It’s often said that car sales are a barometer of the economic climate. But, in the UK at least, they’re not – the booming market of the last five years has been way sunnier than our overcast economic conditions.
However, with a turnover of more than £70bn the retail motor industry is unarguably an indicator of national sentiment – even of our character and values. It’s one of the core elements of UK plc. And in a post-referendum landscape where the nation is redefining itself that makes it important.
The car sales figures for the first half of year show the market at an all-time high. Registrations were a record for any six-month period, up 3.2% on the same period last year, the previous best. March was the biggest ever month since the introduction of the bi-annual plate change. Last year was the best ever. And even post-referendum the indications are that 2016 could still beat it.
If we’re doing these numbers we must be in a pretty good place as we prepare to head up the slip road and off the EU highway – right? Well, no.
The extraordinary, counter-economic motor retail success story is really about the way car companies make their money – and in particular the British attitude to credit.
In the first quarter of this year the growth rate of UK consumer credit stood at almost 10%, 
the highest since the banking crisis. Car dealer finance is a big part of this, accounting for £28bn in 2015 – twice what it was just four years earlier. Four out of five new cars are bought using borrowing, and today the car companies are effectively banks which sell cars. Finance is a core profit centre, and the PCP loans which the majority of customers take out to gain usership – not ownership – a brilliant retention tool.
The ultra-low interest rates enjoyed by consumers since 2008 also mean that almost anybody has been able get behind the wheel of a nice new car. Forget the £30,000+ sticker price – £195+vat a month for a Mercedes C Class, anyone? How about a Nissan Micra for £85+vat a month? That’s what you’d spend in a five-minute shop at Waitrose on the way home from work.
With PCPs, customers are becoming used to the notion of cars as mobile phones – something you get on a pay-monthly contract and replace every couple of years or so. When you do that, the man in the dealership will strongly resist any efforts on the customer’s part to pay cash. Even if you take out finance for a 48-month term he’ll be on the phone after 24 months offering something better, with no cost of change.
Some analysts are forecasting that sales could fall by over 5% next year as the UK adjusts to its new economic realities. However, with the near-certainty of even lower interest rates in the coming months, the appetite for new cars in the UK is likely grow – probably most among those who can least afford it.
And if the referendum fallout creates a drop in demand in the second half of 2016 then expect incentives to kick in swiftly to clear stock which was ordered for a market in economic status quo, not shock. The car industry will distress-sell. And the vicious circle keeps turning.
So while we like to view the Eurozone as a basket case, it’s the UK which has raced headlong back to the very conditions which characterised the economy at the time of the 2008 crash, and will probably continue to do so.
Let’s compare ourselves with Germany. While UK car sales rose by 37% between 2011 and 2015, the German market grew by just 1%. The German economy is humming along nicely, but when it does, the Germans don’t reach for their credit cards.
The difference between the UK and most European countries is that we’re a finance-driven economy and they’re not. What does that say about Brand UK, our character and values? That we’re a nation of borrowers. That we’re no longer creators but consumers (preferably of German cars – VW, Audi, Mercedes and BMW alone account for almost 30% of the market). That we support our financial services industry more than we do our domestic car industry. That we see our cars, like our homes, as a measure of our success, yet we usually own neither. We just own the debt.
If the UK is redefining itself, this should not be part of our DNA. The EU may not have a clearly defined brand, but the UK’s is in danger of being devalued. British business culture should contain an element of daring, even risk. But not a lack of self-awareness or foresight.
The strongest statement by any company at the Geneva motor show has been made by one which isn’t even there.
It’s something we all engage with on a daily basis without even registering it – every smartphone is highly personalised, not so much by covers and wallpapers as through the apps we choose. MINI knows this: the car of the future will be personalised through use of technology, not just paint and trim.
The traditional positioning of Mercedes and BMW next to one another at the Geneva motor show provides a neat and obvious chance for comparing Germany’s two traditional powerhouses. And as a show of brand strength Mercedes squashes BMW this year.
Butting right up against the BMW stand is Mercedes’ vision of the future, a concept car with an interior rethought around the autonomous driving capability. It’s backed up by a plethora of plug-in hybrids, a new E-Class (5-Series competitor) and new variants of the C-Class (3-Series competitor).
A week after the Geneva show opened, BMW marked its centenary by announcing the Vision Next 100 autonomous-driving concept car – a step on from the autonomous Mercedes at Geneva. How the Geneva stand could have done with that. BMW should hold the high ground in engineering for the future. If the Vision had been at Europe’s most important motor show it could rightly have claimed that territory. Far better that than a longer history.
In a year when the Geneva motor show has seen world premieres of new production cars from Bugatti, Lamborghini, McLaren, Aston Martin, Porsche, Jaguar and Mercedes, the most interesting thing there is something rather different.
The company’s presence in Geneva is noticeably more human and warm than the usual giant white car park stuffed full of mundane mainstream models. There are semi-separate sections with constantly morphing mood lighting, Beats Audio listening pods and a giant screen snaking across the stand. Everyday models are displayed in bold colours, not just white, and there are two new concepts which tell us how VW wants us to see the brand: forward-thinking/eco-friendly, and fun/adventurous.
The Budd-e mini people-carrier isn’t as lovable as the Campervan-referencing Microbus of a few years back but it’s electric, clean and modern – what the brand needs to be. It also sits in front of an illuminated backdrop saying ‘Think New’: this is a company which very obviously knows it needs to renew itself for the public gaze. The T-Cross Breeze signals the smallest of three new SUVs, and here it’s in a not-for-production convertible form – this company, they would have you believe, is full of fresh air.
Things aren’t getting much easier for the mainstream, high-volume car brands.
Yet what do these things say about the Ford brand? “We make great cars. They’re well designed, comfortable, high-quality and handle well. But we can’t persuade private buyers to consider us alongside Audi, BMW Mercedes and Volvo.” And the focus on the Mustang, GT and Edge – which as a large, expensive SUV will remain a niche choice against the premium competition – makes a telling contrast with Renault. The French brand was the most distressed of all after the 2008 crash, but now boasts a confident, all-new range of cars. No halo products, no premium pretensions; just attractive, honest cars people want to buy, including electric vehicles with dedicated designs.
Mark Carbery 