NEWS

Each time we produce our quarterly newsletter we talk about the constant changes in the automotive industry that are affecting the demand and supply of new and used cars.

The most recent challenge is the bad press surrounding diesel cars. After years of Governments encouraging drivers to get into diesels to help reduce CO2 levels they are now trying to penalise the fuel based on the particulates emitted that contribute to poor air quality in our cities.

Cities are penalising diesel cars
Cities like Madrid, Paris and Berlin are already starting to penalise diesels either preventing/restricting them from entering the city centre or forcing older used diesel cars and vans to be scrapped.

Autorola UK survey proved that demand and prices of used petrol cars are strong but diesels are still in high demand with buyers. In fact the UK has seen both petrol and diesel residuals strengthen in the last few months.

There are still millions of used diesels on our roads
The used buyer seems content to still buy used diesels but the air quality challenge is likely to speed up the growth of sales of new EVs and hybrids in and around our cities. As for the used market, there are millions of diesels in service across the globe which will take decades before they all reach the scrapyard.

In the meantime if used demand does change then online cross border sales are likely to help balance out the demand and supply of used petrols and diesels. Our online remarketing portal has been at the forefront of European cross border sales for many years.

INDICATA will help guide dealers on used diesel prices
Our real time used vehicle business intelligence platform INDICATA will also help OEMs and their dealers determine the demand and pricing for petrol and diesel used cars locally and nationally.

Autorola Turkey recently celebrated the launch of INDICATA as the first ever used values guide into Turkey and its forthcoming launch in the UK means the system is now available in all the key European markets.

Helping customers manage change
Autorola Mexico is also showing signs of good growth helping bring process and structure to the country’s used market and in Denmark we are at the forefront of helping asset owners change their inspection and sales processes to respond to the popularity of new short term flexi lease schemes.

One thing we can guarantee is that the automotive industry will continue to change and we aim to keep helping buyers and vendors respond to those changes to continue optimise the management and sale of their assets.

Have a good summer.

Peter Grøftehauge, CEO Autorola Group


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The Danish new car market continues to go from strength to strength with 2016 reaching an all time high of 259,555 units (222,927 new car and 36,628 light commercials).

Like so many European countries the leasing market is helping contribute to much of this growth, with leasing volumes growing from 38% in 2015 to 43% at the end of 2016. A reduction in the registration duty on new cars from 180% to 150% has also been introduced over the past 18 months.

Van and personal leasing are growing
There have been two major growth areas, in van leasing and personal leasing, both areas where Autorola is the market leader of inspection and online remarketing services.

”The Danish economy continues to grow and businesses are using leasing as a cost effective way of buying a new light commercial to help fuel their expansion. Van sales have grown by around 25% since 2014,” said Pedersen.

Short term flexi leases are a growing trend
 “Manufacturers are making car personal leasing very attractive not just with low interest rates, low deposits and low monthly rentals, but the flexibility of leases are such that a consumer can walk away from a lease after just a year by giving just one month’s notice. Consumers are turning these agreements into short term flexi leases which the Danish market hasn’t seen before.

“This trend is fuelling the growth in 12-18 month old used cars coming from the lease sector, which is traditionally the replacement cycle adopted by rental companies,” he added.

New used car retail brands help reduce the risk of flooding the market
Rather than risk flooding the market full of nearly new used cars both sectors have created new retail brands where consumers can buy a subscription to a nearly new car and then hand it back after a minimum of three months.

Leasing and rental companies are generating three to four more paid subscriptions before they are selling the cars into the used market when the car is still only 30-36 months old.

Each car is inspected a number of times before disposal
“We have had to revise our business model by providing inspection and refurbishment services to the same car a number of different times before it is eventually sold on our online remarketing portal, “ said Pedersen.

“This more flexible approach to car ownership has been greeted positively by the consumer and generally used car prices continue to stay strong in the market.”

Personal lease drivers hand their car back to Autorola
A growing number of personal leasing drivers are returning their end of lease vehicles back to one of Autorola’s eight storage centres in Denmark which process tens of thousands of end of contract lease vehicles each year.

“Generally the Danish driver enjoys being part of the dehire experience. We have worked hard in our vehicle inspection and check in processes to ensure we use language that a consumer will understand. When we take them through their end of contract inspection we have to justify their de hire costs before they will sign their paperwork

Consumers accept dehire costs when they are explained clearly
“Our inspection system automatically generates costed damage repair estimates identical to those used by the insurance industry. When we explain in detail on how a repair works including the cost of labour and materials generally the consumer accepts the dehire costs,” said Pedersen

Used car prices have also been helped by the reduction in registration tax from 180% to 150% as the tax affects used as well as new cars. This has meant a greater demand for Danish cars for export, where previously buyers were put off by the high prices.

Tax changes could increase the amount of used cars exported
A major challenge for motor dealer groups is the change in tax regulations. Normally Danish used car dealers can buy used cars including Tax and VAT, but now the majority of returned vehicles from the leasing industry are without Tax and VAT.

If the Danish used car market does not learn to manage the new tax regulations, then there will be almost no cars available for them to buy in the market and Danish leasing companies will be forced to export them.

Dealers can reduce costs and increase their stock
There are advantages associated with the Danish car dealers being able to buy cars without Tax and VAT including a lower purchasing price for the car because the Tax and VAT is only paid when the car is sold and registered by the Danish authorities.

The used car dealer will have lower financial inventory levels as well as have more cars in stock, giving dealer groups who can manage this new legislation situation a major advantage in the market.

Many of the 19 countries where Autorola has subsidiaries are now suffering from poor urban air quality and diesel cars are being partly blamed for this problem.

Autorola UK surveyed the average prices of used petrols and diesels sold in the country between 2014 and 2017 to understand whether buyers are falling out of love with diesel cars.

Petrol car prices reach four year high in 2017
The price of used petrol cars sold by Autorola actually rose to a four year high of £8,333 in Q1 2017, £1,203 higher than the four-year low of £7,130 recorded in Q4 2014.

Autorola’s survey shows average diesel prices rising from £10,029 in 2014 to £11,493 in 2017, an increase of £1,464. The four-year price high was £11,945 in Q4 2015 against a low of £10,029 in Q1 2014. The smallest gap between average petrol and diesel prices was also in Q1 2017 at £3,160.

Petrol shows a resurgence in demand
“Average petrol prices reached their highest point in Q1 2017, which shows a resurgence in demand and increase in used prices that we have experienced since Q1 2015,” explained Jon Mitchell, Autorola UK’s group sales director.

“However, buyers seem unperturbed by the recent bad publicity around diesels with average prices rising consistently since 2015. Diesel is still firmly the fuel of choice for the 2,000 active buyers on our portal,” he added.

Diesels continue to cover more miles than petrols
Unsurprisingly, diesel cars continue to cover more miles on average than petrol. Average diesel mileage over the 39 months of the survey was 25,357 compared with 20,348 for petrol. Typically, cars sold by Autorola UK are franchised dealer part exchanges and used stock, which means mileages are generally slightly lower than average.

Autorola’s data also shows the average age of both diesel and petrol vehicles have fallen. The average age of diesels was 27 months in Q1 2017, comparing to the previous low of 29 months first seen in Q2 2014. The average age of petrols sold in Q1 2017 was 30 months, bettering the previous low average of 33 months in Q3 2016.

Models costing 40,000-70,000 lira have seen a price rise of around 3 percent thanks to the introduction of a new special consumption tax in Turkey and the government claims the changes will add around an additional 3 billion lira to its budget.

The move hits those luxury cars that are imported from outside Turkey therefore making the mass-market cars made in the domestic market better value for money.

The new tax has ignited Turkey’s interest in used cars
This tax increase has already stalled new car sales but has ignited consumer demand across the 3.5 million strong used car market.

“Historically much of the used car business has been based just around Istanbul. The used market is now maturing quite quickly and trade buyers have been very open to purchasing used cars online.

It is not economical to move vehicles around to sell them
“We have signed up 10 major vendors in the past 12 months which reinforces the response for online remarketing. Turkey is a big country and it is uneconomical to keep moving vehicles round to sell them. This vendor growth has helped us provide a wide mix of stock for buyers which they have responded to very well,” explained Saygi.

In 2016 756,938 new cars were sold in Turkey, a rise of 4.3% rise over 2015, one in three (32%) of which were manufactured in Turkey.

Automotive producers, such as Toyota, Renault, Fiat and Ford have manufacturing operations in Turkey. The country’s automotive sector was the biggest exporter last year with around $23.9 billion in exports, up from $21.3 billion in 2015.

Autorola’s regional auctions support the investment outside of Istanbul
On the back of this success there has been major investment in the country’s transport infrastructure which will also help take away the focus just on Istanbul as the economic capital of Turkey. Better road networks will help spread the external investment to other cities and Autorola is playing its part by running regional online used car auctions in nine different cities.

“It’s all about local buyers being able to buy used cars from both local and national vendors. The response has been positive from buyers as they are getting the chance to bid on stock that would normally end up in Istanbul,” he added.

INDICATA is the country’s first used vehicle values guide
Typically smaller used cars between 50-60,000 lira are most popular in Turkey at an average age of 24 months/50-60,000km.

One challenge for the Turkish market is to know what used cars are worth. Until the recent launch of Autorola’s INDICATA real time used vehicle pricing system in January the country did not have a used vehicle guide for the industry to refer to.

Dealers know the value of used cars based on local demand and supply
INDICATA will help both the OEM and local dealer understand the true value of used cars based on local demand and supply.

“Dealers can use the data proactively to sell more used cars and importantly reduce stocking days. They will be able to adjust prices up or down on a weekly basis to ensure their used stock remains competitive and only buy in new stock that they know is in high demand. INDICATA gives the market the most dynamic insight into the used industry and OEMs and their dealers are already actively piloting the system,” said Saygi.

Buyers who are signed up to buy vehicles on Autorola’s global online remarketing platform can now bid through their mobile device.
 
Buyers can bid via a smartphone or tablet and to ensure they do not miss out on stock, they receive an email or SMS when they have been outbid or when the auction is just about to end.

Mobile bidding is live in 12 countries
Currently buyers in 12 countries (FR, AT, BE, DE, DK, ES, UK, IT, PL, PT, AU, NL) can take advantage of mobile bidding, with other geographies being launched soon.

During its two-month pilot, Mobile Bidding saw a high volume of bids and sales, especially from smaller national and international buyers with broader roles than just buying.

Online bidding is very popular with cross border buyers
“Buyers are often very time-poor and we have seen they have really benefitted from this initiative. The biggest trend so far is buyers purchasing used vehicles cross-border,” explained Morten Holmsten, Autorola Group’s global sales director.

“We hope to have the rest of our countries up and running in the next few months,” he added.