehicles that they have bought new from the manufacturers and try to dispose of these vehicles before they reach the end of their warranty. However, residual values have dropped considerably over the past 2 years and the discounts that were granted for fleet purchasers are not as high as they used to be.

Groups between the ages of 25 to 44 years old are the major users of self-drive car hire, but it is also very popular with all users and business users in the next age group.

Consumer Preferences in Purchasing a New Car

All buyers have views on the type of car they want depending on what is feasible within their financial resources. Essentially, all social categories agree that the price of the car is of fundamental importance, followed by the size of the car. Make, model and style of car is also very important to the buyer but, once these critical points are covered, there is a wide variation on what are the preferred features they look for in a car.

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

All Users (%) Business Users (%)

Age

15 to 19 0.7 0.7

20 to 24 4.2 4.2

25 to 34 10.6 10.6

35 to 44 9.6 9.6

45 to 54 11.0 11.0

55 to 64 7.8 7.8

65 and over 3.5 3.5



The Motor Industry Key Note Field Research

Economy is significant because of the high price of fuel in the UK, but many are not concerned whether they buy from a franchised dealer or from some other source of supply. This has many implications for the market in future if block exemption, which favours the franchised dealer, is removed and deregulation invites a free-for-all among the suppliers. There is not much enthusiasm either for parallel importers, which have done much to highlight price discrepancies in the market.

Other factors have varying degrees of importance when consumers purchase a new car, many of which are shown in Table 2.3.

Ownership of Motorcycles, Mopeds and Scooters

All age groups buy motorcycles, mopeds and scooters, but there are many regulations that make it difficult for any individual for buy a machine as ex-stock from a dealer and ride it away. Training is compulsory before a full licence is granted, and then this can be restricted to cover only certain categories of power. Those under 17 years old who want to buy a motorcycle or scooter are restricted to mopeds that have a maximum speed of 30mph (miles per hour).

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

AB C1 C2 D E Total

The price of the car 212 262 193 162 88 917

The size of the car 206 250 186 151 87 880

Safety features incorporated in a car 201 249 175 158 89 872

Make, model and style of car 195 246 163 147 84 835

Security features incorporated in a car 186 233 169 134 85 807

How economical

and environmentally-friendly it is 181 219 166 145 93 804

Length of warranty 178 218 156 146 77 775

Availability of optional extras 145 193 138 114 63 653

Prefer to purchase from an

independent garage 85 101 81 75 38 380

Prefer to purchase from a

franchised dealer 70 78 47 47 18 260

Prefer to purchase from

a parallel importer 26 28 15 11 8 88

Note: unweighted sample of 1,010 male and female respondents.

Source: BMRB Access


Key Note Field Research The Motor Industry

Those in the age range of 25 to 55 years old are the principal buyers of motorcycles and scooters in the lower and higher power capacity ranges. The most powerful machines (those over 750cc [cubic capacity]) are bought primarily by those in the 34 to 44 years old age group, who will use the vehicles mainly for recreational purposes and as an alternative to another car.

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

Bought New or Second-Hand

15-19 20-24 25-34 35-44 45-54 55-64 65+

Age

Scooter/moped 217 36 109 117 125 54 62

Motorcycle 51cc

to 125cc 200 30 128 86 128 80 62

Motorcycle 126cc

to 500cc 24 66 121 191 127 80 27

Motorcycle 501cc

to 750cc 14 12 142 211 114 88 18

Motorcycle

over 751cc 13 21 117 244 116 82 9

cc — cubic capacity



The Motor Industry Competitor Analysis

3. Competitor Analysis

LEADING SUPPLIERS

Some of the leading suppliers of motor vehicles are involved in the manufacture of both cars and commercial vehicles, but several are purely car manufacturers. Apart from MG Rover, these are all international organisations that have vehicle assembly plants in many other countries.

Out of all the suppliers in the UK, the Ford Motor Company has the largest volume of sales in this market. However, despite its dominance in Britain, the group is reducing the number of cars it produces in the UK and will import its most popular models from the Ford plant in Germany. Overcapacity in the car manufacturing industry, and the cost of modernising the Dagenham plant, has caused this rationalisation and the transfer of production to another country.

General Motors has similar problems with the production of cars in the UK and has closed the Vauxhall plant in Luton to concentrate production in Germany and Spain. It has been reported that the Adam Opel plant in Germany has made heavy losses. For the present time, the Vauxhall plant at Ellesmere Port is to continue with the manufacture of Vectra cars.

Volkswagen Group operates in the UK purely as an importer of its cars, which are primarily made in Germany and the Czech Republic. One model is also imported from its plant in Mexico. The company plans to greatly increase production of the Bentley model, which it now owns.

PSA, the holding company for Peugeot and Citroën, operates a manufacturing plant near Coventry, which makes one of the small Peugeot models. It is also a major importer of the Peugeot and Citroën range of cars. Both Peugeot and Citroën have been very successful in penetrating the British market.

Honda has a manufacturing plant in Swindon, which is the base for its UK and European sales. Although the company made a substantial loss on sales during the past financial year, the plant is to be expanded to produce more vehicles and derive benefits from economies of scale. To reduce costs even further, the company will be importing more of its component requirements from any of the cheaper sources outside the UK, particularly from the Far East.

Daimler and Chrysler have merged, but the two companies have not yet been fully integrated into a single unit. The Daimler organisation is very profitable, but Chrysler is making losses in the US because of the general downturn in demand for cars in its home market. Rationalisation of the group will take place in the near future to take advantage of the group’s buying power and to use more parts which can be fitted in different types of vehicles.

MG Rover is consolidating its position as the only British-owned car manufacturer, with production and sales targets of between 180,000 to 200,000 vehicles by volume. Most of its sales will be in the UK market.


Competitor Analysis The Motor Industry

After disposing of Rover, BMW has recovered strongly from the financial problems that it had incurred when it owned this former subsidiary. The UK market is very important to BMW as a major importer of its cars, and even more now that the Mini is in full production.

Renault has bought a large share holding in the Nissan group and, although this is not a full acquisition of the Japanese company, the two companies are to be closely integrated in new designs and the commonality of autoparts. A new Micra is to be built at the Sunderland factory, but most of the components will be imported. Nissan’s model range and policies, with regards to component supply, is governed by Renault’s management operating from the group’s headquarters in Paris.

Toyota’s output is to be increased at its Burnaston plant near Derby. New models have been successfully introduced for British and European markets. The company is also an importer of cars made in Japan.

Fiat Auto sells Fiat and Alfa Romeo cars in the UK. It is the smallest of the major brands in Britain but is raising its profile among buyers with a new range of models and extensive advertising. Sales of Alfa Romeo have almost doubled over the past year.

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

Turnover Year

Company Holding Company (£m) Ending

Ford Motor

Company Ltd Ford Motor Co. (US) 5,694.0 31/12/2000

General Motors General Motors

Holdings (UK) Corp. (US) 4,794.2 31/12/1999

Volkswagen Group Volkswagen AG

United Kingdom Ltd (Germany) 3,506.8 31/12/2000

Peugeot Motor Peugeot SA

Company PLC (France) 2,923.5 31/12/2000

Honda Motor Honda Motor

Europe Ltd Co. Ltd (Japan) 2,424.0 31/03/2001

DaimlerChrysler DaimlerChrysler AG

UK Ltd (Germany) 2,411.7 31/12/2000

MG Rover Group Ltd - 2,310.5 31/12/2000

BMW (GB) Ltd Bayerische Motoren

Werke AG (Germany) 1,510.6 31/12/2000

Table continues...



LEADING FRANCHISED DEALERS

Franchised Dealers

Manufacturers appoint dealers that are franchised to exclusively sell their range of new vehicles within a specified territory, and stipulate the list prices which are quoted by the dealers. Essentially, the manufacturers exercise control over the dealers without actually owning them, since they can remove the franchise if the dealer is not performing according to expectations. In return for the franchise, a dealer must offer a good aftercare service for the particular make, to honour the warranties that are guaranteed by the manufacturer and to display the vehicles in well-appointed showrooms. Considerable costs are, therefore, incurred by the franchisee who must ensure that there is a large throughput in sales of vehicles.

Currently, the franchised network is excluded from the EU’s competition rules through the ’block exemption’ of the industry, which allows manufacturers the freedom to impose exclusive selective distribution and control retail prices. This exemption may be removed in September 2002 when block exemption is due for renewal.

Unfavourable publicity regarding ’price rigging’ and premium prices charged for cars sold in the UK, compared with other countries, threatens to undermine the position of the franchised dealer if block exemption is removed. New regulations could end exclusivity in the sales territory and open up competition from previously unheard of competitors. This could result in a free-for-all, with all makes of cars displayed and sold on the same premises and independent garages providing a similar service without having to incur the costs of the franchised dealer.

...table continuedTurnover Year

Company Holding Company (£m) Ending

Renault UK Ltd Renault SA (France) 1,436.9 31/12/2000

Toyota (GB) PLC Toyota Motor

Corporation (Japan) 1,215.8 31/12/2000

Nissan Motor (GB) Ltd Nissan Holdings

UK Ltd (Japan) 988.2 31/12/2000

Fiat Auto (UK) Ltd Istituto Finanziario

Industriale SPA (Italy) 749.9 31/12/2000

Source: ICC Juniper database

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



Car and Commercial Vehicle Distributors

At present, franchised car and commercial vehicle distributors have exclusive rights to sell a particular make of vehicle only through their own network of branches. However, it is uncertain as to how long this will continue and how they will defend their position if profound changes are made to the EU’s competition rules.

The largest dealers are likely to benefit from their ability to buy in bulk from all the manufacturers, so they can claim similar discounts to the largest fleet buyers and can then offer lower prices that will enable them to compete with other importers. The size of orders and the throughput of the dealer will be critical for it to obtain the best possible discounts, some of which will be passed on to customers. Therefore, it is probable there will be many mergers between some of the larger dealerships. Conversely, the small dealer who currently survives under the existing arrangements is likely to disappear as a seller of new cars.

Leading dealers do not appear to be deterred by possible changes in block exemption. All their annual reports state that they are still acquiring new dealerships and that they are expanding their presence in areas where demand is growing. Price levels are now lower than in the past, as the manufacturers finally responded to market pressure and cut prices, so their dealers are in a better position to compete with the rash of new entrants in the new car market.

Mercedes-Benz has decided to become a retailer of its own products in certain cities in the UK, and this will remove a very important brand from the luxury car dealers’ portfolio of brands.

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

Turnover (£m) Year EndingUltimate

Company Holding Company

Inchcape PLC - 3,086.1 31/12/2000

Arriva PLC - 1,743.1 31/12/2000

Reg Vardy PLC - 1,303.5 30/04/2001

Lex Service PLC - 1,221.2 31/12/2000

Pendragon Motor

Group Ltd Pendragon PLC 1,154.5 31/12/2000

Arnold Clark

Automobiles Ltd - 863.4 31/12/2000

C D Bramall PLC - 839.3 31/12/2000

Ryland Group PLC - 694.2 31/12/2000

Table continues...



LEADING MOTOR COMPONENT MANUFACTURERS AND DISTRIBUTORS

Introduction

The market subsectors for motor components are original equipment, repairs and maintenance, and accessories. Autoparts are made and supplied mostly by independent specialist companies and, decreasingly, by the in-house parts divisions of the car and commercial vehicle manufacturers. The motorcycle industry has its own specialist manufacturers but the main producer, Triumph, makes most of its own components in-house.

The largest parts (such as body pressings and panels) are usually made in-house, but the most significant contribution is from outside specialists. These specialists have dedicated expertise in particular areas of the components industry. They have invested heavily in research and manufacturing technology for their specialisms and, because of the complexity of parts, the car and commercial vehicle industry has become dependent on bought-in components and electronic systems (so the manufacturers are now essentially assemblers of these parts).

...table continued

Turnover (£m) Year EndingUltimate

Company Holding Company

Hartwell PLC Bishopsgate

Investments Ltd

(Bermuda) 648.3 30/11/2000

Sytner Group PLC - 596.9 †28/02/2001

Quicks Group PLC - 553.0 31/12/2000

Caffyns PLC - 143.4 31/03/2001

Lancaster Specialist Jardine Matheson

Cars Ltd Holdings Ltd

(Bermuda) 138.9 31/12/2000

† — figures are for 61 weeks

Source: ICC Juniper database/Annual reports

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



The primary market for the original parts are the vehicle assemblers, and this is classified as the OEM (original equipment manufacturers) market. This market is supplied by a limited number of first-tier manufacturers, which have close relationships with the assemblers.

The secondary market is for the aftercare repair and maintenance of vehicles, which has a much wider manufacturing and distribution base than the OEM market. Components for this market are made by both original equipment manufacturers and independent companies that replicate the parts. These motor components are sold by motor factors and wholesalers to shops, franchised and non-franchised garages, fast-fit chains, and specialist retailers. A large number of suppliers are involved in the secondary market, as many of the parts are imported as well as manufactured in the UK.

Manufacturers and Distributors

GKN is the largest manufacturer of motor components in the UK, followed by the Unipart Group. Most of the other leading companies are subsidiaries of US groups that established themselves in the UK market when this market was growing. There are also companies, such as Robert Bosch from Germany, that make electrical equipment, and others such as SKF (a Swedish company that makes ball bearings and related products).

Rationalisation of the industry has had fairly severe consequences because of both falling demand for British-manufactured autoparts and fundamental changes in the US market that have caused many changes both in ownership and in names. Previously well-known companies in the industry have acquired new identities and lost their original names. LucasVerity has become a subsidiary of TRW Ltd, one of the largest manufacturers of parts in the US, AlliedSignal is now under the control of Honeywell International Inc., and Quinton Hazell is part of the Dana Corporation.

Other important companies in the UK that make motor components are subsidiaries of larger international groups that are not wholly involved in the manufacture of autoparts. These include Tomkins PLC (which has an Automotive Engineering division making V belts for the OEM and aftermarkets), the TI Group (which merged with Smiths Industries and is now looking for a buyer of its Automotive Parts division), the TT Group (which is a manufacturer of electronic components) and The Mayflower Corporation (whose Mayflower Vehicle Systems makes sheet metal panels for the automotive industry, and which also makes buses and coaches).

The largest distributor is Halfords Ltd, which is owned by The Boots Company PLC and operates a national chain of parts stores, some of which are also equipped to service cars. Kwik Fit is another well-known name in aftercare, operating a national and international chain of tyre-fitting, brake and clutch repair depots. This company was bought by the Ford Motor Co. several years ago, but is now for sale following a change in company strategies. Partco, one of the largest distributors, was acquired in 2000 by its main rival Unipart PLC.

Finelist Group was once a major distributor of motor components to the aftercare market in the UK, but was bankrupted shortly after its sale to a French-based investment company.



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

Turnover Year(£m) Ending

Holding

Company Company

GKN Holdings PLC - 4,124.0 31/12/2000

Unipart Group Ltd UGC Ltd 805.6 31/12/2000

TRW Ltd TRW Inc. (US) 743.0 31/12/2000

Halfords Ltd The Boots Company PLC 508.5 30/03/2001

Robert Bosch Ltd Robert Bosch GmbH

(Germany) 379.4 31/12/2000

Honeywell UK Ltd Honeywell International

Inc. (US) 213.1 31/12/1999

Automotive Products

Group Ltd - 191.2 31/12/2000

Arvin International PLC Arvin Industries Inc. (US) 176.6 31/12/1998

Wagon Industrial Ltd Wagon PLC 168.5 31/03/2001

Eaton Ltd Eaton Corp. (US) 154.4 31/12/2000

Dana Automotive Ltd Dana Corp. (US) 142.5 31/12/2000

Arvin International Meritor Holdings

(UK) Ltd LLC (US) 124.2 30/09/2000

SKF (UK) Ltd Aktiebolaget SKF

(Sweden) 114.1 31/12/2000

Autoliv Ltd Autoliv Inc.

(US) 97.9 31/12/1999

QDF Components Ltd Thyssenkrupp AG

(Germany) 61.8 30/09/2000

Dura Automotive Ltd Dura Automotive

Systems Inc. (US) 19.7 31/12/1999

Source: ICC Juniper database/Annual reports



MAJOR MANUFACTURING GROUPS AND THEIR MARQUES

The consolidation of the motor industry through mergers, acquisitions and joint ventures by US and leading European motor manufacturing companies, is profoundly and rapidly changing the structure of the international industry. Ford, Volkswagen and BMW have chosen to enter the limited volume luxury car market through their acquisition of well-known British brands, namely Jaguar, Land Rover and Aston Martin (Ford), Bentley (Volkswagen) and Rolls-Royce (BMW). Conversely, the Daimler group has merged with Chrysler, a high-volume producer in the US, and BMW has introduced a new Mini, which is intended for the high-volume markets in the UK and overseas. Proton, a Malaysian company, has bought Lotus, which specialises in the production of upmarket sports cars.

The UK is a major producer of luxury cars for world markets. The importance of this sector is expected to grow as plans for expansion by their respective owners are currently being implemented to greatly increase the volume of output of Aston Martin, Rolls-Royce, Bentley, Jaguar and Land Rover cars. As premium prices will be paid for these cars, this will to a large extent offset the disadvantages currently experienced by the mass-volume car manufacturers in overcoming an unfavourable exchange rate for making sales in the European markets.

General Motors (US)

The two main subsidiaries of the General Motors group in Europe are Vauxhall in the UK and Opel in Germany and Belgium. Both companies have excessive manufacturing capacity relative to demand for their products, and both are cutting their labour forces. The Vauxhall car manufacturing plant at Luton is being closed down. This part of General Motors’ car production will be transferred to Germany, but the company’s plant at Ellesmere Port will continue to manufacture the Vectra. Production of vans and engines at Luton will not be affected by the closure of the car manufacturing plant.



Financial Results and Employment Details

Ford Motor Company (US)

In the UK, the most significant developments related to Ford are the closure of the volume car manufacturing facility in Dagenham and the strong new emphasis on building up sales of its luxury cars that are built in other areas of the country. However, a major setback to Land Rover sales is the financial collapse of UPS-Thompson, which supplies its Discovery manufacturing plant with chassis. A new supplier will have to be found quickly if UPS, which is heavily in debt, cannot be rescued from bankruptcy.

The parent company in the US has had many problems in its Home-Based Car division, which has resulted in the recall of many cars, law suits and a subsequent drop in sales. This has caused heavy trading losses during the accounting year to 31st December 2000. A number of senior management changes have recently been made and this has included the removal of the Chief Executive.

It is expected that Kwik-Fit — the tyre, brake and clutch service specialist — is to be sold following a change in business strategy. This company was bought approximately 3 years ago by the Ford Motor Company in an effort to improve its servicing facilities nationwide.

Table 3.4: 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 1997-1999

Turnover Pre-Tax Number of(£m) Profit (£m) Employees Year Ending

4,449.0 30.8 12,229 31/12/1997

4,283.8 22.8 12,004 31/12/1998

4,794.2 90.6 12,298 31/12/1999





DaimlerChrysler Group (Germany/US)

The amalgamation of Daimler with the Chrysler group has not yet resulted in the full integration of the two companies, possibly because this is necessary to preserve the Mercedes-Benz image as a manufacturer of luxury cars and because the brands serve different markets. Chrysler is now making a larger impact on the British and continental European markets with its large people carrier, an unusually styled car (PT Cruiser), and the Jeep.

None of these cars are manufactured in the UK, so the turnover figures are based on the value of imports.


Table 3.5: Financial Results for Ford Motor Company Ltd by Turnover, Pre-Tax Profit and Number of Employees



6,708.0 61.0 27,800 31/12/1998

6,292.0 -119.0 26,900 31/12/1999

5,694.0 -660.0 22,800 31/12/2000


Table 3.6: Financial Results for DaimlerChrysler UK Ltd by Turnover, Pre-Tax Profit and Number of Employees



2,066.7 66.1 1,024 31/12/1998

2,177.8 54.0 1,010 31/12/1999

2,411.7 55.8 1,071 31/12/2000




BMW Group (Germany)

The UK market is extremely important as both one of the major sales outlets for BMW of the cars imported from Germany, and for the recently introduced Mini, which is manufactured in the UK. There are plans to greatly increase the production and sale of Rolls-Royce cars, now owned by BMW, in a completely new plant that is to be built on a greenfield site in Goodwood.

Many of the motor components used in the manufacture of the Mini and Rolls-Royce are imported, including the engine of the Mini, which is made in Brazil to offset the higher price of components made in the UK.


Renault Group (France)

The Renault Group has been very successful in promoting and selling its brand of vehicles in the UK, with the products now among the bestselling imported cars in Britain. A joint venture has been agreed with IBC, the commercial division of General Motors, to produce a new type of van that will be made at Vauxhall’s van-making plant in Bedfordshire.

Renault is also very successful in the commercial market with its range of light vans, medium-sized vans and heavy trucks that are sold in the UK.

Table 3.7: Financial Results for BMW (GB) Ltd by Turnover, Pre-Tax Profit and Number of Employees



1,477.9 212.9 312 31/12/1998

1,580.2 196.0 302 31/12/1999

1,510.6 71.8 339 31/12/2000





PSA (Peugeot-Citroën) Group (France)

The Peugeot division of the PSA Group is a major manufacturer of cars in the UK at its plant in Coventry. It is also a major importer of cars made in France. The Citroën division shares many components with Peugeot but has a completely different brand image. Unlike Peugeot, the Citroën brand does not manufacture any of its cars or vans in the UK.

Both marques are very successful in selling their range of petrol- and diesel-engined cars and vans in Britain.


Table 3.8: Financial Results for Renault UK Ltd by Turnover, Pre-Tax Profit and Number of Employees



1,823.6 12.8 415 31/12/1998

1,765.7 16.5 309 31/12/1999

1,436.9 9.9 337 31/12/2000


Table 3.9: Financial Results for Peugeot Motor Company PLC by Turnover, Pre-Tax Profit and Number of Employees



2,390.3 52.9 5,267 31/12/1998

2,639.1 104.7 4,158 31/12/1999

2,923.5 172.2 4,227 31/12/2000




Volkswagen Group (Germany)

The various Volkswagen and subsidiary brands produce a range of vehicles, which span every sector of the market, including the high-value, low-volume and top range following its acquisition of the Bentley brand. There are major production plants in Germany, Spain and the Czech Republic, which supply all the European markets but, apart from Bentley, there is no production of Volkswagen cars or vans in the UK.

Volkswagen is one of the largest producers of cars, light- and mediumweight vans and heavy trucks (it owns the MAN brand, a leading manufacturer of trucks) in Europe. It has very strong brand image in all the European markets and is the pre-eminent exporter of vehicles to most of these markets. Group policy is to design vehicles that utilise as many common parts as possible in order to benefit from economies of scale and to obtain the lowest prices from component suppliers.


Fiat Auto (Italy)

Fiat Auto is an importer of the Fiat and Alfa Romeo range of cars that are produced in Italy. Other brands made by the parent company are Lancia (which is not imported) and Ferrari (which is imported).

The volume of cars sold in the UK has increased, particularly of Alfa Romeo, but the company is making pre-tax losses. The brand image is not yet as strong as that of the leading importers, at least in the British market, but as more new models are introduced and heavily promoted, it is possible that the brand will make a greater impact in the near future.

General Motors owns a minority share interest in the Fiat Group, and this may develop into joint co-operation for the development and sale of new models.

Table 3.10: 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 1998-2000


2,951.4 101.1 492 31/12/1998

3,156.8 -19.7 518 31/12/1999

3,506.8 18.4 532 31/12/2000





Toyota Group (Japan)

Toyota has become a major manufacturer of cars in the UK since it opened a production plant near Derby approximately 10 years ago. Despite recent financial losses in the UK, the company is increasing its annual production targets to 220,000 cars by 2004, up 29.4% from the current 170,000. Existing assembly lines will be worked harder, and production capacity is to be expanded to cope with expected growth in sales of its new models to British and European markets. It is expected that a high proportion (around 70%) of the autoparts and assemblies used in the manufacture of these cars will be imported to reduce costs.

Cars are being designed for European tastes in style, interior trim and performance in order to help the company retain its present market leadership for its bestselling Corolla car.

Table 3.11: Financial Results for Fiat Auto (UK) Ltd by Turnover, Pre-Tax Profit and Number of Employees



745.5 40.7 201 31/12/1998

712.6 -17.4 187 31/12/1999

749.9 -34.5 189 31/12/2000





Nissan Motor Ltd (France/Japan)

Renault has bought 38% of Nissan shares and is now closely involved with all its future product development. The buying of all the Renault/Nissan Group’s requirements for autoparts will be centrally controlled from headquarters in France, so maximum discounts can be obtained from its main parts suppliers.

A new Micra is to be produced at the company’s Sunderland plant, which will be in addition to the present output of Primera and Almera models. However, future investment in new models will depend, according to the company’s chief executive, on the timing of Britain’s participation as a full partner in the euro currency. Approximately 80% of Nissan’s output is exported. To reduce the costs of production, around 70% of its motor components will be obtained from overseas sources.

Table 3.12: Financial Results for Toyota (GB) PLC by Turnover, Pre-Tax Profit and Number of Employees



1,248.3 32.6 442 31/12/1998

1,161.7 10.2 469 31/12/1999

1,215.8 -16.0 478 31/12/2000





Honda Motor Europe Group (Japan)

The Honda Group has been restructuring operations at its Swindon plant, thereby incurring heavy financial losses over the short term. Output capacity is being expanded at a cost of £450m, which will enable the company to produce around 250,000 cars annually by 2004 in anticipation that there will be a high level of domestic and overseas demand (including from Japan).

A new strategy is being decided for Honda’s European markets due to the perceived difficulties in selling to the eurozone countries from the UK, because of the high value of sterling. More intensive use of assembly lines is planned, which will increase the number of workers required to man the plant, and more components will be bought from cheaper eurozone and Asian suppliers.

Table 3.13: Financial Results for Nissan Motor (GB) Ltd by Turnover, Pre-Tax Profit and Number of Employees



1,070.8 6.5 308 31/12/1998

979.1 -33.0 309 31/12/1999

988.2 2.1 214 31/12/2000





MG Rover Group (UK)

The MG Rover Group seems to have stabilised after uncertainty regarding its future when breaking from the BMW group (from which it received £500m). Its output target is around 200,000 cars per annum, which is high for a current UK market share of less than 5%.

The model range is based on the former Rover 25, 45 and 75 types that were originally developed by BMW, but a more sporty version has recently been introduced under the MG brand name called the ZT 190. While still a volume car manufacturer, the Group hopes that the products will compete at the top end of the buyers’ expectations (rather than at the bottom end where the products are much cheaper and often heavily discounted).


Table 3.14: 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 1999-2001


2,925.1 -17.2 3,833 31/03/1999

2,773.5 -180.2 3,711 31/03/2000

2,424.0 -345.7 4,387 31/03/2001


Table 3.15: Financial Results for MG Rover Group Ltd by Turnover, Pre-Tax Profit and Number of Employees



5,482.1 -570.5 38,668 31/12/1998

4,801.2 -2,138.6 31,393 31/12/1999

2,310.5 542.7 14,409 31/12/2000




The Mayflower Corporation (UK)

The Mayflower Corporation makes a range of vehicle systems and automotive body structures for the car and commercial vehicle industry, in addition to manufacturing buses and coaches. It has recently formed a joint venture with Henlys, also a bus manufacturer, which has been named Transbus International. Transbus owns the leading UK brands of Dennis, Alexander and Plaxton, whose integration has created one of the largest bus and coach manufacturing companies in Europe. Rationalisation of the new group has resulted in the closure of the manufacturing plant in Scarborough, and the transfer of this operation to another plant in Falkirk.

The medium-term strategy is for Transbus to exploit new overseas markets and sell double-deck buses in the US, Canada and Spain. In these countries, bus operators are looking for large-capacity, fuel-efficient and low-emission products.


Triumph Motor Cycles Ltd

The Triumph motorcycle company has a strong brand image. It is also the only survivor of the long-established British-owned brands that remained following the collapse of the British motorcycle industry in the early 1970s. After many years of heavy investment in the development of new models in the ’superbike’ class of motorcycles, it now successfully competes in the UK and international markets (alongside the best of the Japanese motorcycles, which have effectively dominated these markets for several decades).

The company concentrates exclusively on large capacity machines and regularly introduces new models (the latest is the Sprint ST, which has a strong appeal in the affluent, highly specialised world markets). Around 80% of its output is exported. Most of the components used in the manufacture of these machines are made in-house, so the company has total control over the quality and availability of parts.

Table 3.16: Financial Results for The Mayflower Corporation PLC by Turnover, Pre-Tax Profit and Number of Employees



495.2 23.1 4,630 31/12/1998

702.4 35.0 5,534 31/12/1999

592.8 23.2 5,263 31/12/2000




A new factory has been built at Hinckley to expand production capacity to around 30,000 motorcycles annually. There are around 65 franchised dealers in the UK, which sell both Triumph motorcycles and a range of Triumph branded clothing and accessories.


Table 3.17: Financial Results for Triumph Motorcycles Ltd by Turnover, Pre-Tax Profit and Number of Employees

(£m and number of employees), Years Ending 30th June 1997-1999


86.4 -4.2 489 30/06/1999

105.9 -4.8 559 30/06/2000

125.9 8.7 571 30/06/2001



The Motor Industry Cars

4. Cars

DEFINITION

The car sector of the motor industry covers private cars of all descriptions and engine capacities, irrespective as to whether the fuel is petrol, diesel or liquefied petroleum gas (LPG), providing that they conform to all the regulations for road use and are designed specifically to carry people.

KEY TRENDS

Demand for cars reached a new peak in 2001 due to a combination of factors. First, manufacturers and their distributors started to officially reduce their selling prices, so there was less need to resort to the subterfuge of selling new, preregistered cars to the private buyer at lower prices. Furthermore, interest charges remained low as disposable incomes were rising, and employment levels fairly stable. In addition, there has been a reduction in the annual road tax for cars with an engine capacity of under 1,600cc (cubic capacity), and a new type of licence plate was introduced during the year.

Rising taxation on single users of a company car is causing more of these users to consider the merits of buying their own new car, so sales to the private buyer will become more important to car manufacturers. Most cars are now sold with comprehensive 3-year or 60,000-mile warranties, so the buyer is assured that there will not be any heavy repair bills to pay before the car is resold.

European and US manufacturers have, in the past, over-invested in production capacity for the volume car markets. Plans are now being implemented to close some plants in order to balance supply more closely with demand. The US companies in their home markets, and their subsidiaries in Europe, have particularly been badly affected by the costs of overcapacity. This has resulted in heavy financial losses and radical restructuring within such companies. There is also more emphasis on the production and sale of higher-added-value cars that can command premium prices in growing markets. Many of the smaller, formerly independent groups in Europe (e.g. Volvo, Saab and Jaguar) have been acquired by the leading US international groups in the industry. These now manufacture a range of vehicles that extend from the most basic models to the most luxurious and prestigious in brand names.


Cars The Motor Industry

MARKET SIZE

Apparent demand for cars in the UK is growing in terms of both the volume and value of sales. This is due largely to prospective buyers having responded to the various inducements offered by the manufacturers and dealers — including lower prices for better equipped cars and 3-year warranties — and other factors such as parallel imports, the low cost of borrowing, fairly stable employment, a change in the registration of cars, and the introduction of many new models in all the price and specification ranges.

Although the lower engine capacity models continue to be the bestsellers in the car market, sales of higher priced and higher specification models are also growing, as more buyers are prepared to pay for the greater degree of individuality and status that is only obtainable in the luxury car sector. This trend effectively increases the value and profitability of sales at a time when the volume car manufacturers are struggling to overcome the adverse impact on price levels of the current imbalance in supply and demand.

Private customers are becoming increasingly important to the car manufacturers. This is because of the changes in the level of company car taxation and the incentives given to employees to buy their own cars, the uncertainty of sales to the high-volume fleet markets because there is strong competition from a variety of new sources, the level of discounts that car leasing and rental companies expect from their suppliers, and the sharp drop in the residual value of nearly new vehicles that has caused many buyers in the fleet markets to rethink their buying strategies.

Ford has ceased the production of small cars in the UK, and General Motors has also reduced volume production in the UK, so that these two companies can fill spare production capacity at their non-UK plants. However, their contribution to exports was already falling before these decisions were made. More significantly, Toyota, Honda and Nissan are expanding production capacity in the UK with the intention of greatly increasing their exports of cars. Meanwhile, the volume of output of the luxury Jaguar and Land Rover brands owned and manufactured by Ford Motor Company in the UK is to be increased, so the transfer of Fiesta production to Germany and Spain will probably have a negligible effect on Ford’s total British output.

Imports of all ranges of cars are continuing to grow in all the price and specification ranges, as British buyers are offered a wide choice from a variety of world suppliers. The transfer of production to continental Europe of the popular Ford and General Motors models will inevitably increase the total volume of imports. Other companies that are already supplying the UK from overseas bases are also determined to gain a greater share in a growth market.



MARKET STRUCTURE

The market for cars is essentially divided between private buyers and the fleet buyers, which specialise in providing a range of company and general hire cars for their clients. Franchised dealers are currently the main suppliers of new cars, but a relatively new phenomenon has been the establishment of a growing number of non-specialist car importers that sell new cars at heavily discounted prices in the UK. The discounters offer a range of many different makes as they are not tied to any manufacturers. However, they do not, in general, accept any responsibility for the after-sales care of the vehicle. A sale made through a discounter does not invalidate manufacturers’ warranties, which have to be honoured by the franchised dealer, and this obligation obviously creates a potential source of friction between the buyer of the discounted vehicle and the authorised dealer.

Company and private car buyers are offered a range of financial packages by the specialist finance houses, from which they can choose the option that best suits them over the short, medium and long term. Contract hire is the most popular option for company cars as, at the end of the contract, the company user does not have any responsibility for the disposal of the vehicle. Fleet car owners take the risk when the car is sold on the open market and, lately, their profits have been badly affected by the general fall in residual values as new car prices dropped. The fall in prices was caused by the need for manufacturers to maintain a high volume of output at factories where there is excess production capacity, and by the aggressive activities of the discounters in the car market.

Table 4.1: The Apparent UK Market for Cars by Value (£m at msp), 1997-2001

1997 1998 1999 2000 e2001

UK manufacturers’ sales 18,463 18,560 19,055 20,000 21,200

Less exports 8,690 8,499 8,494 8,325 8,300

Plus imports 13,432 13,873 14,737 15,768 16,666

Apparent UK market 23,205 23,934 25,298 27,443 29,566



Source: National Statistics ’Motor Vehicles’/Society of Motor Manufacturers and Traders (SMMT)/Key Note



MAJOR PLAYERS

Manufacturers

Car manufacturers are the largest and most lavish spenders on advertising and promotion, as many regard it as essential to constantly project the image of their brand and their models. Television, radio, the national and local press, general and specialist magazines, and direct mail are used extensively to promote their products. In general, customer loyalty to a particular brand is fickle, so buyers can be influenced by image as well as price and specification (e.g. top speed is often quoted as a selling point, even though there is no chance of legally, or illegally, achieving this on normal roads).

Total advertising and promotional expenditure increased by 6.5% between December 2000 and December 2001. Every manufacturer takes a different view on what constitutes a reasonable level of expenditure, in relation to actual sales, and what can be achieved by spending on advertising. Consequently, the overall total advertising expenditure may increase for new product launches (or decrease if nothing new is being offered), but the product is well regarded and potential customers need to be reminded of its continuing existence.

For appointed dealers, the level of manufacturers’ investment in advertising is crucial to their own sales. They expect their main suppliers to continue promoting the models by whatever means possible, and to provide the glossy sales literature that their customers want.

Table 4.2: Main Media Advertising Expenditure on Motor Cars (£000), Years to December 2000 and 2001

2000 2001

Alfa Romeo 9,861 13,091

Audi 19,959 19,440

Bentley Motors - 115

BMW 12,711 21,594

Cadillac 522 -

Chevrolet 482 324

Chrysler 9,268 10,395

Citroën 31,116 35,288

Daewoo 12,799 6,506

Daihatsu 1,334 3,322

DaimlerChrysler - 581

Fiat 28,954 31,461

Table continues...




Ford 45,900 75,284

Honda 21,705 24,777

Hyundai 12,830 8,085

Isuzu 856 -

Jaguar 8,171 11,517

Kia 3,107 3,073

Land Rover 14,816 14,734

Lexus 6,736 8,347

Lotus 174 107

Maserati - 303

Mazda 10,363 3,572


MG 626 7,046

Mitsubishi 7,172 4,386

Nissan 18,527 24,372

Peugeot 45,938 44,618

Porsche - 482

Proton 290 486

Range Rover - 758

Renault 66,348 59,221

Rover 28,087 22,176

Saab 8,869 9,765

Seat 13,655 13,776

Skoda 7,512 12,861

Smart - 696

Subaru 3,626 2,989

Suzuki 5,844 9,281

Tata 187 -

Toyota 30,752 27,218

Vauxhall 43,986 48,097

Volkswagen 43,238 35,949

Table continues...




Dealers

Appointed dealers have an obligation to advertise regularly and extensively in their local area. This is a high cost that must be met from their own resources, so poorly performing sites are usually eliminated if the volume of sales is inadequate and does not meet targets. Dealers who do not perform according to manufacturers’ expectations can lose their franchise, so the level of advertising can be the vital element that ensures they have a future.

The best-placed dealers are those who are in good locations and catchment areas, and who specialise in the bestselling brands in the popular and luxury markets. These consistently maintain high expenditure on advertising and, as they are locally well known for their specialism, are virtually assured of repeat business. Dealers for the less well-known brands are very dependent on advertising to achieve a reasonable level of sales, but are often constrained by the lack of finance so the rate of advertising tends to be uneven, seasonal or opportunistic.

Some dealers combine their advertising to promote the particular brand that they collectively represent, and list their addresses as suppliers of the cars. This can be more cost effective than promoting a single dealership advertising only itself, but the business may have to be shared.


Volvo 20,786 13,613

Other brands 3,039 4,354

Total 608,607 647,946

Note: totals do not sum due to rounding

Source: ACNielsen MMS




Table 4.3: Selected Main Media Advertising Expenditure on Motors by Vehicle Dealers (£000),

Years to December 2000 and 2001

2000 2001

Arnold Clark 2,261 2,788

Arriva 323 328

Audi 557 506

BMW 280 1,253

Bristol Street 483 996

Caffyns 195 191

Caledonia 244 83

Daewoo 104 -

Dagenham Motors 132 82

DC Cook 375 -

Dixon 1,573 1,537

Dutton Forshaw 169 231

Evans Halshaw 207 221

Fiat 545 664

Ford 27,861 4,043

Honda 266 453

Ken Thorne 448 429

Lancaster 194 -

Land Rover 143 792

Mazda 507 -

Mercedes-Benz 440 677

Mitsubishi 287 82

Network Q 4,530 467

Nissan 565 81

Peugeot 201 218

Reg Vardy 6,846 6,025

Renault 709 349

Rover 281 431

Saab 1,463 396

Toyota 294 415

Vauxhall 1,525 649

Table continues...



BUYING BEHAVIOUR

Outright Buyers

Most households are owners of at least one car which is bought for private transport, but it is quite common for households to own more than one car for this purpose. However, many of the cars are bought second hand, and a large number of the cars in circulation are over 10 years old. Purchases of new cars by private buyers have been low compared with the number of cars bought for lease or rent. This is because of the overriding interest of the manufacturers in fleet buyers, which were offered the best terms, warranties and discounts.

The private buyer is becoming more significant as the market structure is changing, as manufacturers have found that the fleet markets are excessively competitive and often relatively unprofitable despite the high volume of cars that they are able to absorb. The company car has become a less attractive proposition because of the changes in the regulations and higher taxation. Growth in self employment, and the growing trend for employees to use their own car for company business, has widened the options of the private buyer. As their own money is involved, most private buyers who use their cars for business purposes want to be offered better deals, discounts, warranties, etc., which are closer to the deals offered to fleet buyers.

...table continued

2000 2001

Volkswagen 1,855 3,461

Volvo 802 486

Other 50,514 48,504

Total 107,180 76,834

Note: totals do not sum due to rounding


Table 4.3: Selected Main Media Advertising Expenditure on Motors by Vehicle Dealers (£000),

Years to December 2000 and 2001



Internet trading has provided the means for independent traders and importers to grow into serious competitors to the traditional franchised dealer. They can also buy and sell identical models from other European dealers who are willing to supply cars and offer them to the public at a cheaper price than the authorised UK dealer. Effectively, the independents have forced down car prices for most models in the UK to a level comparable to those charged in continental Europe. If the block exemption regulations are not renewed in September 2002 when the current agreement expires, it is likely that there will be major changes in the way cars are sold to the private buyer in the UK.

Leasing and Contract Hire

Short- and long-term leases provide an alternative to buying for companies that need vehicles for their operations. This is a popular way for firms to spread their payments, guarantee regular servicing and not take responsibility for disposing of the vehicle at the end of the contract. It is a highly competitive market, which is not very profitable for the leasing companies that rely heavily on obtaining high residual values for their vehicles. The size of the fleet is very important to the operators in this industry as the largest leasing companies get the best deals from the manufacturers. It puts the smaller leasing companies at a considerable disadvantage with regard to cost pressures and price competition, so these tend to service only local needs.

A steep fall in used car residual values has badly affected the profitability of leasing companies — they have changed their policies and contracts to avoid future losses over the disposal of vehicles. Their new contracts ensure that the customer shares a proportion of any loss that may be incurred.

Rental

Short- and long-term rental of cars is offered by both franchised dealers and rental specialists, which may operate locally with small fleets, or nationally and internationally with large fleets. There are benefits in renting, but the cost to the customer is usually higher than for contract leasing (as there is a higher turnover in vehicles which are regularly replaced after comparatively short use).

Ownership by Social Grade

Most households in all the social grades own at least one car, with many owning two or more as members of the family begin to acquire their own personal transport. The difference between AB and the other social categories is likely to relate more to the quality and age of the car rather than in the number of cars.



ABs owning only one car are less in percentage terms than the C1s, and only marginally more than the C2s. This is possibly because ABs often live in areas within city centres where, although the housing is desirable, there is an acute shortage of parking spaces, which acts as a deterrent to owning cars. Where parking is not a problem, the ABs more typically account for a much higher proportion of those who own three cars or more compared with the other social categories.

Despite the ubiquity of the car, it still represents a status symbol and prestige to many people, with performance, size, appearance and the brand name having considerable significance in all the groups. The latest models are bought by all the social categories, and so the social background of the owner is often immaterial to the type of car that is purchased if the desired model is at the top of the ’must buy’ wish list.

FORECASTS 2002 TO 2006

If present trends are unchanged, the demand for cars will continue to grow steadily over the next 5 years. Various attempts may be made to control this growth but, unless there is an extreme shortage of fuel (which appears to be unlikely) or draconian methods are used to discourage sales (equally unlikely), because of the car’s central contribution to the economy, an increase in demand seems inevitable. Buyers are not deterred by high fuel prices or heavy traffic congestion, shortage of parking spaces, parking fines, the various additional taxes that are imposed from time to time, or the generally high cost of motoring. They are an integral part of the lifestyle and are, therefore, regarded as a necessity by the majority of the adult population.

Table 4.4: Penetration of Cars in the UKby Social Grade (% of households owning), 2001

1 Car 2 Cars 3 Cars or More

AB 40.7 42.7 6.4

C1 42.4 33.7 4.0

C2 44.7 30.7 4.5

D 40.8 23.6 1.8

E 28.5 10.0 0.2




Falling car prices should stimulate sales of new cars and lead to a more rapid rate in the disposal of old cars. However, a significant fall in the price of cars may be only a temporary phenomenon. This is because of an EU Directive that will shortly make manufacturers responsible for the recycling of their old cars and the additional cost will be passed on to the buyers of new vehicles.

UK manufacturers’ sales are expected to increase in terms of both volume and value. Plant capacity is being extended by the Japanese car assemblers to greatly increase their volume of output, the new BMW Mini has been successfully launched and will soon be in full production, and production capacity at the remaining Ford-owned plants making the Jaguar and Land Rover is being expanded. MG Rover’s future is not totally secure, but the chances of the Group surviving as an independent volume car producer appear to be reasonably good.

The downward spiral in exports should soon be brought to an end. Furthermore, an upward trend in sales could soon be established as the volume car manufacturers in the UK are taking drastic action to reduce the cost of selling their cars in export markets. To minimise costs, an ever increasing number of car components and assemblies are being imported from diverse sources and installed in British-assembled cars. This is until the time when a normal relationship can be established with domestic component suppliers as sterling becomes more competitive against the euro. The introduction of new models made in the UK will also be an important factor, and one which should increase sales in the world’s volume and luxury car markets.

Imports are expected to increase, but at a slower rate than in the past, because of the growing strength of domestic competition and market saturation. There is a finite limit to car sales in the UK and it is unlikely that new peaks will be established in import growth during the next 5 years, unless there is a shortfall in domestic production.

Table 4.5: The Forecast Apparent UK Market for Cars by Value (£m), 2002-2006

2002 2003 2004 2005 2006


Less exports 8,715 9,063 9,425 9,896 10,390

Plus imports 16,693 16,831 17,718 17,958 17,857


% change year-on-year 3.0 3.0 3.0 3.0 2.0

Source: Key Note


The Motor Industry Commercial Vehicles

5. Commercial Vehicles

DEFINITION

The motors in the commercial vehicles sector comprise all light and heavy commercial road vehicles specifically designed for carrying goods. In addition, public service buses and coaches equipped with seats for carrying passengers are also considered.

Other commercial vehicles, including taxis and those for special purposes (e.g. fire engines), are excluded from this report, because such subsectors are limited.

KEY TRENDS

Light Commercial Vehicles

Buyers of light commercial vehicles range from the self-employed tradesman to the largest of companies and organisations in the private and public service sectors. Consequently, the variations in sales of these vehicles year-on-year provides a good general indicator of developments in the British economy and its short-term prospects. Most have a relatively small payload and, therefore, are primarily used for local and short-distance deliveries. However, they are all capable of being continuously used for long-distance routes if this is required.

Car-derived light vans are popular with tradespeople but the largest sales are of specifically designed vehicles in the 2,600kg to 3,500kg capacity range (which can be driven on a standard car licence). The next most popular light commercial vehicle has a carrying capacity of around 1,800kg.

Heavy Commercial Vehicles

The heavy commercial vehicle ranges from being over 3.5 tonnes to the legal maximum of 44 tonnes capacity. In between these ranges are several carrying capacity categories (e.g. 7.5 tonnes, 12 tonnes or 15 tonnes) that are based on two axles. Additionally, because of the legal obligation to distribute heavy weights over many wheels, there are three-axle rigids, four-axle rigids, and two- and three-axle tractor units for articulated vehicles whose trailers also have several axles.

Most of the heavy commercial vehicles registered annually in the UK are imported mainly from continental Europe. All the domestic UK manufacturers are now under foreign control, as this industry was not able to successfully compete with its international counterparts or to offset rising imports.


Commercial Vehicles The Motor Industry

Buses and Coaches

The buses and coaches subsector is divided into mini, midi, light and heavy buses and coaches that are used for fare-stage, and short- and long-distance work. After deregulation, there were many operators offering bus and coach services. However, by the mid-1990s, they had been reduced and consolidated into only four or five major groups of operators.

Fleet modernisation was undertaken by all the major groups and thousands of old vehicles were scrapped or sold in overseas markets. Many of the replacements were imported either complete or in chassis form, but the British-owned Dennis company and associated bus bodywork companies (e.g. Alexander and Plaxton) are among the main manufacturers and suppliers in the domestic market.

Rapid modernisation achieved the immediate objective of providing safe and efficient public transport nationwide. However, the rate of demand for new buses and coaches has since slackened because the re-equipment programme is now complete. In future, new orders will depend more on growth in the number of passengers than on fleet modernisation, so the emphasis placed on public transport by government and local authorities should benefit bus and coach manufacturers in the longer term.

MARKET SIZE

Road transport is an industry that includes all types of operators, ranging from one-person, one-vehicle businesses to large firms owning vast fleets of vehicles. Although their purchasing decisions may be totally dissimilar in nature, the dominance of road transport (accounting for around 90% of freight distribution in the UK) means that total demand for commercial vehicles tends to correspond very closely with movements in the national economy. Nevertheless, despite the importance and size of the road transport fleet, most of the UK’s commercial vehicle manufacturers found it very difficult to maintain their market shares during the downturns in the business cycle. Subsequently, they became subsidiaries of foreign companies.

New registrations are increasing, as the domestic economy has remained fairly buoyant for a long period. Growth in consumers’ expenditure has helped to sustain this increase, and the service industries that supply this market require many vehicles to make fast and frequent deliveries to their outlets. It has also become standard practice for industrial companies to demand of their suppliers that they make fast and frequent deliveries of components just in time (JIT), in order to minimise stock holdings.



Except in a few instances (e.g. buses and coaches), there is a downward trend in exports of commercial vehicles, which is related to an earlier lack of investment in overseas markets and the concentration on supplying the domestic market. The risks and costs of investing in non-familiar overseas markets also meant that there was undue emphasis on making sales primarily to traditional customers with long-established ties to British suppliers. Many of these markets are in the developing countries whose finances are often severely stretched so their ability to purchase new vehicles is limited. Another factor that limits export prospects is how many of the larger developing countries (e.g. Brazil, India and China) are now manufacturing their own commercial vehicles in large numbers, often in partnership with manufacturers from the developed countries, and consequently they have no need to import.

The number of imports of commercial vehicles of all types is growing, as they are competitive in technology, price, specifications and repair facilities with the domestic manufacturers’ brands and buyers being offered a wide choice. Most of the imported vehicles are produced in large numbers for local and international markets, so they have the advantage of a high international profile and economies of scale in manufacture and distribution. Imported vehicles from continental Europe — the main source of supply — also benefit from the current disparity in exchange rate values. This means that there is greater scope for price flexibility in setting up deals with prospective customers.

Table 5.1: The Apparent UK Market for Commercial Vehicles by Value (£m at msp), 1997-2001

1997 1998 1999 e2000 e2001


Less exports 962 960 666 633 600

Plus imports 1,845 2,296 2,233 2,399 2,446




Note: the figures for international trade in cars and commercial vehicles can vary between the tables because some vehicles are outside the definition used by Key Note and these cannot be separated from the mainstream categories.

Source: National Statistics/Overseas Trade Statistics/Key Note



MARKET STRUCTURE

The commercial vehicle industry produces a large variety of vehicle bodies for almost every conceivable activity, but most of these bodies are mounted on conventional mass-produced engines, transmissions and chassis. Its product ranges include light commercial vehicles, heavy commercial vehicles, buses and coaches, and a number of ‘specials’ for fire fighting, logging work, road construction, and for mining and quarrying purposes. Although there are many domestic manufacturers of commercial vehicles, the majority of the brands are under foreign control. Most of the models made in the UK are supplied to buyers in the domestic market.

Although most brands are owned by overseas companies, there is still strong brand loyalty by some road hauliers for heavyweight brand names, such as Leyland, ERF and Foden. These hauliers tend to operate only in Britain. However, international road hauliers prefer the major international brands of heavyweight vehicles for deliveries made to continental European and Middle Eastern destinations, because they are certain of reputable local repair services ‘en route’. Delivery vans and lightweight trucks are made in relatively large numbers in the UK and these are popular with domestic buyers. Imports of similar type vehicles are also popular, as they compare favourably with the home-manufactured product.

MAJOR PLAYERS

Advertising Expenditure on Commercial Vehicles

Expenditure on advertising commercial vehicles is concentrated on promoting light commercial vehicles. Ford, Renault, Vauxhall, Fiat and Mercedes-Benz have the largest advertising budgets. The light commercial vehicle market is larger and more diffuse than the market for heavy commercial vehicles, and so there is a wider spread of advertisements that are placed in non-specialist local papers and business as well as specialist trade magazines.

In general, buyers of commercial vehicles are not as strongly influenced by advertisements as are the buyers of cars (where the competition from many different manufacturers and dealers makes is stronger). More factual information on the vehicles is provided, such as payload and their performance in an operating environment. The amounts spent on advertising are not consistent year-on-year and, consequently, high spending may easily be followed by low spending, and vice versa. Model changes generate most impact in the level of advertising expenditure but, as these are not as frequent as in the car industry, there is no heavy incentive to increase budgets.



BUYING BEHAVIOUR

As the purpose of commercial vehicles is to collect and deliver goods, their sale responds very closely to short- and medium-term economic factors. However, there are also other considerations which affect the purchase of these vehicles, such as changes in the operating environment. This may be caused by legislation that imposes financial penalties for causing pollution, the lifting of maximum weight restrictions (e.g. to 44 tonnes), the prohibition on heavier vehicles using some major roads and bridges, and night-time restrictions on commercial vehicle traffic movements in some urban areas.

Table 5.2: Main Media Advertising Expenditure on Trucks and Vans (£000), Years to December 2000 and 2001

2000 2001

Citroën 635 610

Daihatsu 79 -

ERF 131 -

Fiat 1,267 3,407

Ford 8,645 5,832

Hyundai 140 -

Iveco 138 241

Iveco Ford - -

LDV - -

Leyland DAF 436


Nissan - 461

Renault 3,687 4,146

Suzuki 85 -

Vauxhall 4,042 4,329

Volkswagen 480 379

Other 467 372

Total †21,341 21,277





The choice of vehicle is based on the practical knowledge of the operator with regard to what the vehicle is required for, and how it can best be employed for this purpose. The large transport and logistics companies are the main buyers of light and heavy commercial vehicles, as they have long-term contracts with large enterprises in a diverse range of industries (e.g. from chemicals distribution to food distribution). Their vehicles have to be exactly right for the task and totally reliable in all operating conditions. Some are required for inter-continental journeys, so the quality of the non-UK maintenance services has to be of a high standard.

It is common for commercial vehicles to be leased or rented, and a number of companies specialise in providing this facility. These companies buy a range of vehicles for their fleets, as their customers’ requirements vary from the general purpose vehicle to a particular type. Further down the scale, some companies prefer to regularly buy and dispose of a small number of vehicles exclusively for their own business activities. In addition, there are many individuals who buy vehicles for one-person operations.

Bus and coach services in the UK are concentrated among several large specialists, the buying power of which dominates this market. These specialist bus companies have their own criteria on what vehicles they need to operate their services, and buy from any continental or UK vehicle manufacturer that fully meets their requirements.


Around 90% of the goods transported in the UK are carried in road vehicles. This dominance is likely to continue during the forecast period, despite efforts to improve the rail infrastructure and the incentives given to companies to use the rail goods networks more intensively. There is, at present, little confidence in the rail network as a good alternative to road transport. The amount of investment needed over the long term to make the rail system a credible alternative for goods transport will be difficult to raise in the financial markets because of the uncertain returns on outlay. Consequently, demand for goods vehicles is expected to grow overall between 2002 and 2006, in parallel with growth in the national economy. Technical developments will make the commercial vehicle safer, more fuel efficient and more environmentally friendly. These factors, combined with stringent testing of older vehicles, will enhance prospects for the purchase of new vehicles.

Improvements in the road infrastructure are lagging behind the increase in the number of cars and commercial vehicles in circulation. It is possible that commercial vehicles, of such importance to the national economy, will be given some form of priority in new road construction with designated lanes similar to bus lanes, but this is not likely in the immediate future. Road congestion will remain a major problem for road transport operators, but it will not deter them from adding to their fleets if the need occurs.



Table 5.3: The Forecast Apparent UK Market for Commercial Vehicles by Value (£m), 2002-2006

2002 2003 2004 2005 2006

Apparent UK market (£m) 5,280 5,365 5,452 5,541 5,632


Source: Key Note


The Motor Industry Motorcycles and Scooters

6. Motorcycles, Mopeds and Scooters

DEFINITION

Motorcycles, mopeds and scooters are powered two-wheel machines with engine capacities ranging from 50cc (cubic capacity) to 1,500/1,600cc. This sector includes motorcycles where the rider sits astride the machine, and scooters where the rider sits behind an open frame and over the engine.

KEY TRENDS

Motorcycles, mopeds and scooters are used for work and recreational purposes. Their popularity declined when the small car market expanded from the early 1960s onwards. However, from the mid-1990s, the popularity of these machines increased steeply as traffic congestion made them a convenient and practical alternative to public transport for commuting. Scooters are particularly popular in London, which accounts for around half of total UK sales, because they can easily be manoeuvred in slow moving traffic, they are cheap to run, and reserved parking spaces for two-wheel vehicles are often free in the city centre. However, their low engine capacity of between 50cc and 125cc, along with slow speeds, restricts their use outside cities. Thus, there is a demand for larger machines with engine capacities between 500cc and 600cc, which is now being met by some manufacturers.

The large-capacity motorcycle market is more restricted, as there is a complex system of expensive training, tests and licensing before riders can progress up the scale to the largest machines. In this market, there is both a work element (e.g. courier despatch riders, police, etc.) and a recreational element where the machines are mostly used at weekends and sometimes for commuting. As these machines cost as much as a car, many of the buyers are from the AB social category who want something different and more exciting than another car.

MARKET SIZE

The apparent UK market for motorcycles, mopeds and scooters has grown in value, by 68.2%, between 1997 and 2001. Although there are now three British motorcycle manufacturers, the only volume manufacturer is Triumph (accounting for approximately 95% of UK production).


Motorcycles and Scooters The Motor Industry

All the scooters sold in the UK are imported mainly from continental Europe (especially Italy and France) and Japan (although Taiwan and China are now becoming important suppliers at the lower end at the market). The market for large-capacity motorcycles is dominated by manufacturers in Japan, followed by Italy, Germany and the US.

As the market is growing and is profitable, this has attracted the attention of some large car dealers (e.g. Dixon Motors and Pendragon), which have set up their own distribution, maintenance and repair facilities to sell and service these bikes. In most cases, however, motorcycles and scooters are sold by specialist franchised dealers who are authorised to sell machines from different manufacturers as the market is still relatively small.

MARKET STRUCTURE

The domestic market for motorcycles, mopeds and scooters is essentially supplied by imports, which are growing by both volume and value as buyers of powered two-wheel vehicles utilise them in many different ways. They are known to have advantages and disadvantages. Their main advantages are that riders have greater flexibility in avoiding traffic jams, running costs are low, and parking is usually easily available on the completion of a journey, even in the most inaccessible of places. Their main disadvantages are that they give riders virtually no protection against bad weather and so special clothing has to be worn, there is no storage space, and the rider is very vulnerable in road accidents.

All age groups of over 16 years old (and of either gender) are potential buyers, but the greatest concentration of buyers is in the 25 to 50 years old age range who also own a car and want the flexibility of a two-wheel motor for leisure and commuting. There are probably as many female riders as male riders of scooters, particularly in the main market in London, as this form of personal transport gives total anonymity and is possibly safer for an individual than driving a car at night. Buyers of high-powered motorcycles are male orientated but not exclusively, so as many females are also being attracted to these machines for the same reasons as their male counterparts.

Table 6.1: The Apparent UK Market for Motorcycles, Mopeds and Scooters by Value (£m at msp), 1997-2001

1997 1998 1999 2000 2001

Apparent UK market 277 315 399 441 466



Source: ICC Juniper database/HM Customs & Excise/Key Note



The bikes are fitted with electric starters so they are easy to start, the engines are often enclosed so the rider can remain clean and, because of their complexity, it is no longer feasible for the individual to perform roadside repairs. Professional roadside assistance from several motoring organisations is readily available for motorcyclists and scooter riders, so there is the reassurance that help is there when it is needed.

MAJOR PLAYERS

Triumph is the major producer of motorcycles in the UK, while BMW is the main manufacturer of motorcycles in Germany (although its new style of covered scooter is made in Italy). Harley-Davidson is a US brand of motorcycles, while Peugeot makes scooters in France.

The most popular brands of motorcycles and scooters are of Japanese and Italian origin. Honda, Yamaha, Kawasaki and Suzuki are the principal Japanese brands. The Italian brand names are more diverse, with Piaggio (maker of the Vespa), Gilera, and other names dominating the scooter market (e.g. Ducati and Aprilia).

Most of the advertising expenditure for motorcycles and scooters is concentrated on the specialist motorcycling and scooter magazines. However, opportunistic advertising to promote scooters is sometimes placed in local and national newspapers whenever there is impending chaos in the public transport network.

Both manufacturers and their dealers advertise products in specialist magazines and in the form of brochures, which are distributed in show rooms and at national exhibitions.

Table 6.2: Main Media Advertising Expenditure by Manufacturers and Dealers of Motorcycles, Mopeds and Scooters (£000), Years to December 2000 and 2001

2000 2001

Manufacturers

BMW 142 272

Ducati - -

Harley-Davidson - -

Honda 448 108

Kawasaki - -

Peugeot - 77

Piaggio - 96

Suzuki 253 180

Table continues...


Motorcycles and Scooters The Motor Industry

BUYING BEHAVIOUR

The market for motorcycles, mopeds and scooters is small compared with the market for cars, and dealerships tend to be multifranchised (i.e. dealers stock and sell many different makes). There are a few large dealers but most are small, family-owned businesses with limited advertising expenditure.

Dixon Motors is the UK’s largest motorcycle dealer, as well as being one of the main UK car dealers. It has recently expanded its interests in motorcycles by acquiring Motorcycle City, a former competitor to its own Carnell subsidiary. This acquisition has made Dixons the largest motorcycle retailer in Europe.

...table continued

2000 2001Manufacturers (cont.)

Yamaha - -

Other 1,240 1,642

Total †2,082 2,375

Dealers

Braye World of Cars - 83

Carnell 256 162

DK Motorcycles 162 169

George White Superbike Centre 152 115

Motorcycle City 592 -

Peugeot 171 -

Vospers Motorcycles - 118

Other 2,527 ‡3,426

Total 3,860 4,073


‡ — includes £378,000 combined spending by Carnell/Motorcycle City, other than that listed


Table 6.2: Main Media Advertising Expenditure by Manufacturers and Dealers of Motorcycles, Mopeds and Scooters (£000), Years to December 2000 and 2001




Demand for high-powered motorcycles is not growing as fast as the demand for scooters, as they require a higher degree of commitment from buyers. Motorcyclists have to bear in mind the cost of the bike itself, high insurance premiums, the purchase of special clothing, and the heavy cost of compulsory training and passing the various tests for licences. Scooter riders make only a relatively small outlay on their machines, which can be driven after a relatively short period of training and taking only one test, or none at all for the smallest engine capacity if the rider already has a car licence.

The practicality of motorcycles and scooters is most evident in heavy traffic, and this is one of the major attractions of this form of transport. Parking is also unusually easy, as they require very little road space so can be left almost anywhere, and there are lower levels of harassment from officials. As traffic conditions are expected to worsen in urban areas and on trunk roads, there is every prospect that demand for powered two-wheel vehicles will continue to grow strongly over the next few years.

Table 6.3: The Forecast Apparent UK Market for Motorcycles, Mopeds and Scooters by Value (£m), 2002-2006

2002 2003 2004 2005 2006

Apparent UK market (£m) 489 513 538 564 592


Source: Key Note


The Motor Industry Motor Components

7. Motor Components

DEFINITION

The motor components industry comprises all the electrical, electronic, mechanical components, and subassemblies. Other components are also considered, such as wheels and tyres that are required as original equipment to build complete vehicles in assembly plants and for providing replacement parts to the aftercare market.

KEY TRENDS

It is not economic for vehicle manufacturers to make parts only for their own use. For this reason, all the major motor vehicle assemblers buy in most of their requirements for autoparts from specialist manufacturers who make the parts (which are then integrated with other parts and subassemblies on the assembly line). Much of the work that was formerly done on-site by the vehicle manufacturer is now done by the parts manufacturers, which are responsible for supplying complete subassemblies, in large volumes, at a time and place that is specified by the assembler.

Minimum quantities of parts are held on-site because of the high cost of holding stocks. Therefore, the parts suppliers are obliged to make frequent deliveries just in time (JIT), so production does not come to a halt because the parts are not available when they are needed.

Vehicle assemblers want guaranteed deliveries of high-quality parts supplied according to schedule. To obtain this guarantee, they buy only from a very limited and selective list of mainly world-class international companies. These companies take all the responsibility for the research and development (R&D) of their products, and also make all the parts and subassemblies in their speciality. Their expertise and production facilities are available to any vehicle manufacturer, so they have contracts to supply many competing companies.

Over the past few years, the autoparts industry in the UK has come under intense pressure from the vehicle manufacturers to reduce its prices, and from the continuing sterling/euro imbalance that has caused many of the principal buyers to declare that they are looking for alternative lower-cost sources of parts supply outside the UK, particularly in continental Europe. This development could threaten the viability of some parts manufacturers, which need to maintain a high rate of investment in R&D and in their production capabilities. Increasing demands on financial and technical resources has put considerable pressure on all the international parts suppliers, both in the US and in continental Europe, as well as the UK. Thus, the component manufacturing industry is being restructured into ever larger groups.


Motor Components The Motor Industry

MARKET SIZE

There are two markets for motor components in the UK, one for original equipment and another for replacement parts. Most parts manufacturers supply both markets but, in the replacement market, there is considerable competition from imports of duplicates of the originals.

Around 2 million cars and commercial vehicles are manufactured annually in the UK, and nearly 30 million vehicles are registered for road use. However, the peak in total demand was reached in 1997. Since then, the market has grown and fallen intermittently up to 2001. It is possible that the high quality and reliability of components, longer service intervals, and longer warranties has reduced the need for replacement parts.

UK-made parts are still widely used as original equipment in motor vehicles, but it is evident that there has been a recent decline in sales and this has become a major concern to the leading parts manufacturers. Several companies that were once prominent as motor component manufacturers have, therefore, decided to permanently leave this market area because of its poor prospects.

Table 7.1: The Apparent UK Market for Motor Vehicle Parts and Accessories by Value (£m at msp), 1997-2001

1997 1998 1999 2000 2001


Less exports 7,448 7,242 7,082 6,869 6,182

Plus imports 8,802 7,864 7,147 7,575 7,953



Source: National Statistics ’Motor Trades’/Overseas Trade Statistics/Key Note



MARKET STRUCTURE

The manufacture of parts and accessories for motor vehicles is being consolidated into larger groups because of the pressure on prices and overcapacity, both within the supply industry and among the customers for its components. There is very little scope for the small specialist companies that operate in this market to act as suppliers to the vehicle assembly industry, so they have to concentrate on making a variety of parts for the main suppliers that need their output. However, they are very vulnerable to the possibility that cheaper imports could replace their contribution to their primary customers if price levels are continuously reduced.

All the vehicle manufacturers have stated that it is their intention to reduce the number of their suppliers of components and sub-assemblies, and to cease the manufacture of parts in-house wherever possible. As very few items are to be made in-house, the orders on preferred suppliers should become larger and contracts extended over longer periods, assuming that all the criteria are met.

Some fundamental changes have occurred in the supply chain, as General Motors and Ford have disposed of their in-house component manufacturing enterprises and converted these companies into independent units. Delphi (General Motors) and Visteon (Ford) have subsequently become the largest component manufacturers in the world. TRW, the world’s third-largest component manufacturer (after acquiring LucasVarity and Federal Mogul) is the object of a recent takeover bid by Northrop Grumman, a US defence contractor.

The replacement market is very large and vitally important to the original equipment manufacturers, as there is greater profit in this market. However, their higher prices, compared with the prices of acceptable substitutes made by other companies, means that they have to share the market for replacements. Similarly, this applies to other consumables (such as tyres) where the higher-priced and well-advertised brand name is important to some buyers, but not to others.

MAJOR PLAYERS

Motor component manufacturers in the UK are operating in a market where key customers are endeavouring to substantially reduce their costs, with one of the targets being the price at which their motor components are supplied. Automotive original equipment manufacturer (OEM) production volumes in Europe are high because the output of the automotive industry is fairly strong, although not enough to overcome the problems of overcapacity. However, the UK manufacturers are not in a very good position to supply this market because of their higher costs. Many UK-based vehicle assemblers are in the process of reviewing contracts and changing their sources of supply, which has potentially adverse implications for some domestic manufacturers of parts.



GKN PLC and the Unipart Group (which now includes its former rival Partco Ltd) are the leading manufacturers of autoparts in Britain. However, there are many other large companies that are also long established as manufacturers, including Robert Bosch Ltd, Wagon PLC, Eaton Ltd, SKF Ltd, Automotive Products Group Ltd, Dura Automotive Ltd, Dana Corporation (which owns Quinton Hazell), The Mayflower Corporation, TRW Ltd and Honeywell UK Ltd (formerly AlliedSignal Ltd).

Some large companies that manufacture motor components have non-automotive engineering interests. These include Tomkins PLC and the TI Group, which has recently merged with Smiths Industries PLC.

Several companies that were major players in the industry decided that there are better prospects in other industry sectors and have either sold or closed their autoparts plants. BTR made mechanical and rubber components and control systems for the automotive industry. It merged with Siebe, which had a subsidiary company that manufactured lubrication systems, to create a new company called Invensys. This company later disposed of all its autoparts businesses. BBA Group once made brakes and friction materials for the automotive industry. Britax International made vision and specialised vehicle systems.

BUYING BEHAVIOUR

Buyers of components for the OEM are diversifying their sources of supply to other countries because of the perceived higher cost of buying their requirements from UK sources. This trend has exposed around 600 domestic component manufacturers to future losses in what was a captive market, when vehicle manufacturers preferred their main suppliers to be located in close proximity to their assembly plants.

The relentless drive by vehicle manufacturers to reduce costs by concentrating on their parts suppliers’ prices has had a severe impact on the components industry. It has also led to the recent collapse of at least one large company, UPF Thomson, which supplied chassis for the Land Rover. More companies may be at risk if the renewal or extension of existing contracts are in doubt and imports continue to grow.

Buyers in the replacement market also expect the cheapest prices, and this has traditionally been an extremely competitive area for original equipment manufacturers that do not own the copyright on the production of their autoparts. Franchised garages are more likely to buy their components from the original equipment manufacturers than the independent garages, because they have to have the guarantee that these products will meet warranty specifications. Once the warranty has expired, the cheaper copy is often preferred if the manufacturer is regarded as reputable by the repairer.



The most consumable products are batteries, spark plugs, windscreen wipers, brake pads, belts, exhausts and tyres, but the frequency of replacement depends on how heavily they are used during the life of a vehicle. Generally, these parts are made to high standards so, as the servicing intervals have become longer, many customers delay making replacements for non-emergency reasons. The decisions to buy these items are mostly left to the garage or other professional repair organisations, except perhaps for tyres where personal preferences may be expressed.


Total demand for motor components in the original equipment market is expected to continue growing, because the motor industry is still investing in new production capacity (even though Ford has transferred volume production of its low- and medium-priced cars from the UK to Germany and Spain). All the Japanese manufacturers are committed to expanding output at their plants — Ford is expanding output at its Jaguar and Land Rover subsidiaries and its engine plants in the UK, Peugeot has started making its very successful 206 model at its Ryton factory, BMW has successfully launched the new Mini, and it appears very likely that MG Rover will stay in business as a volume producer after an uncertain start as an independent company. Volkswagen and BMW are building new manufacturing plants to increase the volume of production of their Rolls-Royce and Bentley brands. The smaller specialist companies (such as Lotus, TVR, Caterham, Morgan, etc.) may decide to increase their output to reduce the waiting lists for their cars.

Commercial vehicle production in the UK is dominated by Ford, which produces light and medium/heavyweight vans of up to 3,500kg. The company has stated that its Southampton plant, which produces the Transit in large volumes, will continue to do so for the foreseeable future. LDV is an independent British company that emerged from the restructuring of Leyland DAF when the parent company collapsed in the mid-1990s. Its future seems reasonably secure as a supplier to the home market, although its model range is dated and output capacity is limited to between 15,000 to 20,000 vehicles per annum. Vauxhall car production has ceased at its Luton plant, but the company intends to continue as a volume producer of light vans.

Heavy commercial vehicle production is likely to only marginally increase, as there are very few manufacturers and these sell primarily to customers in the home market. Volvo and Dennis supply the bus market, where demand is likely to continue growing because of the preferential treatment given to public transport by the Government and local authorities. However, the outlook for the heavy goods vehicles manufacturers (including Leyland, ERF, Seddon Atkinson and Foden) is uncertain because of the strength of competition from imports.

Present trends in the supply structure of motor components tend to favour growth in imports, and this is mainly attributed by the buyers of parts to the adverse effect of the high sterling/weak euro imbalance. This may soon be resolved, so British motor component manufacturers can recover market shares that they are currently being lost to foreign competitors.



Table 7.2: The Forecast Apparent UK Market for Motor Vehicle Parts and Accessories by Value (£m), 2002-2006

2002 2003 2004 2005 2006

Apparent UK market (£m) 12,272 12,640 13,019 13,344 13,877


Source: Key Note


The Motor Industry Strengths, Weaknesses, Opportunities and Threats

8. Strengths, Weaknesses, Opportunities and Threats

STRENGTHS

Cars

• New and used car sales are increasing.

• Reductions in the price of new cars has attracted more buyers.

• Private buyers are making a larger contribution to total sales.

• The luxury car market is growing.

• New models are being introduced to the market more frequently, in order to generate sustained demand.

• Many new features are being incorporated as standard equipment in new designs.

• Higher specifications have not resulted in greatly increased cost to the buyer.

Commercial Vehicles

• The commercial vehicle is indispensable for moving goods and people locally and over long distances.

• Standard and non-standard vehicles can be adapted to perform any task.

• Technical developments have improved the environmental credentials of the commercial vehicle.

• Local authorities are encouraging the purchase of new buses for public transport networks by giving them preferential treatment in urban areas.

• Transport operators and vehicle manufacturers have a mutual interest in lowering the cost of road transport and improving its reliability.


• The powered two-wheel vehicle has become a very popular means of personal transport for male and female riders.

• Scooters are easy to ride and, in the lowest engine capacity, a car driving licence is all that is required to drive on the road.

• Motorcycles and scooters can be used for business, recreational and commuting purposes.


Strengths, Weaknesses, Opportunities and Threats The Motor Industry

• These vehicles are very practical in heavy traffic, and parking is more flexible and easier than it is for a car, particularly in heavily restricted areas.

• The power ranges are very wide so there is an extensive choice of machines for all riders.

• Professional help is readily available for roadside assistance and for regular servicing.

Motor Components

• Motor components are essential for the manufacture of all vehicles.

• Thousands of parts are needed to make assemblies, which are fitted together on the assembly line.

• A large number of specialist component manufacturing companies are located in the UK.

• The industry is well equipped to supply all of the motor vehicle manufacturers with their requirements for parts.

• The UK market for original equipment parts, and for aftercare replacements, is very large.

• The number of vehicles built in the UK, and the number of vehicles registered, is growing.

• There is a quick and well-organised delivery service for the original equipment manufacturer (OEM) and the aftercare markets.

WEAKNESSES

Cars

• Around 70% of all the cars sold in the UK are imported.

• MG Rover is the only independent volume producer of cars in the UK.

• Ford has stopped the production of all cars under its own badge name in Britain, and Vauxhall has ceased production of its cars at its Luton assembly plant.

• The EU’s block exemption, which excludes cars from its competition rules, is due for renewal in September 2002 and, if this is not renewed, there will have to be radical changes in car distribution.

• Because of the block exemption, many private buyers of cars have sought to import cars of their choice from cheaper sources in continental Europe.

• The wide disparity in prices for identical cars sold in Britain and other countries in Europe is publicised frequently.



Commercial Vehicles

• Around 90% of commercial goods vehicles, excluding buses, are imported.

• British manufacturers of commercial vehicles are heavily dependent on their domestic market because they have never had a good network of distributors overseas.

• The international transport market is dominated by foreign makes.


• Around 95% of new motorcycles and scooters registered in the UK are imported.

• There is only one major UK manufacturer of motorcycles and no domestic manufacturer of scooters.

• There is a need for associated special clothing, but limited all-weather protection available.

• The promotion of motorcycles and scooters is low key.

Motor Components

• Vehicle manufacturers are cutting their production costs and applying severe pressure on their domestic autopart suppliers to reduce their prices.

• Buyers of autoparts are looking to other countries for cheaper sources of supply.

• Around 70% of all the cars sold in the UK are imported.

• OEMs cannot copyright their products.

• There is a very active trade in duplicate copies of the originals.

OPPORTUNITIES

Cars

• The demand for cars is consistently high and likely to remain strong.

• The pricing structure for cars is being transformed by greater price transparency in Europe.

• EU regulations have been changed to make it easier for private buyers to buy and import cars at less cost than dealers’ prices.

• Block exemption protection for car manufacturers may be eliminated when the regulations are reviewed in September 2002. The expected changes to block exemption may encourage new entrants as suppliers of new vehicles.



Commercial Vehicles

• The goods vehicle market is likely to grow because of the need for faster and more frequent delivery of goods (for example, online shopping is being heavily promoted by the supermarket chains).

• Express services are being demanded by all types of industrial and retail organisations and more road vehicles will be required to provide these services.

• Paradoxically, the increase in traffic congestion could mean that more goods will be despatched in smaller loads and in more vehicles to ensure that deliveries are made on time.

• Demand for buses will increase because the authorities are determined that public transport will take precedence over private transport in urban areas, and to ensure that more frequent services can be operated.


• Traffic congestion and the continuing unreliability of public transport is likely to to stimulate further growth in demand for scooters for commuting to work in urban areas.

• Changes in legislation could favour the use of powered two-wheel vehicles in cities and towns (e.g. allowing them to be used in bus lanes and providing more reserved parking spaces for solo machines).

• Large motorcycles have become a status symbol for the wealthier middle class, and this is likely to continue as it becomes almost impossible for them to freely move around in expensive status symbol cars.

• The public acceptance of motorcycles and scooters has been transformed by their new found practicality in traffic.

Motor Components

• The present volume of output by the UK motor industry should be sustainable as there has been a favourable national and international response to the recently introduced new models.

• Domestic component manufacturers should be able to recover market share when sterling/euro exchange rates are equalised.

• The UK’s trade deficit in manufactured goods is rapidly widening, and there will be an exchange rate correction when financial markets lose confidence in the underlying strength of the British economy.

• Rationalisation of the motor component industry will create larger groups, which can achieve the economies and price reductions that the motor vehicle assemblers want from their suppliers.



THREATS

Cars

• Despite the car’s general popularity with the public, it is becoming more difficult and expensive to run because of the increasing number of restrictions placed on its use and the inadequacy of the present road network.

• The purchase and use of a car has traditionally been used as a major source of revenue by all governments, and there is no indication that there will be a change in policy (e.g. on fuel taxes).

• More restrictive legislation is planned and likely to be implemented (such as the congestion tax in London, which could be extended to include other cities).

• Taxes on the company car are steadily increasing, which reduces its value to the user and this could affect sales to the fleet markets if demand falls.

Commercial Vehicles

• The cost of operating commercial vehicles is strongly affected by legislation, high taxation and heavy road congestion, all of which are making it difficult for road transport companies to be profitable enterprises.

• There is government indifference to the problems of the road transport industry, despite its crucial importance to the economy.

• The heavy investment which is being planned to improve the rail network for goods and passenger traffic could eventually affect demand for long distance road transport.


• Higher tax and insurance costs for riders of motorcycles and scooters is increasingly becoming an issue.

• The rising cost of compulsory training, and tests for prospective buyers, could dampen the interest and determination of the newest entrants to progress beyond the lower capacity machines.

• Poorly maintained and potholed roads make riders of powered two-wheel vehicles vulnerable to unseen and unavoidable hazards, which could result in serious injuries.

• The withdrawal of free reserved parking spaces and parking restrictions on solo machines would quickly reduce their popularity.



Motor Components

• Continuation of the imbalance in the sterling/euro exchange rate could seriously damage demand for UK manufactured components.

• OEM and aftercare markets could inadvertently become users of substandard parts, as vehicle assemblers and retail distributors widen their search for the cheapest sources of supply.

• Motor component manufacturers will be supplying fewer vehicle manufacturing groups because many of these companies are amalgamating with their former rivals.

• The new groups intend to use centralised buying of components for all their assembly plants in order to obtain the maximum cost benefits from consolidation, and this will undoubtedly change the negotiating position of all the major motor component suppliers.


The Motor Industry The Future

9. The Future

FUTURE PROSPECTS

Cars

Domestic demand for cars is expected to grow slowly in terms of volume over the next 5 years, because the market is close to saturation. However, the value of sales should rise as many buyers will be attracted to higher specification luxury cars. Adding large numbers of new vehicles every year without increasing road space will obviously increase congestion unless the total number of registrations is stabilised. It is, therefore, possible that controls over the registration of new vehicles may be introduced at some point during the next 5 years, in order to bring a closer balance between the total number of cars scrapped annually and their new replacements.

At the present time, at least one-third of all the cars on the road in the UK are over 10 years old, so many should be due for replacement soon. However, if there is no inducement to do so, their owners will run them for several more years as there is no value in these cars.

The largest inducement to scrap old cars at an earlier age is probably the lower cost of new cars. Price disparities exist around Europe and these have been highlighted and given great prominence on television and in the press. Parallel imports have increased as the EU laws on car specifications have been harmonised, so that it is now easier for independent dealers to bring in cars at lower prices than those charged by franchised dealers. The largest change in the pricing structure, however, will occur only if the block exemption regulations are altered to favour the consumer rather than the manufacturer.

It is assumed that price levels in the UK will fall so that they become closer to the European average than at present. This should encourage the entry of a greater number of private buyers to the new car market, as well as upgrades to more expensive new cars. This should mean that, even if the volume of car sales is static over the next 5 years, the value of sales will continue to grow.

Commercial Vehicles

Demand for commercial vehicles for the transport of goods will grow because the road network gives the greatest flexibility in meeting goods delivery schedules, despite the problems caused by traffic congestion. A greater number of small commercial vehicles will probably be required to service more retail outlets that are being forced back into town centres (because of the restrictions on the building of out-of-town shopping developments).


The Future The Motor Industry

Local authorities are determined to improve public transport services and stimulate the greater use of public transport in their area. It is clear that every effort will be made to encourage the independent operators to buy more buses and coaches to increase the frequency of services, as well as to open up new routes by guaranteeing a good return on their investment. In addition to some subsidies for the services provided on unprofitable routes, it is a certainty that local authorities will impose tighter controls on private motoring through heavy fines for entering dedicated bus lanes, congestion charging and high parking fees.


Demand for high-performance motorcycles may not yet have peaked, although many dealers are now trying to reduce their stocks as the market has become less than dynamic and growth prospects are uncertain. A downturn in the economy, the high purchase cost of these machines, high insurance costs, and the heavy cost of special training and clothing, could deter some of the potential new entrants to this market. They need to have the same dedication to motorcycling as a leisure activity as the club and older riders who have made motorcycling into a cult fashion. They also need to be fairly wealthy to indulge their hobby.

Scooters are more practical and offer many options in price and specification. Low-powered two-wheel vehicles are very easy to control, are fairly comfortable, and give the rider freedom to go anywhere at reasonable speeds. They are relatively cheap to buy, economical to run and insure and, although some special clothing may be required, the outlay is much smaller than it is for motorcycling clothing. Consequently, it has become very popular with both genders in all the age and social groups. The increase in traffic congestion, heavy financial penalties for motorists, and the constant overcrowding on public transport services gives the scooter an advantage in personal transport. It is therefore anticipated that the growth in demand for scooters will make the largest contribution to the increase in two-wheel vehicle sales over the next few years.

Motor Components

The motor industry in the UK is one of the largest in the world in terms of both volume of output and sales value. The indications are that, despite the problems that have affected the Ford and Vauxhall car manufacturing plants in the UK, the other manufacturers are still heavily investing in new facilities. This is because they expect future growth in national and international demand for their products.

The current strength of the industry and its growth prospects are soundly based. Consequently, the demand for motor components will rise. What is uncertain is the British manufacturers’ contribution to total demand, which should also increase. However, they may not recover the market share that they held before the recent troubled relationships with their customers began.


The Motor Industry The Future

MARKET FORECASTS 2002 TO 2006

Both the volume demand for motor vehicles and the value of their sales is expected to remain at a high level. This is providing that the economy continues to grow, the number of unemployed is low, and consumers’ expenditure continues to increase. This is the most likely scenario for the future as, in the UK and other developed countries, it would be political suicide for any party that is not committed to these objectives. Consequently, the dominance of the motor vehicle will not be diminished by other forms of transport, despite strong efforts to reinvigorate the rail network for freight and passenger traffic, or by new laws that attempt to restrict the free movement of the private motorist and commercial vehicles, high fuel taxes or heavy traffic congestion.

It appears that nothing will succeed in preventing growth in demand for motor vehicles, because there is nothing to replace its door-to-door convenience. At all levels of society, the majority of the population want private ownership of a car and this is regarded as a priority in the allocation of disposable income. Higher living standards, measured in monetary terms, are expected and this will encourage higher levels of consumer expenditure, which, in turn, will drive the need for more commercial vehicles to make speedy deliveries. Only a severe economic downturn could limit growth in demand and this is likely to be only a temporary phenomenon.

Table 9.1: The Apparent UK Motor Industry by Sector by Value (£m), 2002-2006

2002 2003 2004 2005 2006

Cars 30,450 31,363 32,303 33,272 33,937

Commercial vehicles 5,280 5,365 5,452 5,541 5,632

Motorcycles, mopeds

and scooters 489 513 538 564 592

Motor components 12,272 12,640 13,019 13,344 13,877

Total 48,491 49,881 51,312 52,721 54,038

Source: Key Note

The Motor Industry Further Sources


10. Further Sources

Associations

Automobile Association‘personal assistance organisation for motorists; covers: insurance, financial services, cartography, publishing, driving school, road safety’Norfolk HousePriestly Road BasingstokeHampshire, RG24 9NYTelephone: 0870-600 0371http://www.theaa.com

Automotive Aftermarket Association‘to protect the automotive aftermarket industry (distribution of parts, supplies to garages and truck fleets); to enhance its trading environment and business conditions’Factor HouseAiredale Business ParkKeighley RoadSkiptonNorth Yorkshire, BD23 2UETelephone: 01756-701353Fax: 01756-701323

Automotive Distribution Federation‘interests of companies engaged in the manufacture and/or distribution of aftermarket spare parts for motor vehicles’68-70 Coleshill RoadHodge HillBirmingham, B36 8ABTelephone: 0121-784 3535Fax: 0121-784 4411

British Road Federation Ltd‘to campaign for a safe and efficient road system’194-202 Old Kent RoadLondon, SE1 5TYTelephone: 020-7703 9769Fax: 020-7701 0029

British Vehicle Rental and Leasing Association Ltd‘publishes an annual statistical review of the rental industry’River LodgeBadminton CourtAmershamBuckinghamshire, HP7 0DDTelephone: 01494-434747Fax: 01494-434499http://www.bvrla.co.uk

European Automobile Manufacturers AssociationRue de Noyer 211B-1000 BrusselsBelgiumTelephone: 00-322 732 5550Fax: 00-322 738 7310http://www.acea.be/acea

Freight Transport Association‘for companies involved in distribution, whether by road, rail, sea or air’Hermes HouseSt John’s RoadRoyal Tunbridge WellsKent, TN4 9UZTelephone: 01892-526171Fax: 01892-534989

Further Sources The Motor Industry


• Independent Garage Association‘a federated member of the Retail Motor Industry Federation’• National Association of Radiator

Specialists Ltd‘for automotive radiator specialists’• Petrol Retailers Association‘represents the interests of petrol retailers to government, oil companies and the general public’• Society of Motor Auctions‘an association within the Retail Motor Industry Federation’9 North StreetRugbyWarwickshire, CV21 2ABTelephone: 01788-576465/538321Fax: 01788-547361

Institute of British Carriage and Automobile Manufacturers‘improvement of design, engineering and manufacturing processes of land transport... to keep abreast of new developments in materials and their uses, safety, performance, economy and ecology which influence the production of vehicles of ever higher safety and quality’31 Redstone Farm RoadHall GreenBirmingham, B28 9NUTelephone: 0121-778 4354Fax: 0121-702 2615

Institute of the Motor Industry‘sets standards for professional qualifications and status for individuals employed throughout the motor industry’FanshawsBrickendonHertfordshire, SG13 8PQTelephone: 01992-511521Fax: 01992-511548http://www.motor.org.uk

Motor Industry Research AssociationWatling StreetNuneatonWarwickshire, CV10 0TUTelephone: 024-7635 5000Fax: 024-7635 5355http://www.mira.co.uk

National Tyre Distributors Association‘for companies in the tyre specialist and fast-fit trade’Elsinore HouseBuckingham StreetAylesburyBuckinghamshire, HP20 2NQTelephone: 0870-900 0600Fax: 0870-900 610http://www.ntda.co.uk

• Retail Motor Industry Federation (RMIF)

‘interests of those selling and servicing new and used cars, trucks and motorcycles and other related activities’• Association of Vehicle Recovery

Operators (AVRO)‘represents recovery operators throughout the UK’• Motorcycle Retailers Association

(MRA)‘represents those selling and servicing new and used motorcycles’• National Franchised Dealers’

Association (NFDA)‘serves the interests of retailers selling and servicing new cars and trucks’201 Great Portland StreetLondon, W1 6ABTelephone: 020-7580 9122Fax: 020-7580 6376http://www.rmif.co.uk



Retread Manufacturers Association‘for the UK retread tyre industry and associated businesses’Federation House (2nd floor)Station RoadStoke-on-TrentStaffordshire, ST4 2TJTelephone: 01782-417777Fax: 01782-5417766http://www.tyres-online.co.uk/rma

Road Haulage Association Ltd‘representation of total interests of Britain’s professional hire-or-reward hauliers’35 Monument HillWeybridgeSurrey, KT13 8RNTelephone: 01932-841515

Scottish Motor TradeAssociation Ltd‘for the retail motor trade in Scotland’3 Palmerston PlaceEdinburgh, EH12 5AFTelephone: 0131-225 3643Fax: 0131-220 0446

Society of the Irish Motor Industry5 Upper Pembroke StreetDublin 2Republic of IrelandTelephone: 00-3531 676 1690Fax: 00-3531 661 9213

Society of Motor Manufacturers and Traders Ltd (SMMT)‘promotion of the motor industry in the UK and overseas, including manufacture and trade in automotive vehicles of all kinds, their components and accessories’Forbes HouseHalkin StreetLondon, SW1X 7DSTelephone: 020-7235 7000Fax: 020-7235 7112http://www.smmt.co.uk

Transport AssociationPeter Acton Associates Ltd185 Great TattenhamsEpsom Downs Surrey, KT18 5RATelephone: 01737-353636

Publications

• Aftersales Management• Automotive Finance• Automotive Digest• Castrol Car Service and Customer

Satisfaction Trend Tracker• Dealer Principal• Fleet Dealer• Sewells Automotive DigestSewells InternationalEMAP Automotive (Media House)Media HouseLynchwoodPeterborough Business ParkPeterboroughPE2 6EATelephone: 01733-468001http://www.sewells.co.uk

• Autocar• What Car?Haymarket Motoring Publications Ltd60 Waldegrave RoadTeddingtonMiddlesex, TW11 8LGTelephone: 020-8267 5688Fax: 020-8267 5750

Auto ExpressDennis Publishing Ltd30 Cleveland StreetLondon, W1P 5FFTelephone: 020-7907 6000Fax: 020-7907 6020http://www.autoexpress.co.uk



• Auto Trader• Coach & Bus Guide• CBW Coach & Bus Week• Fleet Car Business• Fleet NewsEMAP Automotive LtdMedia HouseLynchwoodPeterborough Business ParkPeterborough, PE2 6EATelephone: 01733-468000Fax: 01733-468347http://www.automotive.co.uk/

Automotive News EuropeCrain Communications Ltd4th FloorNew Garden HouseHatton GardenLondon, EC1N 8LDTelephone: 020-7457 1400Fax: 020-7457 1440http://www.automotivenewseurope.comE-mail: [email protected]

• Car• Motor Trade Guide to Used

Car PricesEMAP Active LtdAngel House338-346 Goswell RoadLondon, EC1V 7QPTelephone: 020-7477 7399Fax: 020-7477 7279

Car MechanicsKelsey Publishing LtdCudham Tithe BarnBerrys HillCudhamWesterham, TN16 3AGTelephone: 01959-541444Fax: 01959-541400http://www.ewacars.com

Fleet Operator MagazineStansted News Ltd134 South StreetBishops StortfordHertfordshire, CM23 3BQTelephone: 01279-714505Fax: 01279-714519http://www.acfo.org

• Forecourt• Motor Retailer• Recovery OperatorRetail Motor Industry Federation201 Great Portland StreetLondon, W1N 6ABTelephone: 020-7580 9122Fax: 020-7580 6376http://www.rmif.co.uk

Garage TraderMain Stream Publications139 Thomas StreetPortadownCraigavonNorthern Ireland, BT62 3BETelephone: 028-3833 4272Fax: 028-3835 1046E-mail: [email protected]

• Monthly Statistical Review• SMMT Monthly UpdateSociety of Motor Manufacturers and Traders LtdForbes HouseHalkin StreetLondon, SW1X 7DSTelephone: 020-7235 7000Fax: 020-7235 7112http://www.smmt.co.uk

Motorcycle TraderSeven Kings Publications LtdAldgate House74 Grove RoadSutton, SM1 1BTTelephone: 020-8661 1160Fax: 020-8661 1173



Motor Industry ManagementInstitute of the Motor IndustryFanshawsBrickendonHertfordshire, SG13 8PQTelephone: 01992-511521Fax: 01922-511548http://www.motor.org.uk

Motor TraderCumulus Business MediaAnne Boleyn House9-13 Ewell RoadSutton, SM3 8BZTelephone: 020-8722 6000Fax: 020-8722 6060http://www.motortrader.com

Motor TransportReed Business Information LtdQuadrant HouseThe QuadrantSuttonSurrey, SM2 5ASTelephone: 020-8652 3500Fax: 020-8652 8957

Roadway MagazineInter Regional GroupHill HouseHill House RoadNorwich, NR1 4BETelephone: 01603-627294Fax: 01603-633638

Tyres & AccessoriesTyre Industry Publications LtdUnit 1Magnolia CentreTelford RoadClacton-on-SeaEssex, CO15 4LPTelephone: 01255-222233Fax: 01255-222234E-mail: [email protected]

World Automotive ManufacturingAutomotive World58 Haverhill RoadBalhamLondon, SW12 0HBTelephone: 020-7976 9968http://www.automotiveworld.com

Directories

AA List of Members & Members HandbookFactor HouseAiredale Business ParkKeighley RoadSkiptonNorth Yorkshire, BD23 2UETelephone: 01756-701353Fax: 01756-701323

Bodyshop Buyers’ GuidePlenham LtdCastle MillLower Kings RoadBerkhamsted, MP4 2AATelephone: 01442-285300Fax: 01442-870740

Coach Operator’s HandbookEMAP Automotive Media HouseLynchwoodPeterborough Business ParkPeterborough, PE2 6EATelephone: 01733-468001http://www.emap.com

• Motor Industry of Great Britain• Motor Industry Review• The UK Motor Suppliers DirectorySociety of Motor Manufacturers and Traders LtdForbes House Halkin StreetLondon, SW1X 7DSTelephone: 020-7235 7000Fax: 020-7235 7112http://www.smmt.co.uk



Sewells Pay Guide to the Retail Motor IndustrySewell International LtdMedia HouseLynchwoodPeterborough Business ParkPeterborough, PE2 6EATelephone: 01733-468255http://www.sewells.co.uk

General Sources

ACNielsen MMSMadison HouseHigh StreetSunninghillAscotBerkshire, SL5 9NPTelephone: 01344-627553Fax: 01344-621037

Ashgate Publishing LtdGower HouseUnit 2Croft RoadAldershotHampshire, GU11 3HRTelephone: 01252-331551• Sources of Unofficial UK Statistics

— D Mort and L Siddall

ASLIB: The Association for Information ManagementStaple HallStone House CourtLondon, EC3A 7PBTelephone: 020-7903 0000Fax: 020-7903 0011http://www.aslib.co.uk• ASLIB Directory of Information

Sources in the UK

BMRB International LtdHadley House79-81 Uxbridge RoadEaling, W5 5SUTelephone: 020-8566 5000Fax: 020-8579 9802

Headland Press1 Henry Smith’s TerraceHeadlandCleveland, TS24 0PDTelephone: 01429-231902Fax: 01429-861403• Business Information Sourcebook• How to Access Market Research

Information from your Microcomputer

Bonnier Information Sources

Bonnier PLCField House72 Oldfield RoadHamptonMiddlesex, TW12 2HQ

ICC Information LtdTelephone: 020-8481 8800Fax: 020-8941 6014msn: [email protected]: [email protected]



ICC can provide information via:

• Juniper (WindowsTM online service), updated daily

• Plum (Internet), updated daily• Blueberry (CD-ROM — Credit Index,

Company Index and Broker 50), updated monthly

• Damson (Bulk Data Supply via EDD, EDI, ISDN, magnetic tape and DAT)

Databases available via Juniper, Plum, Blueberry and Damson include:

• Directory information on all live and dissolved companies

• Analysed financial information of every trading British company

• Database of all 4.9 million directorships

• Images of the latest directors’ reports and accounts

• Full text annual reports and accounts of UK quoted PLCs

• Stockbroker research• Shareholders information

IRN ResearchIRN offers a range of research solutions to management, information and marketing professionals on an ad hoc, continuous, contract or outsourced basis, incorporating:• bespoke market research and

consulting• information consultancy• information management services• content/report production.Telephone: 020-8481 8831Fax: 020-8783 3691E-mail: [email protected]://www.irn-research.com

The Prospect Shop LtdTelephone: 020-8481 8720Fax: 020-8783 1940http://www.theprospectshop.co.uk

Business Ratios• Bus & Coach Operators• Freight Fowarders• Motor Component and Accessory

Manufacturers• Motor Goods Distributors• The New Car Industry• Road Hauliers• Vehicle Dealers• Vehicle Renting and Leasing£275 each

Financial Surveys• Car Dealers• Commercial Vehicle Dealers• Freight Forwarders• Motor Component and Accessory

Industry• Road Hauliers• Tyre Manufacturers & Distributors£249 each

Key Note LtdTelephone: 020-8481 8750Fax: 020-8783 0049http://www.keynote.co.uk

Market Reports• Access Control• Autoparts• Bus & Coach Operators• Camping & Caravanning• Commercial Vehicles• Road Haulage• The Tyre Industry• Vehicle Security£340 each



Market Reviews• UK Distribution• Passenger Travel in the UK£565 each

Market Assessments• Forecourt Retailing• In-Car Entertainment• Public Transport£730 each

Government Publications

HM Customs & ExciseNew Kings Beam House22 Upper GroundLondon, SE1 9PJTelephone: 020-7620 1313

Available from:

HMSO Publications Centre PC51DRoom 3083rd Floor51 Nine Elms LaneLondon, SW8 5DTTelephone: 020-7873 0011(postal services)

or

HMSO Bookshop49 High HolbornLondon, WC1V 6HBTelephone: 020-7873 0011(personal callers)

National Statistics1 Drummond GateLondon, SW1V 2QQTelephone: 020-7533 5888Fax: 01633-812599http://www.ons.gov.uk

Annual Abstract of Statistics£39.50

Economic Trends£23.50 monthly

Family Spending Annual£39.50

Financial Statistics£23.50 monthly

National Food Annual£28.00

Monthly Digest of Statistics£15.00

Social Trends Annual£39.50

UK National Accounts Annual£39.50

Other Sources

ACNielsenNielsen HouseHeadingtonOxford, OX3 9RXTelephone: 01865-742742Fax: 01865-742222

Business and Research AssociatesPO Box 8DisleyStockport, SK12 2FDTelephone: 01663-765202Fax: 01663-765511



Business Information Futures1 Henry Smith’s TerraceHeadlandCleveland, TS24 0PDTelephone: 01429-231902Fax: 01429-861304

Embassy of theUnited States of AmericaThe Commercial Service24 Grosvenor SquareLondon, W1A 1AETelephone: 020-7408 8139Fax: 020-7408 8020http://www.usembassy.org.uk/fcs/

ERC Statistics International Ltd5-11 Shorts GardensLondon, WC2H 9ATTelephone: 020-7497 2312Fax: 020-7497 2313

Infotec Services LtdLenton HouseLenton LaneNottingham, NG7 2NRTelephone: 0115-952 4000Fax: 0115-952 4001Marketpower Ltd

84 Uxbridge RoadLondon, W13 8RATelephone: 020-8840 5252Fax: 020-8840 6173

Maurice Palmer Associates LtdChesterton TowerChapel StreetChestertonCambridge, CB4 1DYTelephone: 01223-68705Fax: 01223-324125

MSI UKViscount HouseRiver LaneSaltneyChester, CH4 8QYTelephone: 01244-681424Fax: 01244-681457

The Oxford Institute of Retail ManagementKennington RoadKenningtonOxford, OX1 5NYTelephone: 01865-735422Fax: 01865-736374

Sewell International LtdMedia HouseLynchwoodPeterborough Business ParkPeterborough, PE2 6EATelephone: 01733-468000http://www.sewells.co.uk

Stats (MR)Gloucester HouseSmallbrook QueenswayBirmingham, B5 4HPTelephone: 0121-631 3232Fax: 0121-631 3637


The Motor Industry Understanding TGI Data

Understanding TGI Data

TGI Tables, produced by BMRB International Ltd, are generally based on one of the following groups:

• Households — a private household consists of either one person living alone or a group of people, usually, but not always, members of one family, who live together and whose food and other household expenses are managed as one unit.

• Adults — any person aged 15 or over.

• Housewives — a member of a private household who is solely or mainly responsible for the household duties.

Number, Profile, Penetration

Tables used in Key Note reports may give figures for the Number, Profile, and/or Penetration. These terms are explained in the following Table.

TGI data used in Key Note reports is broken down by age, social grade and standard region.

.0

.0

Table Heading

Population Number (000) Profile (%) Penetration (%)

All housewives 20,371 13,535 100.0 66.4

Age

15-24

25-34

Social Grade

AB

C1

Region

Greater

London

Source: Target Group Index, © BMRB International, 1995

1,045 7.7 0.03

2,697 19.9 12.1

61.5

71.9

2,557 10.4 55.2

The total number of adults, housewives, households, etc

Across

The % of 15-19 years-olds who are users.

This is the projected number of people in each subgroup who use the product

Down

The % of each subgroup who are users. Each sub-group should total 100% vertically.


Understanding TGI Data The Motor Industry

Social Grade

This is normally based on the occupation of the Head of the Household, or if the Head of the Household is retired, their former occupation. If this information is not available social grade is based on environmental factors such as type of dwelling, amenities in the home, presence of domestic help etc.

Social grade is assessed by the interviewer when collecting the information and is, therefore, based on information given personally and verbally by the respondent. Social grade is checked by BMRB’s coding and editing office.

The following table broadly defines the six social grades used. The relationship between social grade and net income of the Head of the Household is a complex one and readers should note that income is not determinant of social grade.

Standard Region

This is as defined by the Registrar-General.

Social Grade Social Status Head of Household’s OccupationA Upper middle class Higher managerial, administrative or professionalB Middle class Intermediate managerial, administrative or

professionalC1 Lower middle class Supervisory or clerical and junior managerial,

administrative or professionalC2 Skilled working

classSkilled manual workers

D Working class Semi and unskilled workersE Those at lowest

levels of subsistence (no other earner)

State pensioners or widows

The Motor Industry Key Note Research


Key Note Research

Key Note is a leading supplier of market information, publishing an extensive range of consumer, industrial, business-to-business and services titles. With over 25 years’ experience, Key Note represents clear, concise, quality market information.

For all reports, Key Note undertakes various types of research:

Online searching is carried out by product code or free search method, and covers the period from the last edition of the report to the current day.

The internal ICC Juniper database is used to select company information relevant to the particular report. The financial information extracted may then be backed up by further online searching on particular companies.

Trade sources, such as trade associations, trade journals and specific company contacts, are invaluable to the Key Note research process.

Secondary data is provided by BMRB International (TGI) and ACNielsen MMS for consumer/demographic information and advertising expenditure. In addition, various official publications published by National Statistics, etc. are used for essential background data and market trends.

Interviews are undertaken by Key Note for various reports, either face-to-face or by telephone. This provides qualitative data (‘industry comment’) to enhance the statistics in reports; questionnaires may also be used.

Field research is commissioned for various consumer reports and market reviews, and is carried out by either BMRB International (BMRB Access) or NOP Solutions (National Opinion Polls).

Key Note estimates are derived from statistical analysis and trade research carried out by experienced research analysts. Up-to-date figures are inserted where possible, although there will be some instances where: a realistic estimate cannot be made (e.g. the number of disabled people in the UK); or external sources request that we do not update their figures.

Key Note Publishing Manager, 2002

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