IMI Magazine

IMI Magazine

Market Review - Beemers hit the buffers

Market review

Beemers hit the buffers

BMW should be benefiting from the rising appeal of German prestige marques, but its market share has scarcely moved over the past three years, in strong contrast to Audi. Stars in this ‘winners, plodders and losers’ analysis by Arthur Way are Honda, Toyota, Mercedes-Benz, Jaguar, Mazda and Kia.

After record sales last year, the UK's new car market hasremained buoyant during the first half of 2004. Manufacturers shifted 1,137,490 units to the end of May - the latest period for which figures are available - an increase of 2.7% compared with the corresponding period of 2003.

The year started well with increases of 5.8% in January and 3.8% inFebruary, while the all-important March market with its '04' registration identifier exceeded the industry'sexpectations by rising a hefty 6.6% to 466,955 units. As a consequence ofthese sparkling results new car sales during January-March totalled 756,006,an advance of 6% compared with the corresponding period of 2003 and thehighest first quarter ever recorded.

Since then, though, the market has been less robust with a dip of 3.8% inApril and 2.8% in May. Even so, the SMMT still anticipates that 2004 willmark the fourth consecutive year of record new car demand with salesforecast to reach the 2.6m level, although it is recognised that this may bespoilt by continuing interest rate rises, along with uncertainty over oil prices.

The strong level of demand has not been enjoyed byall. As always, a free market shaped by the myriad of choices made byindividual consumers has the power to hatch both winners and losersaccording to the complex and changing pattern of each supplier's competitiveadvantage. Crucial factors determining a marque's fortunes include thecontent and direction of marketing programmes (especially finance packagesand other customer incentives), the extent and professionalism of thefranchised network, pricing levels (which are influenced strongly bycurrency exchange rates) and, of course, product offerings and options.

The attractions of diesel are underscored by the fact that derv-powered cars accountedfor 31% of unit sales during the first five months of the present year,noticeably higher than the 26% in the same period of 2003. It helps also tohave convertible options within the model range with this segment's salesrising by 32% to around 50,000 units.

There is a bewildering choice confronting consumers with no fewer than 44 marques identified by the SMMT's figures. Competition in all the main vehicle segments is intense with the result that inadequacies are exposed very quickly.

Ford remains the market leader with a share of 15.1% but Vauxhall is givingchase and has closed the gap significantly during the past three years. Thedifference between the two is now 2.4 percentage points as against 4.7 threeyears ago. The only other marques with a market share in excess of 5% arethe three European majors Renault, Volkswagen and Peugeot. But on a threeyear view only Renault has boosted market share, leapfrogging in the processfrom fifth to third slot. Peugeot has declined noticeably from 8.7% in 2001to the current 6.7%. Meanwhile its stablemate Citroën has dipped from 5.1%to 4.4% over the same period.

An analysis of changing market shares over the medium term (three years)reveals some interesting patterns and dispels a few myths. Marques fallbroadly into three categories - winners, losers and plodders.

Aside from the aforementioned Vauxhall and Renault which may be classifiedas moderate gainers, the clear winners are Toyota, Honda, Mercedes-Benz,Audi, Mazda, Jaguar and Kia. Toyota is the largest Japanese marque in the UKcar market and has moved from a 4.1% share to 4.8% during the past threeyears, while Honda's advance has been even more impressive with a fullpercentage point rise to 3.7% which has enabled it to overtake Nissan. Therises of Mazda and Jaguar have been spectacular, from 0.5% to 1.9% for theformer and from 0.6% to 1.3% for the latter.

A casual observation of any British motorway would suggest that UK consumershave a growing penchant for luxury German marques and certainly Audi andMercedes-Benz have both recorded useful gains, the former seeing its marketshare rise from 2.2% to 3% since 2001 while the latter's has increased moremodestly from 2.8% to 3.2%.

But contrary to common perception, BMW has lost its momentum, with market share stuck at around 3.4%. In fairness, though, it should be pointed outthat the company's MINI brand has made a spectacular market entry, risingfrom nowhere to 1.5%.

Apart from Ford, Peugeot and Citroën, manufacturers who should be worried about drops in market share during the past three years include Nissan(3.9% to 3.4%), Fiat (4.3% to 2.8%), MG Rover (3.9% to 3.4%) and Alfa Romeo(0.7% to 0.4%). In the case of MG Rover, the MG marque has benefited fromthe additional of new variants while Rover has continued to slip. AlfaRomeo's decline is distorted by the exceptionally strong first half that themarque enjoyed in 2001 when its market share almost doubled from theprevious year. However, this success was not maintained and hence the marqueis back to its market share of 2000.

Still on the subject of fallers - and, like BMW, in opposition to commonimpression - Skoda's market share has slipped over the past three years from1.4% to 1.2%. In contrast to the success of Toyota, it is worth noting thatthe company¹s upmarket brand, Lexus, has failed to attract luxury car buyersin the numbers that might be expected. Lexus's market share has dipped from0.5% in the first half of 2001 to 0.4% currently.

Meanwhile, there are plenty of marques which have stood still or deviatedonly marginally from their position of three years ago. Examples includeLand Rover which is stuck at 1.7%, Saab (0.7%) and the plethora of suppliersat the tailend of the market rankings, many of them from the Far East.

Despite falling markets shares, the new millennium's buoyant market hasenabled those on a market share plateau and even some of the 'losers' tosecure higher unit sales. Table 2 indicates changes in unit sales during thefirst five months compared with the corresponding period of 2003. A total of23 marques have exceeded the market's overall rise of 2.7%, led by Bentleywhose near fourfold increase stems from the introduction of its ContinentalGT model.

Closer to earth, Korean marques are to the fore with Daewoo and Kia bothachieving a strong increase of around 50% and Hyundai notching up arespectable 24% jump. Japanese marques have tended to perform well too, withMazda, Daihatsu, Mitsubishi and Lexus all expanding their sales by over 20%and Honda and Suzuki both rising by over 10%. However, Subaru, Nissan andIsuzu all saw declines, with Nissan's dip of 11% a source of concern, given its new models and prominent British assembly presence.

Market leaders Ford and Vauxhall have managed more or less to keep pace withthe market's overall increase, while Renault and Volkswagen have donemoderately better. On a less satisfactory note, Peugeot's competitiveposition has continued to slip, as has that of MG Rover, Nissan, Skoda, AlfaRomeo and Citroën, among others.

BMW has continued its relatively lacklustre performance. The marque's unitsales increased, but below the market's average, and there is evidence thatMINI's market share is stabilising, albeit at an encouraging level.  Incontrast to Lexus and Jaguar where sales increased by over 20%,Mercedes-Benz has performed poorly with a 4% fall. Of the three Germanluxury marques, Audi wins first prize with a 7% increase. Porsche¹ssparkling rise of 37% reflects the growing popularity of its Cayenne SUVmodel.

After this first half report how will the 'pupils' shape up during theremainder of the year? Will those at the top and the bottom of the classstill be there by the end of December or will the pecking order change assome try harder while others lose their grip? With the possibility oftighter economic conditions in the world's most cosmopolitan major carmarket, the only safe bet is that there will be no let-up in competition.

THE UK CAR MARKET BY MARQUE(Arranged in descending order of unit sales Jan-May 2004)

Marque     Unit sales   Market share (%)

Ford       171,799   15.10Vauxhall      144,041   12.66Renault     82,059   7.21Volkswagen     78,197   6.87Peugeot     76,545   6.73Toyota     54,478   4.79Citroën     49,653   4.37Honda    41,952   3.69BMW      38,873   3.42Nissan     38,812   3.41Mercedes-Benz   36,324   3.19Audi       34,581   3.04Fiat       31,414   2.76Rover      23,629   2.08Mazda     21,335   1.88Land Rover     19,692   1.73Volvo      17,540   1.54MINI       17,239      1.52Hyundai     16,552   1.46MG       14,998   1.32Jaguar     14,886   1.31Suzuki     14,131   1.24Seat       13,953   1.23Skoda    13,824   1.22Kia       11,631   1.02Mitsubishi     9,759    0.86Saab      8,214    0.72Daewoo     7,361    0.65Lexus      4,548    0.40Alfa Romeo     4,220    0.37Porsche     4,126    0.36Smart     4,038    0.35Chrysler     3,830    0.34Subaru     3,736    0.33Jeep      3,279    0.29Daihatsu     1,924    0.17Proton     806     0.07Bentley      625     0.05Lotus      435     0.04Perodua     343     0.03Ssangyong     310     0.03Isuzu      282     0.02Aston Martin    194     0.02Tata       91     0.01Others     1,231    0.10

Total      1,137,490   100.00

Source: SMMT

WINNERS AND LOSERS IN THE UK CAR MARKET(% change in unit sales Jan-May 2004 compared with Jan-May 2003)

Marque     % change

Bentley      384.5Daewoo     55.4Kia       48.4Mazda     36.9Porsche     36.7Daihatsu     31.3Mitsubishi     30.9Hyundai     24.3Lexus      23.9Jaguar     22.1Saab      21.7Honda     13.4Suzuki     12.4Volvo      10.1Smart     8.3Land Rover     7.9Renault    6.7Audi       6.6Toyota     6.3Lotus      6.1Volkswagen     4.9Ford       3.0Fiat       2.9


Vauxhall      2.6BMW      2.1MINI       1.2MG       0.9Mercedes-Benz   -3.6Subaru     -5.2Seat       -8.0Peugeot     -8.1Chrysler     -9.3Rover      -10.5Jeep       -10.9Nissan     -11.1Skoda     -11.6Perodua     -12.3Alfa Romeo     -13.1Citroën     -15.4Aston Martin    -23.0Proton     -24.0Isuzu      -29.5

Note: excludes Ssangyong and Tata, both newcomers to the UK market.Source: SMMT