Tough times drive down luxury car sales at HR Owen

Luxury motor retailer HR Owen has not been touched by the benefits of the ‘bangers for cash’ scrappage scheme and is continuing to see new car sales reverse.

In a trading update reflecting on the last two months, HR Owen said that ‘market conditions have remained very tough and the substantial rises in financial markets have not yet been reflected in the wider economic climate in the UK’.

The statement continued: “Although new vehicle registrations in the important new registration plate month of September were 11% up on the comparable month in 2008, many of the group’s marques in the ultra-luxury sector continue to record falls compared to last year.”

However, the statement added: “Nevertheless, we are pleased to report that the board remains satisfied that the group’s results at the trading level in the second half of the year will be no worse than those experienced in the first half of the year. However, the outlook for the remainder of the year remains difficult to predict.

“The board recognises that significant challenges lie ahead but is confident that the group’s unique portfolio of luxury brands will provide a strong platform once economic conditions improve.”

Chief executive Nick Lancaster added that sales for most brands were down by about 40% on last year and some by even more. He added that there was still very little finance available for people wanting to buy the high-end luxury cars that the company sells. (The Times: October 22/HR Owen: October 21).

Record rise in cost of car insurance

The cost of car insurance is rising at its fastest rate on record, according to research by the AA.

Average premiums for comprehensive motor cover jumped by 5.6% in the three months to the end of September, the biggest increase since the AA first started monitoring the market in 1994. The annual rate at which the cost of the cover is rising also hit a new high of 14%.

Simon Douglas, director of AA Insurance, said: “Most drivers will be seeing sharp increases when they renew their annual insurance premiums. The index suggests that 89% of insurers have increased their premiums by more than £5 over the past quarter. Only 2.5% reduced them.”

The organisation, which analyses quotes from 90 insurance companies and brokers for 1,000 customer profiles, found the average cost of comprehensive car insurance had risen from £721 a year ago to £821 now.

It warned that further increases were likely to be on the way, as car insurers were currently paying out an estimated £110 in claims and costs for every £100 they received in premiums.

Mr Douglas said: “Car insurers are facing fast rising costs, reserves for paying claims are depleted and investment income has fallen, largely because of the recession.

“Despite motor insurance being one of the most competitive markets in the UK, insurers have little choice but to put premiums up.”

The AA said the main factors fuelling the premium increases were the rising cost of personal injury claims and fraud, which cost the industry £9.6 billion and £1.9bn respectively last year. There has also been a rise in the number of uninsured drivers on the road, while there was a 15% jump in the number of thefts of upmarket cars, with thieves often first stealing the keys. (Daily Telegraph: October 22).

Chinese car company continues Volvo sale talks

Chinese motor manufacturer Geely is continuing to talk to Ford Motor Company about the acquisition of its Volvo Cars subsidiary.

It is believed that the talks focus on the price to be paid for Volvo and access to Ford’s intellectual property.

Geely has already said that it might work with Chinese state investment companies on its bid, and is the only bidder for Volvo to have made its interest public. The carmaker has offered about $2 billion for Volvo.

Ford has declined to comment on the talks. (Financial Times: October 22).

Toyota focuses on a hybrid future

Three in 10 cars sold by Toyota in a decade from now will be low emission petrol-electric hybrids, a company executive said at the Tokyo Motor Show.

Toyota, the leader in hybrid vehicle production, has vowed to build petrol-electric versions of all its vehicles by 2020, but it had not previously said how many of the vehicles it expected to sell.

In contrast to the bullish view on hybrids, Takeshi Uchiyamada, Toyota executive vice president in charge of product development, said he did not expect pure electric cars, which are being heavily promoted at the show, to catch on in the next few years.

He cited high production costs and a lack of infrastructure for recharging the relatively short-range vehicles.

By contrast, Carlos Ghosn, Nissan’s chief executive, has said that he expects electric vehicles to make up 10% of industry-wide sales by 2020.

Mr Uchiyamada said: “We don’t think electric vehicles will spread that fast.” (Financial Times: October 22).

Leasing company fleets shrink 10% as recession hits

The average fleet size of the UK’s top 50 leasing companies has shrunk by 10% in 12 months with very few organisations reporting an increase in the number of vehicles on contract hire, according to BusinessCar magazine’s annual market analysis

The 10% fall comes on top of contract extensions, which are thought to have a damping effect on the figures because businesses use the tactic as a stop-gap while they assess the full impact of the recession.

BVRLA chief executive John Lewis said: “These figures are in line with the data we are getting from our members. They reflect the fact that customers are reducing head counts and business travel.

“Another factor is the restricted availability of finance and heightened fear of credit risk, which has led leasing firms to pull away from what’s perceived as ‘sub-prime’ or marginal business.”

The biggest drop in fleet size was at Masterlease, which shrunk by 24,000 units to 44,346 after General Motors’ UK sales operations (Vauxhall, Saab and Chevrolet) decided to stop using the company in favour of ALD Automotive.

Dealer group-owned Pendragon Contracts also saw a significant fall in 2009 with its fleet shrinking 23% to nearly 18,500 vehicles.

By contrast, Hitachi Capital Vehicle Solutions grew its fleet 17% to hit more than 36,500 vehicles. (BusinessCar: October 22).

Fleet funding fear over broker cull

Fleets will find it increasingly difficult to get funding for new vehicles after a number of major lease companies either stopped using brokers or significantly reduced the number of brokers on their books.

Smaller fleets – typically those operating less than 50 vehicles – use brokers to source funding for new fleet vehicles, often through contract hire deals with major lease companies.

However, LeasePlan and Lex Autolease recently took the axe to their broker networks.

LeasePlan has almost halved the number of brokers it uses, taking some 80 out of its Network operation, while it is believed Lex Autolease has let 70 of its brokers go.

This follows Lombard and Hitachi Capital Solutions both stopping using brokers altogether.

Lombard said it has cut out the middleman and is now going after broker-generated business itself, while Phil Peace, director of sales at Hitachi Capital Vehicle Solutions, said it exited the broker market because ‘the business introduced through the broker channel did not generate adequate returns’.

This succession of lease company withdrawals and reductions in broker business could have a devastating effect on the ability of small businesses to fund new fleet vehicles.

However, the BVRLA, which has brokers as well as lease companies among its members, explained why lenders were moving away from brokers.

“With credit in short supply, funders are looking to maximise their return on investment,” explained BVRLA chief executive John Lewis. “Although some leasing companies are cutting the number of brokers they deal with, it remains a major route to market for them.

“There is still more than enough competition in this part of the market. With leasing companies, brokers and manufacturer-captive programmes looking for business, small and medium-sized organisations will still be able to drive a hard bargain on their fleet requirements.” (Fleetnews.co.uk: October 22).

Hyundai profits reach record high

Quarterly profit at Hyundai has tripled to reach a record high, helped by government incentives and a lack of strikes, according to the manufacturer.

The company reported a net profit of 979.1 billion won (£497.4 million) in the third quarter. The figure is more than three times the 264.8bn won profit that the company made a year ago.

Since May, the South Korean government has been offering consumers a 70% cut in taxes when they buy new cars.

Hyundai’s success comes as the global industry struggles to emerge from an unprecedented downturn.

Hyundai now looks set to challenge Volkswagen as the most profitable of the world’s major carmakers this year. (BBC.co.uk: October 22).