Emissions KPI’s: Which ones really count?

Like most business people, we’re familiar with key performance ratios such as production, sales and profit targets. But, when we’re told that our favourite calculations might be missing an important factor, we ask, “How can that be?” That’s where automotive production and distribution managers find themselves today. They measured production, sales and profits accurately, but not correctly. They missed one crucial item. They measured vehicle tailpipe emissions and watched them fall year on year. But, the calculation excluded the social costs of the vehicle’s contribution to air pollution and climate change, which have been evident for the last 50 years. Now, under the principle of ‘the polluter should pay”, vehicle manufacturers and distributors should expect some significant new policies,regulations and costs as governments try to clean up the environmental mess and avoid further damage. This post looks at what those policies and costs might be in the coming years for both vehicle makers and their distributors.

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Thinking the Unthinkable: Net Zero Emissions

Welcome the attention given to global warming or not, it ranks high on the world’s political agenda. But, political aspirations and policies are all predicated on the assumption that electric vehicles can be produced and deployed fast enough and in sufficient numbers to make a difference to global emissions. For the more radical activist’s timetable of ‘net zero’ emissions by 2025, aspirations are likely to be dashed. However, the direction of travel is clear and will have significant consequences for the automotive industry, its supply chain and consumers. This post considers dealer profitability.

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Will sub-prime car loans spark the next financial crisis?

Banks and newspapers have been reporting recently that the boom in new car sales since 2013 in Europe and the US is based on giving car loans, PCP’s and leasing contracts to ever riskier borrowers. But some pundits go further, suggesting that the bonds sold to investors based on car loans – so, called ‘ auto -asset backed securities’ (Auto ABS) – could face dramatic falls in value as a result of this risky lending. In that scenario, not only would new car sales feel the pinch, because auto finance companies would not be able to re-cycle their funds into more loans so readily but – as far as the most alarmist are concerned – possibly the entire global economy could face a new financial shock. They say that the trend in financing new cars with PCP’s and 5-year plus loan durations mirrors the mis-selling of ‘sub-prime’ mortgages back in the first decade of the new millennium. This post looks at the way Auto ABS is created and managed in the post -global crisis period and concludes that, while dealers should expect the boom in new cars sales to slow in the US and the UK, there are now enough safeguards built into the financial system to avoid a calamity. Some bonds may fall in value. So too may residual values, particularly for diesel engine cars. However, the conclusion is that the scale of the sub-prime Auto ABS market is not large enough to spark a regional downturn, let alone a global one.

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After the Arab Spring: Part 2 – the outlook for car markets in the Levant

The Arab Spring began in 2010 in Tunisia,North Africa and travelled eastwards. First, into Egypt and Libya in 2011. Then, in 2012, into Syria, in the Levant. And, in this part of the world, as governments, rebels, terrorists and infiltrators arrived, it has caused chaos. The modern Levant includes Lebanon, Syria, Jordan and the Palestinian Territories and – historically – Turkey as well. It has been described as the “crossroads of western Asia, the eastern Mediterranean and north-east Africa”. It fringes the eastern Mediterranean over a distance of 1,100 miles, with a population of 35 MN, excluding Turkey. The Levant economies share three common characteristics: they are net oil importers; they depend on other states or entities for their economic well-being – through remittances, exports or subsidies; and they share a politically unstable region. Consequently they are, more than usually, economically volatile and vulnerable. In addition, they share exposure to economic downside risks:global economic slowdown: the continuing Euro Area crisis, weakness of Advanced Economy Sovereign risks and the volatile oil prices.

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After the Arab Spring: Part 1 – the outlook for car markets in North Africa

The Middle East and North Africa (MENA) region has three distinct geographic and economic zones: North Africa, The Levant and the Persian Gulf. North Africa stretches over 2500 miles between Morocco and Egypt, has a population of over 150 MN and, excluding oil-rich Libya, has an income per head between $5,000 to $10,000.  Across the region between 15% and 25% of the population survive on $2 per day. The Levant fringes the eastern Mediterranean over a distance of 1,100 miles, with a population of 162 MN, including Turkey.  Income per head is higher at $6,000 to $14,000 and wealth is spread more evenly. Less than 5% of the population earn under $2 per day. The ‘jewel in the crown’ is the Gulf where a small population of nationals own two-thirds of the world’s hydro-carbon wealth. The population is around 70 MN, including ex-pats,  and income per head  – excluding Yemen  – ranges from $43,000 to $130,000. The 2016 average was $33,005. What is the outlook for vehicle markets in the MENA region? Faced with contrasting economic fundamentals – broadly, those who have oil and those who have not  –  the impact of the global financial crisis  has varied between countries and MENA zones. It  revealed structural weaknesses in both US dollar and Euro sovereign debt which increased the flight of investment funds into commodities, leading to higher prices  – in gold, grain, oil and many others.  In turn inflation, unleashed across the world, hit the poor hardest and North Africa has plenty of them. The relentlessly volatile oil price shows how bumpy the economic ride may yet be. It’s estimated that, just to meet the financial costs of social reform, Saudi Arabia –  and many other OPEC members  – need an OPEC price of $90 a barrel to avoid a […]

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The Currency Wars and UK Motor Retailers

With Ireland on the brink of a bail-out and the US arguing over Exchange Rates with China, some say we’re on the brink of ‘currency wars’. If the US gets its way, what might be the effect on UK dealers? And what if it doesn’t? Read the article to find out.

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Steering an independent motor group: Part 2. From Regional to National

Successful independent or family based motor groups pass through three stages: Formation of a stable business; alignment with a manufacturer to achieve control of a region; and either dominance of the region or adding a new one
But a few manage to get beyond this stage, heading towards the national market.
To achieve success they need a clear strategy and vision, relationships with a broad range of partners and a management infrastructure.
But above all, they need a restless and relentless senior management to drive the process through
This post looks at three companies doing it: Stoneacre, Johnson Cars and Toomeys

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Steering an independent UK motor group: Part 1. Survival and success

Stop Press! Medium sized independent motor groups out-perform large PLC’s during the recession. Not much new there. They often do. Many independents, particularly established family owned dealer groups, certainly are surviving this recession, measured between 2007 and 2010, What is less well known is why. That’s not to say that all of them survived. A number of established family-owned dealer groups ceased trading or were significantly reduced in size. But not only did many survive, some actually prospered.  Which begs two questions: why did many independent groups do better than larger PLC’s and why did some out-perform their peers? If you study the AM100 and the Sunday Times’ Fast Track 250 it’s evident that the ingredients for survival are different from the ingredients  for success for medium-sized, independent motor groups. Many are survivors; fewer are successes. So what makes a survivor?

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Election Special 2: Is the UK motor industry about to be over-taxed?

While the main UK political parties offer a similar outlook for motoring costs and charges in most respects, they differ in one: road pricing and congestion charges. HGV road pricing is already in place across the EU. The Liberal Democrats plan to introduce it to the UK in 2015, if elected and then extend it to cars. But a strong case can be made that road pricing is poorly targeted and unfair. More importantly, an alternative policy – carbon trading – could be more effective. Interested? Read on..

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