NEWS

Germany has seen stock of used cars fall sharply, according to the latest data from INDICATA. Market days supply (MDS) of used cars saw the usual uplift in the run up to the end of the year followed by the traditional downward trend in the first quarter (Q1) of 2019 as dealers took advantage of the pent-up demand from car buyers to change their vehicles.

Across the big 5 markets of Germany, UK, France, Italy and Spain combined, the average MDS in Q1 2019 is inline with the same quarter in 2018 but at a country and fuel type level there are marked differences as a result of varying strategies in dealer stocking plans and used car buying demand.

In Q1 2018 MDS in Germany stood at 78 days’ supply, a fall of three days against Q4 2017. Move forward one year and MDS stands at just 72 days for Q1 2019, a drop of 11.3% against Q4 2018 and down 8.0% against Q1 2018. This quickening of stock turn should add a boost to dealers’ profitability.

Drilling down deeper into the INDICATA data shows that market demand for used diesel is weakening but it remains reasonably strong with diesel taking 49.2% of the B2C online used car sales volume in Germany in Q1 2019, compared to 52.0% for the same period last year. But a review of stock levels shows that online B2C stock levels of used diesel cars in Germany has dropped by 15.9% in Q1 2019 against the same quarter last year whilst stock of used petrol cars has risen by 13.9%. Given this imbalance it would appear that dealers are fearful of the used car market following the new car market due to the demonisation of diesel and are choosing to buy used petrol cars rather than used diesel cars.

Whilst the gap between average used diesel prices and petrol prices has moved against diesel by 3.0% between Q1 2018 and Q1 2019 the clear demand and increasing shortage of diesel stock could create some market opportunities with used petrol MDS standing slightly higher at 71.9 days compared to 70.5 days for used diesel.

Italy has also seen MDS falling, down 6.7% to 72 days for Q1 2019 compared to Q1 2018. However, the underlying INDICATA data shows a different trend to Germany. Online B2C used car sales volumes for both fuel types have risen by a little under 9.5% in Q1 2019 versus the same period last year but prices are rising much faster for petrol used cars than for diesel. Whilst dealer stock has seen a 9.4% increase in online B2C used diesel cars on average for Q1 2019 compared to Q1 2018 used petrol stock levels have dropped by 6.0% over the same period, indicating that dealer stock mix is out of line with market trends. This explains why MDS for used diesel stock now stands at 77.1 days on average for the latest quarter compared to just 64.1 for used petrol cars.

Whilst the new car market in Spain has fallen by 6.9% for the first quarter of 2019 compared to the start of 2018 the sale of online B2C used cars has dropped by 18.8% over the same period. The INDICATA data previously showed that Spain was suffering with an excess of used stock as buyers were switching from buying used cars to new cars but it is not in large enough numbers to absorb the stock levels seen and this trend is still visible.

Overall Spanish dealers seem to have now got the mix of used petrol and diesel cars closer to market demand with MDS in Q1 2019 for used petrol at 83.4 days and used diesel 86.0 days, a gap of just 2.6 days compared to 5.6 days for Q1 last year and well below the double digit gap that existed for Q3 on average. However, stock levels are still the highest in terms of MDS adding an extra funding burden to dealers’ bottom line profitability.

New and used car markets in Spain are struggling and companies defleeting used cars in volume may want to consider taking some stock out of the market to achieve better returns.

Autorola has combined the power of its Fleet Monitor asset workflow management system with its INDICATA real time used market insights platform to help OEMs, banks, rental and leasing companies understand the true value of their used car portfolio.

This integration takes used car valuation to the next level, with real time valuations based on actual vehicles from multiple countries, enabling true cross market comparison of vehicle valuations. Working in 13 countries INDICATA has six million used cars on it at any one time.

Optimising profits and reducing stocking days
Used car asset owners can use the new system to look at the most profitable country and sales channel to dispose of the different types of used cars on their fleet, ultimately helping optimise profits and reduce stocking days. Trim levels and body types can impact prices from country-to-country and INDICATA will help navigate the best sales strategy for each car.
The possibility of real time data to analyse residual values against market value enables a stronger and more controlled risk management. Solutions and INDICATA combined help deliver that aim to offer value for the whole company as well as to aid compliance.

An exciting development for vendors
“The integration of Solutions and INDICATA provides asset owners with a valuable insight into vehicle values on an enormous scale. It combines the workflow power of Solutions with the big data power of INDICATA which an exciting development for vendors,” explained Ib Kimose, Global Director of Solutions.

According to INDICATA’s latest data 3.35 million online business-to-consumer (B2C) used cars were sold in the first quarter (Q1) of 2019 compared to 2.99 million new cars. It means that whilst new car sales have fallen by 2.6% for Q1 2019 compared to Q1 2018, across the big 5 European car markets online B2C used car sales have risen by 8.5% over the same period.

Both new and used car sales saw the usual quarterly seasonal increases in Q1 2019 with new car sales rising 23.2% compared to Q4 2018 and used car sales rising 16.3% over the same period. This is stronger growth than the previous year where new car sales rose 18.4% in Q1 2018 versus Q4 2017 and used car sales rose 9.8%.

Except for Spain, which has seen online B2C used car sales falling by 18.8% in Q1 2019 over the same period last year, the remaining four largest European car markets have all seen used car sales volumes increase as buyers switch from new to used according to Indicata.

Europe’s largest new car market, Germany, has seen new car sales stagnate for the first quarter of this year with just a 0.5% year-on-year increase whilst online B2C used car sales have jumped up 5.0% over the same period. With tense global trade conditions and uncertainty over Brexit pushing Germany into its deepest manufacturing slump for six years, new car sales are likely to continue to struggle with conservative consumers in Germany opting to buy cheaper nearly new cars instead.

It is a similar story in the UK where new car sales are down 2.4% in Q1 2019 compared to a rise of 14.7% of online B2C used car sales. Once again, we see Brexit weighing heavily on consumer confidence with neither Brexiteers nor Remainers happy with any of the proposals. From an employment prospective, the recent announcement from Honda about shutting down its UK plant along with further insolvencies and closures of High Street stores is creating concerns about employment prospects. Whilst there are many other factors at play the upshot is that consumers continue to be wary about spending on big ticket items and this is likely to continue to support the sale of used cars over new ones.

Used car sales in France have now been outstripping new car sales for the last three quarters, a reversal of fortunes compared to 2018 in total. This leaves just Italy and Spain where new car sales continue to outperform the used car market.

The French economy is currently struggling to grow as fast as it needs to, according to the OECD with its Secretary-General, Angel Gurría recently stating: “There is a real need to address the social challenges of long-term unemployment, difficulty in joining the labour market and weak social mobility.”

With this, it is difficult to imagine new cars outselling online B2C used cars at least during the remainder of 2019 and into 2020 when we have the added burden of Real Driving Emissions (RDE) tests to contend with and the risk that new car sales will be hit in the same way that the Worldwide Harmonised Light Vehicle Test Procedure (‘WLTP’) did.

The war on diesel has seen the marketshare of online B2C used diesel cars fall by 2.8% in the quarter one (Q1) 2019 compared to the first quarter of 2018 with buyers switching to petrol alternatives according to INDICATA.

In volume terms, total online B2C used diesel car sales were almost flat for the quarter with Q1 2019 seeing 1.590 million used diesel cars sold compared to 1.593 million sold across the big 5 European car markets the previous year.

But this only tells half of the story as online B2C used petrol car sales shot up by 11.4% over the same timeframe, with 1.64 million cars sold in the first three months of this year compared to just 1.47 million sold last year over the same period.

Germany (-7.2%) and the UK (-6.7%) saw the biggest fall in used diesel car marketshare with Spain a close third as diesel lost 4.4% of its market for Q1 2019 compared to a year earlier.

Spain has historically been the strongest used diesel car market with diesel sales representing 72.2% of online B2C used car sales in the country but this has fallen to 69.0% in Q1 2019. With used diesel car sales losing just 1.2% marketshare year-on-year in France and currently standing at 65.1% for Q1 and Italy seeing diesel losing just a 0.1% marketshare and used diesel cars now representing 68.1% of the market it would seem the inconsistency in the war on diesel may change the way and location international used car sellers choose to trade out of their used stocks.

At a country level, in absolute terms, Spain has seen the sharpest fall in used cars, down 18.8% for Q1 2019 over the same period last year but diesel has taken the brunt of that drop. Sales of online B2C used diesel cars have fallen by 22.9% in Spain Q1 2019 versus Q1 2018 whilst used petrol car sales fell by just 10.1%.

Germany and France both saw quarterly used diesel cars falling by 3.5% and 2.1% respectively compared to the previous year whilst used petrol car sales rose by 9.4% in Germany and 1.5% in France.

The UK and Italy saw strong demand for used car sales resulting in both fuel types increasing total sales. Used diesel car sales in the UK rose by 5.6% to 465,949 units in Q1 2019 compared to a year earlier, whilst Italian used diesel car sales rose by 9.2% to 207,282 units.

Bilsalg and Autolease colleagues review the inspection and collection customer journey.

Bilsalg Denmark was set up to service the largest Danish leasing fleets around all process regarding to de-fleeting their used vehicles more efficiently. This included initially only the auction process but has since been expanded to everything from vehicle appraisal and inspection to online disposal via Fleet Monitor.

It aims to make life easier for fleets and it has found inspection and appraisal is a vital element in keeping good relationships going with our customer and their driver.

Explaining damage to drivers
“When a driver brings a car to us at the end of the contract we carefully explain to them any damage they have on their car and what that means in end-of-life costs,” explained Thomas Friis Pedersen, Autorola Denmark’s country manager.

“When we deal with a private lease customer our approach is even more important as they don’t always understand the importance of this inspection process. We advise them to remember their spare key and servicing documents to help the process in their favour.

We have worked for Autolease for over 10 years
“Our colleagues receive regular training to ensure we provide the best possible service to all drivers. We have worked for Autolease for over 10 years and they regularly visit our compounds. Our teams work together to achieve the best possible service for the customer.

“Autolease was our first Fleet Monitor customer and we sell several hundred used cars for them each year online. A number of their used cars are exported, and prices are strong. Our use of INDICATA means we work out the true value of their vehicles before disposal.

“We continue to make each other better at what we do which is what a successful business partnership is all about,” he added.

Autolease Denmark’s remarketing manager Anders Kaae comments on the valuable partnership with Autorola Bilsalg.
“Autolease is part of the DNB Bank and provides a complete leasing and fleet management service across Scandinavia. Long before Fleet Monitor was developed, our collaboration with online car auction began. It was a smart way of remarketing and we achieved some good used prices. However, buyers complained about the quality of the vehicle descriptions that we were responsible for at that time, and the solution was that we outsourced the inspection of the cars to Autorola, and this was how we solved this problem.

“Autorola decided it wanted to take the online inventory to the next level, so they could help manage assets more optimally through the complicated processes. Through our two companies working together on the processes involved in managing vehicles across the supply chain the Fleet Monitor asset management system was born. We have been making a valuable partnership ever since.

Autolease uses Fleet Monitor across Scandinavia in different ways
“Autolease runs a leasing fleet of around 38,000 lease vehicles via Fleet Monitor. Autolease Norway and Sweden also use the system, but in slightly different ways compared to Denmark. Online remarketing remains our favourite route to market in Denmark and Sweden. It is efficient and very slick. Buyers are accustomed to buying used cars online and our sales are very successful.

“Our company partnership continues to flourish as we trust each other, and we continually drive each other forward to get better at what we do.”

According to the latest data from INDICATA even though new and used car sales are falling sharply in Spain, with used diesel car sales particularly suffering, it is the price of used petrol cars which have been dropping the sharpest since the third quarter of last year. It appears that dealers pushed up prices as demand for used petrol cars increased but then the market overheated.

Since then, dealers have been correcting stock levels and prices to meet demand in the face of a declining market. However, used petrol car prices in Spain remain 11.8% higher on average in Q1 2019 compared to the same quarter last year whilst used diesel prices are 7.4% up year-on-year.

Used petrol car prices in Italy have jumped by 9.2% to €18,861 for Q1 2019 compared to the previous year whilst used diesel prices fell by 1.7%. This means the premium used diesel cars historically enjoyed in Italy has now been seriously eroded even though used diesel cars remain more popular amongst used car buyers. With total used diesel car sales volumes in Italy rising at a similar rate to used petrol car sales and marketshare of petrol versus diesel remaining almost static we could be seeing used petrol car prices being artificially pushed up which may explain why the Italian used car market is not following the move away from diesel being seen in other countries.

Apart from Italy, the UK is the only other one of the big 5 European car markets to see average online B2C used diesel car prices falling, down 12.4% in Q1 2019 compared to Q1 2018. Over the same period the UK saw petrol prices rise 4.3% although a drill-down into Indicata’s data shows that significant variances at a segment level exist in all countries and this should be considered before taking any pricing action.

Germany and France saw used cars of both fuel types rising. Germany continues to be the market which has fallen out of love with diesel more than most and with used petrol prices rising 4.0%, compared to used diesel prices rising 1.6%, the diesel premium is continuing to be eroded.

Despite some of the economic challenges in France both used petrol and used diesel cars saw above inflation average price increases with used petrol prices rising by 5.8% and used diesel car prices increasing by 5.6%.

Being able to look at the Indicata data in more detail you can understand how the overall averages start to diverge as you get into the different segments and also down to brand and model specific issues.

A quick review of just three segments in Germany shows how the large sized cars are showing strong pricing for used petrol cars and a sharp decline in used diesel car prices compared to last year and yet looking at the smaller, medium-sized cars and also SUVs the overall pricing dynamics for petrol and diesel vehicles have been relatively consistent at a segment level.

Whilst we won’t get into the detail at brand level it is also worth reviewing the segments at a brand and even model level in order to adjust pricing and to help understand the best markets to optimise your revenue.

Morten Holmsten, global director for Autorola Marketplace recently presented his views on disruption within the automotive sector suggesting that although it was difficult to create – upstream used car selling; data driven inventory management; and online consumer sales were clear trends.

In his session – ‘European disruption within the automotive sector’ – organised by the Turkey Authorised Automotive Dealers Association, Morten discussed the trends in the European automotive market and explored the reasons why the market changes so slowly.

Nobody questions whether an online auction works
Morten, who oversees Autorola’s Marketplace business unit across Europe Australia, Brazil and Mexico spoke of how in 2001 Autorola started to disrupt the physical auction market by being the first auction provider to go 100% online with its process. However, it was five years previous that Autorola made the first attempt – ‘an attempt that failed due to technology not being ready’ explained Morten.

He continued, ‘If we were able to say that we succeeded with disruption, there shouldn’t be any physical auctions left in Europe. But there is. We managed though to get a fair market share and we started the movement towards online auctions. Today nobody questions if an online auction works.”

Disruption in the automotive sector is challenging
Morten discussed why disruption in the automotive sector is such a challenge in comparison to other industries which have been greatly impacted by disrupters such as Apple (mobile phones); Airbnb (accommodation); Uber (taxi); and Netflix (movies).

“All three challenged the established players in their respective markets causing some to go out of business whilst others adapted to the rules of the new players,” he said.

Buyers and sellers have a different view on the quality of a used car
Focusing on the automotive sector, Morten said there are many reasons why it was difficult to create real disruption, namely the fact that some very big players own the products along with most of the distribution channels; the products need regular servicing at a designated location; and the actual physical product is expensive to distribute.

He said: “It’s also worth noting that used vehicles are a product where two people – buyer and seller – can have very different opinions on the quality of the same product.”

Data drives Autorola’s decisions about prices and buying markets
Turning his attentions to the European market trends of upstream selling, data driven management and selling vehicles online to consumers, Morten provided more insight into how each was contributing in providing all stakeholders, specifically dealers, with enhanced decision making, cost savings, process efficiencies and overall transparency.

“With more and more digital processes and data, comes new possibilities in how you can benefit. At Autorola all decisions about prices and buying markets is today based on data from the market,’ explained Morten.
“There is no doubt in my mind, the winners in the automotive market, are and will be the dealers who learn to act on data and not intuition or feeling.”

Dealers now generate leads through the online world
Highlighting the specific challenges associated with selling vehicles online, Morten pointed at how the major players all offer services associated with the vehicle sale in the form of delivery, finance, insurance and services.

“But one thing which is very difficult for all of them to solve is how to handle the trade-in car when trying to make a 100% online journey,’ said Morten. “Dealers need to see the online world as a lead generator to create traffic to their physical location.”