(last updated July 2019)
What has been happening in the motor trade
The motor industry has seen some major changes in recent years. These include:
- a big fall in the number of franchised dealers in the UK - numbers are still declining
- a change in the vehicle licence plate system
- changes in the way that new cars are sold, including internet based 'virtual' dealers, manufacturers' direct sales channels, parallel importers and independent new car 'supermarkets'. The volume of relevant information available online has meant that customers typically make far fewer visits to a dealership than they used to before making the decision to buy a car. Many customers are now as knowledgeable as the sales team about the models they're interested in. They can also use online tools to find the best deals and to set up finance packages
- the introduction of revised European competition legislation for car makers and dealers
- changes in the road tax system, to encourage drivers to choose smaller, less polluting cars and discourage them from choosing large 'gas guzzlers'
- technological developments, particularly in the field of hybrid vehicles
- the demise of car makers Rover and Saab, the sale of Vauxhall-Opel by General Motors to Peugeot-Citroen and the arrival to the UK market of Chinese car manufacturers and the Romanian manufacturer Dacia, part of the Renault group
During 2016 there was a major change of attitude towards diesel vehicles, brought to a head as a result the VW group fitting a cheat device to lower emissions during testing and reports that emissions from diesel vehicles are very much more harmful to health than those from petrol vehicles, being linked to cancer, heart and lung damage, and impaired mental function. During 2017 the government committed to making the UK's roads free from both petrol and diesel cars by 2040. Sales of diesel vehicles continued to fall sharply during 2017 and April 2018 saw high vehicle excise duty increases for diesel models.
The economy
After several good years during the 2000s, the motor industry was hit very hard by the economic downturn which began in 2008. Demand for new cars dropped off almost overnight, used car values plummeted, and repairers were hit as motorists saved money by missing out on routine servicing.
Conditions remained tough for the industry into the early 2010s as the economy remained weak. A VAT increase in 2011 didn't help matters, and sharp rises in fuel prices also caused problems for the industry. Economic conditions did start to improve during 2013, when new car sales picked up quite considerably, and 2014 and 2015 were very good years for the trade.
New car registrations topped 2.69 million in 2016, up 2% on 2015 and a new record. The reasons for the increase were thought to include:
- strong consumer confidence
- low interest finance deals
- a large number of new models
However, an analysis of the figures shows that sales to private purchasers decreased month on month during the year and that total sales held up as a result of fleet sales. New car sales weakened during 2017, falling by nearly 6% for the year as a whole. Rising inflation, concerns over the Brexit negotiations and a move away from diesel cars all contributed to the fall. New car registrations are forecast to fall again in 2018 and 2019.
Although the industry welcomed the Brexit transition period agreed until December 2020, commentators highlighted the importance of reaching a satisfactory trade agreement for the future. Over 85% of cars sold in the UK are imported from the EU and a failure to negotiate a good deal for leaving could see car prices increase by up to £1,500.
Vehicle technology
While cars have become more and more complex and sophisticated, the technology used to drive them has remained essentially unchanged for more than a century. Things are slowly starting to change though as more and more manufacturers bring out hybrid, plug-in hybrid and all-electric powered cars, improving the technology as they do so. The government and industry are currently exploring ways of improving refuelling/recharging provision across the country for users of alternatively-fuelled vehicles (AFVs) and in October 2016 the government announced a £35 million package for installing charging points and encouraging the purchase of electric scooters and motorbikes. By the beginning of 2018 AFVs had gained a market share of nearly 6%.
Elsewhere, vehicles have become increasingly computerised, and a typical modern car includes a variety of complex electronic systems. Despite all this, improved production methods have in the main made vehicles more reliable and longer-lived, allowing manufacturers to offer longer and longer warranties.
Fewer dealers
The number of franchised dealers in the UK has fallen considerably during the last decade or so as territories have grown bigger and manufacturers have rationalised their networks. Rising costs have also played their part. The sharp economic downturn in the late 2000s and early 2010s saw some motor franchise businesses fail, reducing numbers further.
Number plate changes
In the past, the first day of August was by far the biggest day in the car dealer's calendar. This was the day when the new number plate came in each year and motorists would rush to be among the first to own a car bearing that plate. This changed at the end of the 1990s when the government brought in a new style of number plate which changed not once but twice each year. This made things much easier for the motor industry, which now sees more even demand throughout the year.
Alternative ways of buying
A few years ago, British car buyers woke up to the fact that new car prices on the continent were generally as much as 40% lower than in the UK. This prompted many dealers to become involved in making parallel imports to the UK, undercutting franchised dealers' prices by thousands of pounds. Eventually, the government stepped in to level the playing field, causing new car prices in the UK to fall substantially. Nevertheless, savings can still be found on some makes and models in certain European countries.
The early 2010s saw some manufacturers look to the web as a means of selling original equipment parts and accessories direct to motorists. BMW, for example, launched its own official eBay shop to do just this. In 2014 Korean manufacturer Hyundai launched an online-only dealership in partnership with a retail specialist, enabling car buyers to complete the whole process online and BMW followed suit in 2015.
New car buyers are increasingly attracted by the range of attractive finance deals on offer, particularly personal contract purchase plans (PCPs), which have largely replaced traditional hire purchase agreements. However in 2017 concerns were raised that PCPs were encouraging consumers to take on too much debt. The Financial Conduct Authority began reviewing the PCP market, with a final report due at the end of 2018.
Competition legislation
EU competition legislation that applied in full from 2003 shook up the motor industry, with both motorists and franchised dealers benefitting from the changes. In particular, the manufacturers' tight control over what their dealers can and can't do was eased so that dealers had more freedom to sell cars outside their territory, take on additional franchises, and wholesale cars to other businesses for resale to the end user.
EU competition rules for the motor industry changed again in 2013, when normal competition rules were applied to new car sales.
Road tax
In 2008 the government introduced a revised system of road tax, with punitive higher taxes for the worst polluting vehicles. This change coincided with a sharp downturn in the economy and soaring fuel costs, and the car retailing industry was plunged into turmoil. Demand for larger cars like SUVs in particular went into free-fall, wiping millions of pounds off the value of the used car market almost overnight.
An additional 'showroom tax' (high rate of vehicle excise duty in the first year) came into effect in 2010 for the least fuel efficient vehicles.
2014 saw the paper road tax disc abolished and replaced by a paperless electronic system.
The road tax bands changed quite significantly again from April 2017. For cars registered on or after 1 April 2017 there is a first year rate of £0 to £2,000, depending on its emissions, followed by an annual standard rate of £140 a year for all cars. In addition, there is a £310 supplement for five years for cars costing over £40,000. A further tax on new diesel cars that don't meet Euro 6 emission standards was introduced in April 2018.
Voluntary codes of practice
During the second half of the 2000s the industry launched several voluntary codes of practice for the motor industry. Government-approved codes are now available covering:
- new car sales
- vehicle warranties
- servicing and repairs
You can find out more on the Motor Ombudsman website.
Keeping up with developments
The motor industry is changing fast and it is essential to keep up with developments as they occur. An excellent way of keeping up to date is to join a trade association. Motor traders are represented by two lead industry associations, the Society of Motor Manufacturers and Traders (SMMT) and the Retail Motor Industry Federation (RMIF). The RMIF has a dedicated franchised dealer section, the National Franchised Dealers Association (NFDA). You can find out more about the RMIF and the SMMT on their websites.
Many franchised dealers belong to their manufacturer's Dealer Council. Joining your Dealer Council is a very good way of having your own say over issues which affect your business.
Subscribing to a trade journal is another good way of staying up to date with developments. Motor Trader journal, for example, contains features and articles of interest to those working in the automotive sector.