car sales statistics

Eurofinas & Leaseurope joint annual conference Antwerp 2006 David Betteley October 2006 Point of sale motor financechallenges and opportunities Toyota Financial Services in Europe Global Network …. Covers 90% of Total Toyota Sales Norway Denmark Germany Sweden Finland Poland Czech Rep. U.K. France Spain ★ 30 Locations Globally (13 in Europe + 1 in South Africa) S Korea Canada U.S.A. Japan Puerto Rico China Taiwan Mexico Brazil Venezuela Slovakia Hungary Italy Thailand Malaysia Philippines Australia S. Africa New Zealand Argentina TFS Europe & South Africa Locations 14 Countries Year Established Germany Finland France Italy Norway United Kingdom (1988) (1995) (1997) (1997) (1997) (1998) (2000) (2000) (2000) (2002) April (2002) July (2003) May (2005) Jan (2000) Covering 75% of all European Toyota Sales Czech Republic Poland Sweden Denmark Hungary Spain Slovak Republic South Africa Contents • Industry dynamics • Compliance • Competitive changes • Options to fight back Challenging Environment in 2006 POS in decline: UK stats 1997-2005 POS new car penetration (%) POS used car penetration (%) 80 70 60 50 40 30 20 10 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Impact on Intermediaries (dealers): •Direct impact today •Shrinking/negative dealer new car margins •Dealers dependent on F&I and bonus income •Dealers need to maximise F&I profit (per customer), not penetration •Impact on POS •Dealers maximising profit per finance customer at the expense of volume •Dealers selling at higher margins/rate spreads to fewer customers •Dealer finance perceived by customers as being expensive •Declining finance penetration Intermediaries are also under threat from Compliance and corporate restructuring: Compliance • Block Exemption – CDA Strategy – Larger dealer groups – Brand – Sales process – Independent finance Compliance (cont’d) • Basel II Impacts: – Lending linked to capital – Banks may lose appetite for Motor Industry in general • Credit crunch? • Ration by price • Increased demand for new wholesale lines • Manufacturer finance companies (captives) lenders of last resort? Compliance (cont’d) • Insurance Mediation Directive (European) – Car insurance, Creditor, GAP, Extended Warranty – Brings dealers under the control of the FSA – Introduce a rigid sales process – All sales people need to be compliant – May impact volume of sales and profits – Ongoing training and education process required Not embraced equally across Europe! Compliance (cont’d) • Consumer Credit Directive – Export customer protection policies over Europe – Attack on balloon products – Introduce cooling off period – Advertising parameters Competitive Changes POS in decline: UK stats 1997-2005 POS new car penetration (%) POS used car penetration (%) 80 70 60 50 40 30 20 10 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Reasons for POS decline – increasing competition Increase in direct marketing Growth in use of the internet Convenience and speed Rate headlining by direct lenders Consumer perceptions of rates Cost comparison with POS finance POS finance perceived as expensive POS Competitive Changes (cont’d) • Convenience no longer the key driver: 2005 Have an account Lowest rate Previous customer Convenience 1 2 3 4 1999 1 3 4 2 Source Datamonitor Competitive Change: Average Commission Paid by TFS per Contract 700 600 € per Contract CY2005 500 400 300 200 100 0 Finland Germany Slovakia Poland Sweden Norway Hungary Czech Italy Denmark France Spain UK Competitive Changes - Gross Commission Paid by TFS CY 2005 140 120 100 80 60 40 20 0 Poland Slovakia Sweden Finland 34.452 Norway 36.452 Czech Spain France Denmark Germany Hungary Italy UK € 000's 2.766478 12.98885 33.68707 39.87979 40.1681 49.30769 52.47312 58.06028 63.62464 109.6935 130.267 Dealer departmental profit – 1994 and 2004 high volume dealerships 1994 Direct profit £ 173,348 (65,942) (64,635) 177,015 139,486 98,887 58,447 % 26.8 (10.2) (10.0) 27.4 21.6 15.3 9.0 2004 Direct profit £ 523,887 (236,795) (289,857) 294,143 140,612 40,281 13,154 475,036 1,012,077 % 51.8 (23.4) (28.6) 29.1 13.9 4.0 1.3 46.9 100.0 Vehicle sales Of which - bonuses* - F&I Service & Repair (SMR) Parts Bodyshop Other (rental, forecourt) Bonuses and F&I income grows from 20% to over 52% Total aftersales 415,388 64.2 Total franchise 647,184 100.0 Dealers losing money from Direct car sales in 2004 without bonus and F&I income! * Volume and standards bonuses Source: Dealer composites Competitive Changes (Retention) • Cost of ownership as dealers strive to maintain income from fewer customers • Leads to debt consolidation • Loss of customer database – further erosion of retention effectiveness • Impact on Trade Cycle • Negative impact on CS measures • Inability to re-market used cars Competitive Changes (cont’d) In conclusion • Declining income from F & I a serious structural issue • At the same time costs for compliance are increasing • What are the options? What are the options? • Give up? • No of course not! What are the options? (cont’d) • Options to fight back using the sales process: • Closer co-operation between Fin Co, dealer and distributor to fully understand impact on TCM and CS – Change of culture to more acceptable income levels per customer – More use of packaged campaigns that have unique customer advantages: • Maintenance, insurance, extended warranty The sales process and deciding how to pay: At which point in the purchase process did you start thinking how you would pay for your car? At which point in the purchase process did you make the final decision on how you would pay for your car? 3% 16% 2% 26% 41% 55% 26% 31% Before choosing the make / model On the day of purchase After choosing the make / model Other/Dk/NS The sales process and the ownership cycle: Purchase Consideration Ownership REPURCHASE What & How Much? What are the options? (cont’d) • Captives can provide the Tools: – Only have one customer – Processes can support manufacturer campaigns • TCM roll out • Fleet solutions • Used car brand and vehicle remarketing – Retention – Taking RV risk – Developing e-banking Customer Retention is the Key to convincing the intermediary! How do we reward our best customers? Can we find a way to satisfy ALL our stakeholders? TFS Europe & Africa Region CRM – How captives can assist : • • • End of contract process in most markets TFS needs to work with every distributor to integrate data and process TFS has more legitimate touchpoints : – – – Pay every month Regular statements Balloon products / end of contract • • • Introduce smart marketing : Pilot new CRM systems Integrated communication strategy (reduce communication fatigue) Trade Cycle Management: • Definition: • TCM is much more than a finance product, it is complete purchase solution designed to shorten the customer ownership cycle while maximising CS • Outputs: • Specific SMART objectives: shorten customer buying cycle by 10% & improve customer retention rates by 2.5% • Boosts Brand efforts to maximize conquest customers • Helps establish and maintain No. 1 ‘CCS’ performance Why Complete Customer Satisfaction ? CCS improves customer loyalty. Retention rates are significantly higher amongst Complete Satisfied Customers (vs satisfied Customers) 70% 60% 50% 40% 30% 20% Satisfaction with previous car Loyalty is 1.5 times higher when customers are completely satisfied 40% Fairly satisfied Very satisfied Completely satisfied 60% Source: NCBS 2004, Toyota owners Improved Customer Experience > Integration of TFS and NMSC survey reduces “survey fatigue” which can negatively influences customer satisfaction. POS from the customers perspective: The sales process and deciding how to pay: At which point in the purchase process did you start thinking how you would pay for your car? At which point in the purchase process did you make the final decision on how you would pay for your car? 3% 16% 2% 26% 41% 55% 26% 31% Before choosing the make / model On the day of purchase After choosing the make / model Other/Dk/NS Did the dealer discuss alternative ways of financing your purchase with you? In a large number of cases, particularly 24% of all cash sales and over 39% of personal loan sales, dealers failed to discuss alternative methods of finance. Cash / savings Dealer finance Personal loan Yes 30% 59% 47% No 24% 38% 39% No, but I made it clear from the outset I would pay cash Yes, but I made it clear from the outset that I would pay cash 33% 1% 10% 13% 2% 3% Research findings summary • • • • • • • • • • Declining POS market – volume and value Increasing ‘low cost’ competition POS losing its traditional competitive advantages Wide variation in finance penetration among car dealers Influence of rates charged and effectiveness of sales process Retail car buyers perceive POS as expensive unless discounted Rising penetration of ‘cash’ and personal loans Method of finance generally decided upon before visiting the dealer Car buyers still believe they can get a discount for ‘cash’ Overall impact – falling new and used car finance penetration Conclusions: • Financing decisions at the start of the process NOT the end! • Develop dealer training programmes that work and can persuade customers to buy POS • Manage potential conflict with dealer income • Develop products that provide the opportunity to sell add on products Thank you