IMI Magazine

IMI Magazine

News Analysis

News Analysis

Black day for Browns LaneSad as it is, the virtual closure of Jaguar’s plant at Browns Lane, Coventry, is a rea-sonable decision by parent company Ford. Quite simply, Jaguar’s current manufacturing network of three assembly locations turning out around 120,000 cars a year cannot secure the economies of scale to compete effectively. Even without a weak dollar hav-ing a disastrous impact on US sales, one plant had to get the chop.The scaling down of Browns Lane from assembly point for XJ and XK models with 2,500 employees to a mere producer of wood finishings with a workforce of around 300 represents a momentous dilution of the marque’s once proud presence in Coventry. But those who criticise Jaguar’s parent for this latest episode ignore the support that the operation has received since joining the Ford family at the end of the 1980s. A massive level of investment has provided the wherewithal for new models and manufacturing technologies, effectively preserving the company from the steady decay that was apparent during its time as an independent company following privatisation. And, if as a result of this latest surgery Jaguar achieves the required financial stability, there will be a strong chance of moving forward once again.Of course, it hasn’t all been bad news for the West Midlands. On the plus side, news that Solihull is to remain the epicentre of Land Rover’s operations has come as a huge relief. The threat of closure was lifted at the beginning of September following Ford’s acceptance of a plan, hammered out between Land Rover’s management and unions, aimed at attaining world class competitiveness within five years. The imperative now is to ensure that the agreement delivers the anticipated results.Back to Jaguar, it is hard to find fault with the marque’s withdrawal from F1 after five fruitless seasons. While Jaguar can claim a strong racing heritage, this stems from the glory days of sports cars at events like Le Mans and subsequent endeavours in touring cars, and there was no involvement in F1until the rebranding of Jackie Stewart’s team in 2000. With sponsors jumping ship and little chance of success without a substantial increase in spending, the sight of the cars at the tail end of the grid and, more often than not, sidelined trackside or in the pits was simply no longer acceptable.

Youngsters being priced off the roadGovernment statistics showing that fewer young people in the 17-20 age bracket have a full driving licence - around 25% now compared with 50% in 1990 -  may be excellent news for existing motorists suffering from chronic congestion on the nation’s roads. But it’s a worrying development for the motor industry which requires a strong  entry of new consumers at the lower end of the market to underpin its fortunes.On first analysis the erosion of licence holders appears surprising. All available evidence indicates that most young people crave for the freedom and opportunities of car ownership. And with the market awash with used stock, acquisition has never been more affordable.In the event, though, the market’s potential is being held back by two crucial factors, both beyond the motor industry’s sphere of influence. First, the marked growth in higher education means that students are accounting for a high and rising proportion of young people. To make matters worse, student loans and the introduction of tuition fees suggest that an increasing number of graduates will be ending their studies with a heavy burden of debt which may be expected to influence their short term consumption patterns.Secondly, rising running costs - notably taxes, fuel and insurance - are pricing the young off the road. With little relief in prospect, the onus is on the motor industry to develop programmes aimed at easing the cost of ownership. What’s needed is some original thinking among car manufacturers’ marketing departments. In similar manner to the wooing of students by financial institutions in the hope of securing lifelong customers, how soon before subsidised motoring is offered to new entrants on the labour market?

Heavy weather over bulk discountsWill there ever come a time when the suspicion is lifted completely that private consumers are paying over the odds for their new cars to the benefit of fleet buyers? This old hornet’s nest has been given another vigorous stir following the Trade and Industry Select Committee’s ‘findings’ that some vehicle manufacturers are still failing to provide the same level of discount to retailers as to fleets, despite the provisions of the Supply of New Cars Order 2000 which requires that the same terms are available to all bulk buyers.Bulk discounts are bedevilled by fuzziness and, regardless of the merits or otherwise of making an investigation, it is hard to see how any further probing can lift the fog. In many cases bulk orders from retailers will reflect a noticeable mix of options to reflect the varying preferences of individual consumers, whereas fleet orders will embrace a high level of standardisation. In addition, the topic is destabilising for the motor industry insofar as the latest rumblings have already triggered a division between manufacturers and fleets on one side and distributors on the other.What also remains to be determined is the extent to which individual consumers are able to benefit from retailers’ bulk orders. The priority of showroom staff at franchised dealerships is to obtain the highest possible price for the vehicle, and bulk discounts provide them with more scope to match the competition rather than pass on the discount to the customer without a struggle.New car prices in general have dropped in real terms in recent years, even though the latest evidence suggests that they are now rising faster in the UK than in continental Europe and are still higher than the European average. From the consumers’ standpoint, a more fertile topic for investigation concerns servicing and repairs where costs have risen significantly. The perception among con-sumer groups is that the motor industry is making up for lower new car prices by higher aftercare bills.

Eight years old and past its sell-by dateAlthough there are clear signs of a slowdown in the UK’s new car market, the buoyancy of demand during the past few years continues to provide an abundance of fodder for the used sector. With fleets trading in their vehicles on a regular cycle and many private buyers running their cars on two or three year finance plans, it appears that supply of nearly new and fairly new vehicles is now markedly ahead of demand and, as a consequence, prospective used car consumers can afford to be especially choosy.The used car market has worrying similarities with the buy-to-let vogue in residential housing, where excess supply and higher financing costs are leading to a distressed marketplace. Many seasoned observers are predicting that an increasing number of landlords will be forced to sell as tenants become harder to find and rental yields decline.If so, the much-heralded slump in property values could begin and lead to further distressed selling.With regard to the used car market, residual values are likely to remain soft and the point is fast approaching when the value of anything (other than a classic) older than, say, eight years will be derisory, if not zero.