Automotive Messenger

November 2016

The third quarter news flow again focused on registrations, Brexit, the weak pound and the strongly performing stock market.

September 2016 saw a 2% EU remain a mystery, and continuing Once the hedging has come to an end, uplift for new car registrations; speculation will only stoke future the UK economy and automotive however, pre-registered uncertainty, raising additional market will feel any effect of sterling’s vehicles may have been questions over the outlook for the potential weakness. used to reach this number; UK’s economy and the £ sterling. some pundits in the market Whilst sterling weakened However... suggest that this element is substantially on Monday 3 October ...this industry in this country copes increasing and presents a real following Mrs May’s announcement really well in all situations and thus challenge. We may be heading at the Tory Party Conference that the there is a good reason to be positive for a market with an excess UK would invoke Article 50 by the if only for the old adage "survival of of 2.6 million units registered, end of March 2017, there has been a the fittest". The right product, sold at but what about 2017? Amid rebound. Sterling fell close to a 31-year the right monthly price point, by the uncertainties over Brexit, next low against the US dollar ($1.28) and best retailers, with the right support, year appears less clear and the reached a three-year low against the remains a winning formula. SMMT has suggested that new euro (€1.13) on that date and has fallen car registrations could fall to and risen since. Much of the UK press Contents 2.5 million units by year end. is focusing on comparisons against the dollar and euro; however, the 03 Registrations are strong, but Brexit is Brexit remains a topic of interest still in the back of our minds and is unlikely to disappear anytime Japanese yen has also been affected. 05 Pitfalls of negative equity VAT soon. Prime Minister Theresa May has Sterling has declined against the yen 06 McLaren Automotive said that Article 50 will be triggered since the beginning of 2016, reaching 09 News snippets from the by the end of March 2017, and has its lowest point in October 2016. 14 UK new car registrations indicated that she would like the Clearly, sterling’s weakness against 16 Registration of new commercial vehicle UK to continue with its free-trade the yen will impact. We would expect agreements with the EU. Nevertheless, that manufacturers will have hedged 17 EU and EFTA passenger car registrations the terms of the UK’s exit from the against this negative exchange rate.

Tarun Mistry Neil Barrell Bill Parfitt CBE Paul Burrows Owen Edwards T +44 (0)20 7728 2404 T +44 (0)20 7865 2700 T +44 (0)20 7385 5100 T +44 (0)1908 359 554 T +44 (0)20 7865 2291 M +44 (0)7966 432 299 M +44 (0)7976 550 312 M +44 (0)7528 870 341 M +44 (0)7850 538 309 M +44 (0)7811 991 128 E [email protected] E [email protected] E [email protected] E [email protected] E [email protected] Automotive Messenger

As sterling has continued to remain appealing, and other non-traditional To conclude, in this edition of weaker and is expected to remain weak asset classes – such as classic cars, Automotive Messenger we have two for some time, the stock market has jewellery, and fine wines – are growing articles of interest – a strategic piece performed strongly. The London Stock in popularity. Nevertheless, it is on an automotive manufacturer, its Exchange nearly exceeded its all-time worth remembering that the benefits distribution and retail network in the highs on 3 October, up by 20% from generated by dividend payouts and eyes of McLaren; and one of our tax its yearly low of February 2016. favourable currency effects are only a colleagues providing insight on the pit Several factors have driven share short-term substitute for sustainable falls of negative equity, and how this prices. FTSE 100 companies have corporate earnings growth and strong can result in HMRC demanding more continued to perform and the weak share price performance. VAT than is due. pound has provided support for Following the recent US election and corporate earnings. Many investors the unexpected result of Donald Trump This industry in this country believe that the Bank of voted in as President-elect, the impact copes really well in all situations could cut interest rates even further, remains unclear and in furious debate. and thus there is a good reason generating even lower returns for Further commentary will feature in the to be positive if only for the old savers and bond investors. Dividends next edition of Automotive Messenger. adage "survival of the fittest". from the stock market look relatively The rigth product, sold at the right monthly price point, by the best retailers with the right support remains a winning formula.

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Registrations are strong, Brexit is still in the back of our minds but positivity remains

September's new car registrations were eagerly awaited to see whether 2016 had exceeded 2015. New vehicle registrations were the highest on record with 469,696 new vehicles registered.

New vehicle registration The premium brands continued Volkswagen fell by 10.6%. Negative analysis to grow strongly: total market share press coverage has suggested that For the month of September, new for the three main German brands Volkswagen could pay up to US$16.5 vehicle registrations represented an (Mercedes Benz, Audi and BMW) YTD billion in settlement for its diesel annualised increase of 1.55% and over was 19.25%, up from 17.84% in the emissions scandal, not surprisingly this the year to September, new vehicle same period in 2015. Putting this into has not benefited this brand. registrations increased by 2.56% year context, the combined market share The best-selling model was the on year (YoY). This was a strong for Ford and Vauxhall for YTD 2016 Ford Fiesta, underpinned by the 20th result, particularly in the light of the was 21.26% – a decline from 22.91% anniversary of the model. The Vauxhall disruption created by Brexit and weak in the same period in 2015. This serves Corsa and the Ford Focus were the sterling. The actual number of vehicles to reinforce the strength of the German second and third most-sold vehicles in that were sold to an end customer and/ premium brands and their "push" for the UK YTD. Surprisingly, in the top- or the level of preregistered vehicles market share. Jaguar posted a strong ten best-selling models, the Mercedes remain something we will never know. performance and YTD new vehicle Benz C Class reached number nine New vehicle registrations for registrations rose by 47% YoY, boosted YTD, while the Audi A3 was ranked in September showed strong growth in by the launch of new vehicles and tenth place, suggesting that both these the fleet market: units registered year to percentage growth from a low base; models are more volume models rather date (YTD) increased by 5.4% in 2016 and also had an impressive than premium – so premium in nature versus 2015, while private registrations September month with a YoY increase but not in registrations! YTD only increased by 0.4%. YTD of 49.14%. Fleet and Business accounted for 54.2% The volume brands had a difficult of total number of vehicles registered time in September with year to date in 2016, compared with 53.3% in 2015. market share declining. Ford vehicle Fleet is taking an increasingly large registrations declined by 5.3% YTD, proportion of vehicle registrations. Vauxhall declined by 4.3% and

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Light commercial vehicles FLA statistics The light commercial vehicle FLA motor finance providers reported market (for commercial vehicles less an annualised rise of 13% in new business than 3.5t) continued to grow, rising in volumes – business and consumer – September 2016 at an annualised rate during August 2016 to 192,989. The of 1.89%. Over the YTD, the LCV corresponding value of new business was (< 3.5t) grew YOY by 2.7%. Ford 16% higher than in August 2015 at £2.5 continues to dominate the market with billion. New consumer vehicle purchases an increase in market share from 26.6% with car financing (FLA statistics) in YTD September 2015 to 30.9% in increased by a total of 10% in the year YTD September 2016. Over the year to August 2016 and PCP growth rose by to September 2016, Volkswagen’s 15% over the same period. Growth in registrations were still lower than used consumer finance for vehicles was at the start of its emissions scandal. robust, PCP used consumer car finance Nevertheless, Volkswagen seems to increased at an annualised rate of 23% in be starting to experience a rebound in August 2016. its market share, which rose by 2.71 percentage points from the month of September 2015 to 2016. The commercial vehicle market between 3.5t and 6.0t increased at an annualised rate of 18.2% in September month; however, this followed a large percentage decline in August and means YTD September 2016 remains lower YoY. Ford continued to dominate this market with market share of 34.3% YTD September 2016.

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Pitfalls of negative equity VAT

Are you at risk of paying more VAT than necessary?

Our automotive tax specialists HMRC has quickly established a the dealer should seek professional examine the potential risk of the project team tasked with interrogating advice. For some dealers there may phenomenon of negative equity dealers’ finance systems to identify be a counter claim available where and how this can result in HMRC where they think VAT has been there is outstanding litigation on the demanding more VAT than is due. understated. Even for relatively smaller stocks relating to overpaid VAT on The phenomenon of negative equity dealers the exposure could run into demonstrator cars. as it applies to the vehicle market, the tens of thousands of pounds. It is In certain limited circumstances, has increased in recent years. The apparent that HMRC are forearmed Grant Thornton has successfully combination of ultra-low interest with specific market intelligence that negotiated additional settlements rates, the extension of loan periods and gives them a heads up on which finance for dealers where appeals to the Tax consumers changing vehicles earlier in house transactions could be vulnerable Tribunal have been lodged. the loan period has led to consumers to a tax assessment. For further information, please sometimes facing negative equity when A similar challenge has historically contact: they look to refinance the purchase of been made where dealers ‘bump’ a new car. When consumers refinance the value of vehicles taken in as their loans, they effectively roll over part exchange, possibly as a way to the negative equity into a single finance incentivise the sale of a new car. The Morgan Montgomery Automotive VAT package for a new vehicle. selling price of the new vehicle is The risk for dealers comes during the potentially overstated with HMRC T +44 (121) 2325 126 E [email protected] documentation of the transaction (with seeking the VAT on the higher value. the documents sometimes exchanged Similar to negative equity, the cost of electronically between dealer, finance change for the customer, the profit for house and consumer), the selling price the dealer and loan provided by the of the new car is sometimes overstated. finance house remains the same – this In effect, the documentation may only affects the dealer’s VAT bill. suggest that the car has been sold for a Dealers are encouraged to regularly value including the rolled over negative review their VAT accounting on equity. HMRC will then demand ‘negative equity’ and ‘part ex’ deals to VAT on the inflated value, unless ensure they are not needlessly giving the documentation clearly identifies away profit to the ‘VAT man’. the negative equity as separate to the If dealers are in any doubt or vehicle selling price. subject to challenge by HMRC,

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McLaren Automotive A focus to build the world's best two-seater super car

McLaren Automotive and McLaren Technology Group started life as Bruce McLaren Motor Racing, established in 1963 by racing driver Bruce McLaren

A brief history In 2010, McLaren Automotive Company structure Before his untimely death in 1970 in (McLaren) was created to focus solely There are two main companies in a racing car accident at the Goodwood on the design and manufacture of McLaren: Motor Circuit, Bruce McLaren had road-going vehicles. To facilitate this, in started to manufacture a very small 2011, the McLaren Production Centre number of road-going cars which hint was opened, adjacent to the McLaren towards a possible longer term strategy Technology Centre, as the sole to manufacturer road sports cars. assembly facility for the new McLaren In the mid-1990s, McLaren Cars road cars. was established to build a limited The first road car from McLaren, the McLaren Technology Group – includes number of McLaren F1 road cars. 64 MP4-12C, rolled out of the McLaren the team: McLaren Racing, road cars were built and 42 racing Production Centre in 2011 at the same McLaren Marketing, and McLaren Applied Technology, a consultancy company that vehicles, including the McLaren F1 time as it opened its first showroom at 1 applies the racing technology and know- GTR - the first GT car to achieve an Hyde Park in London with the promise how to other third party companies. outright win Le Mans at its first outing. that it would launch at least one new car Following this, in 2003, Mercedes Benz or derivative every year. commissioned McLaren Cars to build the McLaren Mercedes SLR.

McLaren Automotive – the road car production company and operations that are associated with the , distribution and servicing of its road going cars.

The businesses are operated as separate companies and have separate management boards.

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The next six years March 2016 saw the introduction of a new business Strategy plan named "Track 22". Future innovations This strategy builds on the McLaren is also considering new original plan and at its core technology and new developments. Historical strategy is McLaren’s commitment Senior management knows that they In 2011, McLaren introduced its first to invest between 25-30% have to continue to expand into their strategy for building road cars. The aim of the business' revenue in niche area of the market, "high-value was to launch at least one vehicle every research and development two-seater sports cars": year. This strategy proved successful (R&D), accounting for about £1 • New engine architecture - this will billion of capital expenditure and McLaren sold 1,649 vehicles in be a key part of this development over the six-year period. 2014. These formed a range of cars over the next six years, with a new McLaren generated revenue including the MP4-12C that became of £475m in 2014, which is powertrain to be launched before the 650S Coupe and Spider (now expected to increase by 50% the end of 2022 referred to as the Super Series), and in the next two years and to • Hybrid technology - McLaren the now-iconic McLaren P1TM (that double by 2022. In each year, already has exposure to hybrid sits in the Ultimate Series). The sales between 2016 and 2022, the technology with the manufacturing of cars increased slightly in 2015, with group plans to be profitable of the P1. Hybridisation has clear an additional five vehicles being sold (operating profit). The number benefits for McLaren, 50 % of between 2014 and 2015. The next phase of car sales is expected to production cars are expected to of the strategy was to maintain the increase from 1,654 units benefit from hybrid technology company's focus on the production of sold in 2015 to approximately by 2022 the world’s best two-seater mid-engine 3,000 units in 2016, rising to between 4,000 in 2017 and sports cars, but building cars that • Electric vehicles - there are plans in 4,500 to 5,000 cars in 2018, catered to a broader customer base who the pipeline to design and evaluate by which time the McLaren a one-off prototype electric sports could use these cars on a daily basis. Production Centre will be at This included the launch of the Sports full capacity. car. This will require an extensive Series cars, including the 570S, amount of planning – not only 540C and 570GT. because of the technology involved, but also in order to create a car that meets their customers’ expectation in terms of noise, vibration and passion of driving. McLaren's

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customers are accustomed to the owned by either Plc. companies or also its technological development. feel and sound of a combustion larger automotive dealer groups. Once Management has a clear strategy to engine, so it will be interesting to the target of 100 dealers on a global take the business through a period of see how the company meets this basis has been achieved, McLaren will strong growth, tripling the volume of challenge. Long into the future, have a sufficiently robust retail network vehicles manufactured annually and McLaren believes that electric with good car parc of vehicles, and the increasing the global retail network by a vehicles will prove core to their car ability to sell and service vehicles to a quarter. Despite McLaren Automotive’s portfolio of vehicles. high manufacturer standard. relatively small size, it retains its strong The Retail and Although McLaren is a small UK car focus on its high-net-worth niche Distribution network manufacturer, it continues to "punch customers, who continue to support the The retail network business started above its weight" relative to its larger brand and business. off with one showroom at 1 Hyde global competitors, not only in its new Park in London in 2011. This has vehicle launches, but increased to 80 retail outlets across 31 countries, including six facilities McLaren car launches in the UK. As sales are expected to Vehicle name Launch year grow, the retail network will also need F1 1992 to expand. The target is to reach 100 Mercedes Benz SLR McLaren 2003 Mercedes Benz McLaren SLR 722 2006 retailers globally, and potential scope Mercedes Benz SLR McLaren Convertible 2007 for a slightly larger UK network in the 12C 2011 longer term. However, this will depend 12c spyder 2012 P1 2013 on demand and the throughput of 650S 2014 vehicles for each of the current dealers. 675LT, 675LT Spider, P1GTR, 570S, 540C 2015 The majority of UK retail outlets are 570GT, 570SGT4, 570S Sprint 2016

McLaren 570S Coupé Source: McLaren

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News snippets from the automotive industry

the total for EV will be at best 10%, Electric revolution sparks so an estimated 10 million, less than Can fixed wheels show activity half of predicted 25 million. The oil the way? Electric Vehicles (‘EV’) give rise producers’ cartel, OPEC, was even There are many new terms doing the to a lot of speculation, analysis and more conservative with a prediction of rounds these days – two of them are arguments/counter arguments. The real 6%, so potentially around six million. ‘big data’ and ‘predictive maintenance’. excitement is that the final outcome is Who knows best? As mentioned We recently enjoyed a piece on unknown, so everyone can be right and earlier in this snippet – the answer German railways – incredibly way wrong at the same time. remains unknown and the end result is less punctual on average than in the Tesla created the case for electric (see likely outside the traditional industry’s UK! The Germans do not just sit back later) – they sell only electric vehicles hands. Automotive manufacturers and and accept, they have started a project and appear to be doing very well. Most oil companies are going to be more around sensors collating big data mainstream automotive manufacturers driven by environmental issues than and using the information to change have gone half way, pushing hybrid ever before. functional parts before they break technology – a mixture of the old and There are still issues around range down. the new. anxiety, battery production and This concept is not new (ie The latest focus of attention is the oil disposal, and government subsidies. telematics). It raises some interesting industry – and with the issues around Battery technology seems to be as big opportunities for automotive excess production – does this mean a an issue as oil production. Recently the downstream – if you receive a disaster is looming? FTSE 100 chemicals group Johnson notification when your customer may A well-balanced article recently Matthey, announced it expected its need parts changing – and this could suggested that by 2040 electric cars battery division to make its first apply to used and new markets – could could make up one quarter of the profit this year. It is a tiny step but you offer a service that pushes mobility world’s automobiles. The same article commentators see this as preparing for to the front of the queue? noted that by the end of 2015, globally an eventual shift in its principal end- Audi is trialling predictive there were 1.2 million electric vehicles market. maintenance to maximise the lifespan of on the roads. This is very short of the Again we comment that all facets of parts, an interesting concept with two 25 million (which one quarter of the the industry need to adapt for the future opposite cause and effects. Evidently a world’s vehicles could represent in the – the further away from production it brake pad set at 70% wear is changed future) and a big step up from zero! seems the less is happening. Can this during a routine service and switching Unsurprisingly the view from within remain the case? to predictive could allow for extra wear the oil industry is less concerning. and have the customer return at a later Exxon Mobil believes that in 2040 stage. On the plus side, the customer

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gets extra wear resulting in lower cost that the new SUV’s bumper over time and the dealer gets to see travels a staggering 2,200 miles and the customer again and engage visual crosses the English Channel three times health checks. On the down side, if before it becomes part of the car which your vehicle keeps advising you to visit leaves the showroom. a dealer for x and y, you may decide it The concern? - Brexit has a lot isn’t the brand for you and go for a less to answer for and will ‘intrusive’ product. Trains are different soon be replaced by but perhaps the technology of change the ‘tariff’ word. is getting closer to the motor vehicle The story begs the and making research more cost effective question as to how with multi-use sales options? many times the bumper component Dare we use the ‘Brexit’ word? may end up paying We have considered some of the an EU tariff if the UK fails to win any Technology, changing latest thoughts about the UK exiting free trade agreements. There are other technology and Uber the European Union following the 23 examples quoted, the best being a A bit of a mixed bag of technology June vote and what seems to be a slow Delphi fuel injector for a heavy truck updates. Whilst Uber appears to go and somewhat painful process to work which has been mapped as potentially from strength to strength and some, out how we leave. entering and exiting the UK five times PSA boss Carlos Tavares has gone Brexit can be hard, soft or anywhere before the truck reaches a customer, so down his own route citing detachment in-between. The current (if turning) tariffs could have a profound impact. from his customers as the main reason run of the £ sterling is making the Nissan and in the to ‘shun’ Uber. It seems around OEMs quite nervous around their cost UK are reputed to hold certain parts for s€100 million has been set aside by PSA base importing cars to the UK and only two hours, an incredible example for investment in start-up companies some have raised prices to counteract. of ‘just-in-time’ – tariffs alone may working on transport innovations, Not quite the epic ‘marmite war’, but not have any impact but what about ranging from car sharing and hailing potentially enough to either squeeze border customs delays? The future is to car-ownership clubs. Maybe the dealer margin or impact PCP offerings. very unclear but Brexit will have a big connection to customers will be won One story caught our eye which influence on lots of areas in automotive. by sub-contractors and not the OEMs. just about sums up some of the issues We also read about the influence from Israel around advances in automotive manufacturers will continue The new Bentley to face – it relates to Bentley in the VW SUV’s bumper technology. Not a widely-known fact, travels a staggering Group stable. The published story runs 2,200 miles and but Israel used to manufacture cars crosses the English Channel three times before it becomes part of the car which leaves the showroom.

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– names such as Sussita and Carmel. they are very much disruptors and they should be completed by autumn 2017 Now the high-tech prowess born out of do cut the mustard when developing and all customers will have received cyber security and artificial intelligence new transport solutions. Recently communication by the end of this is coming to the fore. The words Tel Uber acquired Otto, a ninety person calendar year. Aviv and Silicon Valley are becoming start-up focused on the truck market VW also faces the issue of how to mutually inclusive – examples include and self-driving technology. Some reduce costs, mainly labour costs, in Ford acquiring a ‘computer vision’ commentators see the return on negotiation with their German Works company, General Motors having an investment in truck technology to be Council. The strategic future direction advanced technology centre in the quicker than passenger cars. is electric – or that’s the new mantra to country and more obviously VW Evidently Volvo have a self-driving offset the emissions scandal. The VW investing in Gett, the Uber rival based lorry operating deep underground. CEO recently made a telling statement in Israel. In addition is MobilEye, There aren’t pictures but it seems after a major worker meeting – ‘VW’s the pioneer of autonomous driving entirely feasible provided the internet brand is the heart of the company, but technology. doesn’t crash – what would happen that heart must beat powerfully again’. All-in-all, the car is becoming more to a buffering vehicle? Now there’s a Carlos Ghosn and the Nissan a computer science conundrum than conundrum. X-Trail to Outlander a piece of engineering. Not sure how You may recall in the previous Mr Ghosn is attracting a lot of Henry Ford would see all this, but edition of Automotive Messenger we attention by taking on the role of whatever this may be, we should heed mentioned truck “platooning” which Mitsubishi’s chairman, an astute the quoted words ‘Automotive is no meant trucks could travel very close investment this year following the longer metal on wheels, it’s computers together reducing wind resistance, issues Mitsubishi were facing. As on wheels’ by Ziva Eger, head of fuel usage and cutting costs. There are chairman of both Nissan and Renault foreign and industrial co-operation essential money-saving technologies as well, he has a serious portfolio of with Israel’s economy ministry. like these already available to the brands to drive forward and overcome commercial world, and commercial the challenges of variable global Technology again – and Uber! technology can be tested away from demand and fierce competition from New wave technologies seem to have public glare and danger. premium brands landing in his space all the glory at the moment as the race with cost-effective PCP solutions. to replace the driver has infiltrated the The VW emissions progress The UK’s vote of 23 June has given big truck market, something that might The emissions issue has proved Mr Ghosn plenty of food for thought. make you uneasy next time you get challenging for Wolfsburg. Getting Sunderland factory is a major success sandwiched between 56 tonners on the a hard time from the US and paying story and turns out more than half a M1! the price was a given, but the EU has million cars each year. They have taken You may also think our fixation increased the pressure and Brussels is on board investment to enable the with Uber is boundless – well only getting involved. VW has moved to Infiniti Q30 and derivatives production in the sense that they are trailblazers, bolster the recalls by saying that they in the same facilities. His new issue is

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News snippets continued...

tariffs – will there be any and at what Smartphone Apps create the tool amount? This could have a major US towns use lateral thinking – then you back-fill with services. impact on future model production and revert modern technology Interestingly, the mayor of Summit is given Sunderland is a big net exporter. to clunky solutions quoted as saying their solution is one The UK government has probably had We always appreciate the chance to of parking and not transportation. an email reminding them that around quote a new phrase coined somewhere You can see the ride-sharers becoming 7,000 people work in Sunderland and in the world, and this edition’s offering mainstream and part of infrastructure it is suggested a further 20,000 in local is ‘last mile’. Some US towns have been very quickly in the right circumstances supply chain. Add this to the JLR using ride-share offerings such as Lyft and geography. business case in the West Midlands and and Uber to address issues that are you have some pressure. Nissan’s new perceived to be solvable at a better cost. sets out its stall model Qashqai and X Trail will now Some examples include Summit in New We have commented previously that be built in the UK, but it has evidently Jersey where commuters are offered there are a large number of Chinese been a close call. free rides to and from the train station Automotive manufacturers, yet very Whatever happens next, Nissan is a – hence the term last mile – which few have a full presence in Europe and big success story in the SUV market, solves a serious ‘downtown’ parking the UK. Some have operations – SAIC where it continues to trail-blaze around problem and Boston subsidising rides and MG plus Great Wall – but now with the now iconic Qashqai. It remains for disabled passengers. we read that Geely are bringing a new to be seen how Mr Ghosn develops the These are transport solutions; SUV to the region, the Lynk. The roll Outlander, already a recognisable leader technology is providing the means out plan is China in 2017 and then in hybrid products, not least because it to clunky solutions such as public Europe in 2018, followed by saloon and looks like a regular model and pulls the transport, building car parks etc. hatchback models. strengths of Mitsubishi. We suspect this Overall it is a cross-over between man, above all, can succeed. technology and infrastructure.

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One commentator believes this is tables. In the top fifty no less than 21 strategic partner is Faraday Future who just the start – the Chinese have learned UK companies are included, allowing are from the same mould, an electric car the technology and have raised quality. for the fact that a number of the start-up. The dream team is high quality with continental groups act as distributors as LeEco is a consumer electronics low cost. well as retailers. The UK vehicle market group at heart and is trying to provide We understand that the price bracket is very well served by bigger retail a consistent experience across its will be under Volvo, which is also groups who enjoy fleet opportunities “ecosystem” of devices (HD TV, owned by Geely, and will be sold via alongside retail new and used. They Smartphone, online video service etc). social media rather than the traditional are simply not comparable to other Try picking the intention from this dealer route. They will target the countries but groups like Penske can sentence attributed to LeEco’s chief younger market, anecdotally adding find cross-over synergies even if they R&D officer in the USA – “we are to the argument that the current high are not immediately obvious. France ‘reconstructing the value chain’ of teens are going to do more on their and Germany have sixteen groups electronics and media, while providing a smartphone than we have experienced. between them in the top 50, so retail more ‘elegant and intuitive bridge’ that The sales pitch is massive connectivity sales-per-outlet has to be considered will ‘solve the problem of a fragmented power and not massive horsepower. All differently. user experience’” There you have it very trendy and relevant, but cynics then! Sounds a bit like...Apple? abound that it will be beaten off by The last words are autonomous its traditional and well-established vehicles competitors. No-one stands back and We have mentioned this concept, takes competition on the chin! but where are the main protagonists in terms of progress? Tesla continues to One strictly for the dealers push fully autonomous and sees end The latest European motor retail 2017 as the target date for the capability. group league table makes interesting That would be huge and will really reading, and says a lot about the way start to spook its traditional rivals. The business is transacted here in the UK. vision is no human intervention. The data is based on 2015 financial data LeEco was mentioned in a previous and is thus a little dated, nonetheless edition of this newsletter. It is a Chinese the UK effectively occupies six of technology company who want to offer the top ten slots, if you count Penske fully autonomous electric vehicles. Automotive as Sytner! They had a big blip to a publicity The US Penske empire now sits exercise in the US recently, but the at number one having displaced vehicle in question “Le SEE” car, has Pendragon – and these are turnover adjustable seating and a steering wheel that disappears in to its dashboard. Its

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UK new car registrations

New car registrations in the UK grew by 2.56% YTD 2016, with a record of 2,150,495 registrations between January and September. New vehicle registrations for the month of September were the highest on record at 469,696 vehicles, a 1.55% increase on September 2015.

Electric and alternative vehicle down on the YTD September figures registrations which include hybrid and of 2015's share of 12.8%. Vauxhall plug-in-vehicles, increased in the month and Volkswagen – the next two of September up 59.1% on the previous volume players in order of vehicles year to 6,011 vehicles. Electric and registered – experienced a decline in alternative vehicles accounted for 1.2% market share, and also a decline in the market share. YTD to September 2016, absolute number of vehicle registered. 28,035 electric and alternative vehicles Respective market shares were down have been registered, up 40.7% on the YTD to 9.4% for Vauxhall and 7.6% prior year if only 1.3% of the total new for Volkswagen. vehicle registered market. In the premium segment Audi, BMW, Jaguar Land Rover and Mercedes-Benz saw significant increase in market share YTD to 6.4%, 6.4%, 4.3%, and 6.4% respectively. Ford once again led the market with market share of 11.8%, although this was

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UK new car registrations YTD 2016

YTD2016 YTD2015 2016/2015 FY15 FY14 Share (%) FY13 Share (%) Brand Units Share (%) Units Share (%) % Change Units Share (%) Units Units Ford 254,220 11.8% 268,328 12.8% (5.3)% 335,267 12.7% 326,643 13.2% 310,865 13.7% Vauxhall 202,956 9.4% 212,100 10.1% (4.3)% 269,766 10.2% 269,177 10.9% 259,444 11.5% Volkswagen 163,020 7.6% 182,441 8.7% (10.6)% 223,784 8.5% 214,828 8.7% 194,085 8.6% BMW 138,656 6.4% 124,309 5.9% 11.5% 167,391 6.4% 148,878 6.0% 135,583 6.0% Audi 138,411 6.4% 133,300 6.4% 3.8% 166,709 6.3% 158,987 6.4% 142,040 6.3% Mercedes-Benz 136,892 6.4% 116,509 5.6% 17.5% 145,254 5.5% 124,419 5.0% 109,456 4.8% Nissan 119,836 5.6% 124,967 6.0% (4.1)% 153,937 5.8% 138,338 5.6% 117,967 5.2% Peugeot 80,986 3.8% 84,593 4.0% (4.3)% 104,249 4.0% 103,566 4.2% 105,435 4.7% Toyota 80,918 3.8% 81,604 3.9% (0.8)% 98,709 3.7% 94,012 3.8% 88,648 3.9% Hyundai 73,649 3.4% 70,623 3.4% 4.3% 88,117 3.3% 81,986 3.3% 76,918 3.4% Kia 72,949 3.4% 64,208 3.1% 13.6% 78,489 3.0% 77,525 3.1% 72,090 3.2% Renault 68,112 3.2% 59,221 2.8% 15.0% 75,618 2.9% 66,334 2.7% 46,173 2.0% Citroen 67,560 3.1% 70,887 3.4% (4.7)% 88,626 3.4% 83,397 3.4% 78,358 3.5%

Land Rover 63,644 3.0% 49,881 2.4% 27.6% 66,574 2.5% 56,200 2.3% 54,699 2.4% Skoda 63,310 2.9% 60,144 2.9% 5.3% 74,692 2.8% 75,488 3.0% 66,081 2.9% 51,716 2.4% 47,182 2.3% 9.6% 63,581 2.4% 53,661 2.2% 51,933 2.3% Fiat 49,868 2.3% 51,867 2.5% (3.9)% 64,257 2.4% 67,162 2.7% 60,198 2.7% Honda 49,656 2.3% 43,563 2.1% 14.0% 53,417 2.0% 53,544 2.2% 55,660 2.5% Mazda 39,764 1.8% 37,923 1.8% 4.9% 45,504 1.7% 37,784 1.5% 31,228 1.4% SEAT 36,912 1.7% 40,520 1.9% (8.9)% 47,654 1.8% 53,512 2.2% 45,312 2.0% Volvo 34,861 1.6% 32,391 1.5% 7.6% 43,432 1.6% 41,066 1.7% 32,666 1.4% Suzuki 31,593 1.5% 28,706 1.4% 10.1% 34,437 1.3% 37,395 1.5% 33,088 1.5% Jaguar 26,416 1.2% 17,966 0.9% 47.0% 23,954 0.9% 18,401 0.7% 16,210 0.7% Dacia 20,923 1.0% 20,386 1.0% 2.6% 26,228 1.0% 23,862 1.0% 17,146 0.8% Other 83,667 3.9% 73,267 3.5% 14.2% 93,857 3.6% 70,270 2.8% 63,454 2.8% Total 2,150,495 2,096,886 2.56% 2,633,503 2,476,435 2,264,737 Source: SMMT

Automotive Messenger November 2016 15 Automotive Messenger

Registration of new commercial vehicles

The commercial vehicle market experienced a moderate increase in vehicles registered in September 2016.

The commercial vehicle market Registrations of new commercial vehicles YTD 2016 <3.5t

YTD YTD (<3.5t) for September YoY increased 2016/ Sept Sept FY2015 FY2014 FY2013 2015 by 1.89%. The commercial vehicles 2016 2015 % Country Units Share % Units Share % Units Share % Units Share % Units Share % registered (>3,5t and <6.0t) for Change September 2016 increased up 18.21%. Ford 90,141 30.9% 75,601 26.6% 19.2% 100,262 27.0% 82,519 25.7% 68,054 25.1% The pick-up market continued to Volkswagen 33,889 11.6% 34,963 12.3% (3.1)% 43,091 11.6% 40,238 12.5% 36,925 13.6% Vauxhall 31,438 10.8% 31,038 10.9% 1.3% 41,736 11.2% 32,619 10.1% 29,736 11.0% grow, September 2016 increase YoY Peugeot 25,698 8.8% 26,390 9.3% (2.6)% 33,695 9.1% 31,867 9.9% 21,230 7.8% 16.4%, while the 4x4s declined by Citroen 22,588 7.7% 23,996 8.4% (5.9)% 30,119 8.1% 27,228 8.5% 22,989 8.5% 93.80%, which can be attributed to the Mercedes 22,346 7.7% 22,689 8.0% (1.5)% 31,887 8.6% 30,464 9.5% 25,667 9.5% Renault 19,581 6.7% 17,577 6.2% 11.4% 25,371 6.8% 18,170 5.6% 12,978 4.8% decline in Land Rover which include Nissan 12,462 4.3% 9,708 3.4% 28.4% 11,621 3.1% 10,270 3.2% 10,619 3.9% YoY September 2016 down by 97.93% Fiat 7,822 2.7% 9,456 3.3% (17.3)% 11,704 3.1% 12,629 3.9% 12,019 4.4% as the Defender was no longer being Mitsubishi 6,833 2.3% 6,992 2.5% (2.3)% 9,006 2.4% 6,946 2.2% 5,927 2.2% Toyota 5,093 1.7% 8,118 2.9% (37.3)% 10,266 2.8% 8,344 2.6% 8,063 3.0% registered. Isuzu 4,453 1.5% 4,649 1.6% (4.2)% 6,220 1.7% 5,502 1.7% 4,112 1.5% Ford (<3.5t) once again was dominant Land Rover 3,916 1.3% 8,019 2.8% (51.2)% 10,124 2.7% 9,611 3.0% 6,644 2.5% this quarter with a market share of Iveco 3,303 1.1% 3,097 1.1% 6.7% 4,326 1.2% 2,769 0.9% 3,275 1.2% Other 2,151 0.7% 1,868 0.7% 15.1% 2,402 0.6% 2,510 0.8% 2,835 1.0% 30.90% up from 26.60% at the same Total light CV 291,714 284,161 2.7% 371,830 321,686 271,073 point in 2015 YTD. Volkswagen was Source : SMMT the second largest register of under 3.5t vehicles with a decline in market share, Registrations of new commercial vehicles YTD 2016 >3.5t and <6.0t

YTD YTD from 12.30% in 2015 to 11.62% in 2016 2016/ Sept Sept FY2015 FY2014 FY2013 2015 (YTD), Vauxhall is also losing market 2016 2015 % Country Units Share % Units Share % Units Share % Units Share % Units Share % share, with the 2016 September YTD Change being marginally down at 10.78% versus Ford 2,003 34.3% 2,196 34.5% (8.8)% 2,722 34.0% 1,852 27.2% 2,767 40.8% Fiat 1,446 24.8% 1,580 24.8% (8.5)% 1,954 24.4% 1,313 19.3% 1,231 18.1% the previous year of 10.92%. Nissan Mercedes 1,143 19.6% 1,461 23.0% (21.8)% 1,858 23.2% 1,889 27.8% 1,485 21.9% and Renault continued to perform well Peugeot 472 8.1% 531 8.3% (11.1)% 673 8.4% 401 5.9% 200 2.9% gaining market share and growing the Iveco 341 5.8% 230 3.6% 48.3% 316 3.9% 402 5.9% 420 6.2% number of units registered YTD 2016, Volkswagen 210 3.6% 160 2.5% 31.3% 195 2.4% 386 5.7% 342 5.0% Vauxhall 139 2.4% 104 1.6% 33.7% 140 1.7% 135 2.0% 99 1.5% 28.37% and 11.40% respectively. Renault 53 0.9% 59 0.9% (10.2)% 87 1.1% 74 1.1% 117 1.7% Other 35 0.6% 43 0.7% (18.6)% 56 0.7% 345 5.1% 127 1.9%

Total heavy CV 5,842 6,364 (8.2)% 8,001 6,797 6,788

Source : SMMT

16 Automotive Messenger

EU and EFTA passenger car registrations

In the YTD of September 2016 new passenger car registrations in the EU continued to grow, up 7.7% to a total volume of 11,607,266 units.

In YTD September 2016 new EU and EFTA passenger car registrations September 2016 passenger car registrations in the EU YTD2016 YTD2015 2016/2015 FY2015 FY2014 FY2013 FY2012 continued to grow up 7.7% a total Country Units Units % Change Units Units Units Units volume of 11,607,266 units. This Germany 2,555,783 2,407,938 6.1% 3,206,042 3,036,773 2,952,431 3,082,504 United Kingdom 2,150,495 2,096,886 2.6% 2,633,503 2,476,435 2,264,737 2,044,609 was the highest September on record. France 1,502,450 1,421,435 5.7% 1,917,226 1,795,885 1,790,456 1,898,760 All the major markets in Europe Italy 1,406,035 1,197,274 17.4% 1,574,872 1,360,578 1,304,648 1,403,010 posted growth. The strongest growth Spain 874,220 783,918 11.5% 1,034,232 855,308 722,689 699,589 Belgium 424,382 392,522 8.1% 501,066 482,939 486,065 486,737 YTD came from Italy (+17.4%) and Netherlands 285,355 300,985 -5.2% 449,393 387,565 416,730 502,479 Spain (+11.5%). The smaller Eastern Others 2,044,543 1,812,787 12.8% 2,397,192 2,155,721 1,941,817 1,936,369 European countries performed Total EU 11,243,263 10,413,745 8.0% 13,713,526 12,551,204 11,879,573 12,054,057 EFTA 364,003 362,995 0.3% 488,498 455,681 457,310 474,036 strongly, exceeding Western European Total EU + EFTA 11,607,266 10,776,740 7.7% 14,202,024 13,006,885 12,336,883 12,528,093 markets, with the strongest coming Source : ACEA from: Romania, Hungary and Latvia. These countries have enjoyed strong percentage growth, but account for far 5.7%, while the UK lower at 2.6%, but registrations were, the Netherlands less volume than the major markets. the performance of the UK market has (-4.2%), Greece (-10.3%) and Ireland The three largest countries in the EU been strong over the last 12 months, (-1.6%); however the total contribution and EFTA passenger car registrations while the EU continues to play catch of these countries is only 2.9% of the increased at a rate lower than the total up. The only countries which saw a total EU registrations. EU Market (+7.7%). France was up by decline in the month of September 2016

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