Sales data - "through the looking glass"

I was tempted to focus on “black swan” events for this week’s blog, given that I should now be on my way to the Geneva Show (cancelled) and the team are all working on the materials for our Spring Members’ Meeting (now converted into a virtual format as member companies’ travel policies are becoming restrictive).  Coronavirus is certainly shaping up to be a bigger disruptor of automotive industry revenues and profits than the demonisation of diesel or the effect of implementing the new European emissions regulations this year.  However, there is more fear than fact around the possible spread and impact of Coronavirus, so instead I will focus on a different distortion of facts – sales figures.

In Alice Through the Looking Glass, the book by Lewis Carroll in which Alice climbs through a mirror and finds herself in a fantasy world, everything is reversed, just as in the reflection in a mirror.  You run to stand still, if you walk away from something, it gets closer, and so on.  In some ways, published new car sales volumes are like that in many markets – the higher the sales number, the more likely it is that it includes sales that are not sales.  We all live in an Alice-like fantasy world, where the massaging (manipulation?) of sales figures is part of every day life.  Like the White Queen who Alice meets in the story, sales directors can foresee the future, predicting their monthly and annual sales numbers with some accuracy.  But in the context of discussions around agency and franchise systems, and therefore the difference between retail and wholesale sales, this may not hold for much longer.

The prompt for this was renting a car in Cancun whilst on holiday two weeks ago – I was presented with a wide range of options from the major rental firms at USD$1 per day for a small hatchback.  At the moment, it’s high season there, so this is even better value than deals at similar and even lower prices currently available in Spain.  (Fiat Panda in Malaga for €0.27 per day anyone?)  If you want to buy or lease, there are also many incredible deals out there – 40% off zero kilometre Opel Astras and 37% off similar Renaults in France, 47% off Renault and Citroen in Germany or a Renault Twingo for €49 per month through an East German dealer group.  Or if your tastes and budget are a bit richer, you can have a brand new unregistered Audi A8 in the UK with a 36% discount.

Deadlines to sell cars built to old emissions standards and similar factors play a role in this, but we have shown data on many occasions in the past around the size of the declared fleet market and true fleet across most European markets.  Registrations by manufacturers, dealers and sales to daily rental companies represent anything up to 40% of the total new car sales market (with Germany being the worst case amongst the EU5), and whilst a proportion of these meet genuine needs, a significant proportion are the fodder that proves the sales director was right about his or her numbers and feeds the brokers and daily rental companies with cheap cars.

Agency in itself does not prevent crazy deals.  If the price is low enough there will always be trade and retail buyers regardless of the economic climate and black swans like Coronavirus, but whether the model is agency or franchise, we need better management of the new vehicle supply chain processes to remove the worst excesses.  Without that, some customers will still feel that they have been duped when they accept the deal on offer and I’ll continue to be able to rent a car for a dollar a day.