Increasing use of alternative-fuelled cars will help to drive growth over coming years
London, United Kingdom (PRWEB) June 03, 2013
The past five years have not been an easy ride for operators in the New Car & Light Motor Vehicle Dealers industry. Industry revenue is expected to fall at a compound annual rate of 0.7% over the five years through 2013-14, to £91 billion. According to IBISWorld industry analyst Lewis Sutton, “in the aftermath of the global downturn, car sales crashed due to poor business and consumer confidence, rising unemployment and the difficulty of obtaining financing”. The government intervened by providing a car scrappage scheme to boost new car sales. However, its result was not pronounced enough to offset the downturn's effects on vehicles sales. Demand for new cars slowed as high fuel prices drove consumers away from cars to public transport. At the same time, car technology has improved, lengthening the life of new vehicles and leading to longer replacement cycles. Consequently, the replacement market also slowed down.
Car sales are forecast to grow only moderately in 2013-14 because the scrappage incentive scheme brought car purchases forward. The economy will remain sluggish over the year, which will not improve demand. As a result, industry revenue is forecast recover at a moderate 2.4%.
Industry profitability has weakened over the past five years. Margins contracted as overcapacity and low demand forced operators to shoulder higher inventory costs. Many of the less efficient firms suffered operating losses, which dragged down industry margins. Operating profit margins contracted significantly during the global downturn as demand plummeted and inventory costs eroded margins. Most operators took severe measures to cut costs. These included slashing employee numbers, closing outlets and revamping their stock management.
Sutton adds, “the shift towards more fuel-efficient vehicles will continue over the next five years, and petrol-electric hybrid vehicles and pure electric cars are expected to become more popular”. Government policies and subsidies will support demand for alternatively fuelled vehicles. IBISWorld expects industry revenue to return to modest growth over the five years through 2018-19. The exit of unprofitable dealers, recovering demand and more stable conditions will lead to slightly wider operating margins.
The New Car & Light Motor Vehicle Dealers industry has a low level of market share concentration, as the top four major players are estimated to account for just 15.9% of industry revenue. This low level of market share per enterprise demonstrates the high level of fragmentation in the industry. The industry is typified by firms employing a small number of people and only serving the local area. Major companies include Volkswagen Group UK and Honda Motor Europe.
For more information on the New Car & Light Motor Vehicle Dealers industry, including latest industry trends, statistics, analysis and market share information, purchase the full report from IBISWorld, the nation’s largest publisher of industry research.
IBISWorld Industry Report Key Topics
Companies in this industry sell new cars and other light motor vehicles to end consumers. Wholesalers that sell directly to fleet markets are included in this industry. Vehicles sold include passenger cars, SUVs, specialised vehicles (such as ambulances) and any other vehicles weighing less than 3.5 tonnes. The sale of used vehicles is not included in this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalisation & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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