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Women are the catalyst for industry revolution

The automotive industry will fundamentally change over the next 10-15 years and the cause will be twofold: women and legislation.

With research indicating that by 2015, 65% of university graduates will be women, the industry has two choices: employ lower qualified men or become more accessible to women.

“In reality the industry will be run by women and then we will see real changes,” says former Renault UK sales director Andrew Luck.

“They will see how badly managed the industry is and they will change the showroom environment. My own research shows they dislike visiting showrooms – it sends them into a panic, especially test drives. They don’t like going into a car with a man.”

Out will go bright lights and open space; in will come soft touches, emphasis on smells and more to do, like browsing fabrics and colours.

Greater buying power

Higher educated women moving into higher paid jobs also means their buying power will increase. That presents a real opportunity for switched on retailers.

“Women buy more things online than men, and they change more often because they want the latest products,” says Luck. “Two per cent buy cars online now, primarily new; within 10 years it will be 8-10%.”

Renault found with its internet foray – putting Clio Campus, Mégane Maxim and Scenic Oasis for sale online – that women accounted for two-thirds of the buyers.

Women are not the only catalyst for change. With the review of Block Exemption in 2010, Luck believes sales and aftersales will be further separated. Legislation, he says, will push the market down a similar route to America, where dealers and manufacturers make their money from selling the car, not aftersales.

“If sales and aftersales are forced further apart, the manufacturer will not make their profits from parts and warranty – the market will open up to more competition,” Luck adds.

“Dealers would only keep the business if they are doing the job properly.”

Controversially, he points to the McDonald’s franchise model as a way forward. “The manufacturer would set standards and a fee, but they would have to provide more within that cost.”

#AM_ART_SPLIT# Pilot scheme

One Japanese manufacturer this year started a pilot with a regional retail group. The dealer carries out all the model and tactical marketing with the cost recovered via its margins. All the manufacturer does is supply the car, acting as a wholesaler.

The dealer’s margin rises by 7%, but it has to commit to buying a set number of cars in a certain model mix.

“It’s being looked at from the view of the manufacturer saving money and the dealer making money,” adds Luck. “It’s saying: ‘You are the retailer, we make the car – so you sell the car. But if you can’t, we’ll appoint someone who can’.”

With the Consumers’ Association starting to look again at the issue of UK new car prices compared to other European markets, the motor industry needs to reassess the way it promotes cars.

Consumer offers such as 0% finance, cashback and free insurance, for instance, can add £3,000 to the retail price.

“All manufacturers have inflated retail prices that no-one pays. Why? All it does is allow tabloid journalists to hit us with it,” says Luck.

“It needs a catalyst to change and that might be the exchange rate. If the pound drops against the euro, manufacturers will have to cut volume or look to sell more cars elsewhere in Europe.”

Exchange rate issues

City analysts back this view, telling AM that some French and German carmakers will lose money on every car they sell in the UK if the pound drops below 1.35 euros.

Luck, Renault’s longest serving sales director at six and a half years, left the company in July. He plans to stay in the industry on the manufacturer side, possible helping smaller carmakers to build their retail networks, after a self-imposed hiatus.

“I’ve been with Renault for 26 years – I need to become de-Renaultized,” he says.

#AM_ART_SPLIT# Andrew Luck on…

Chinese carmakers
“With the right quality and their low cost of production, they will have a huge impact in Europe. It will be five years before it starts, and 10 years before they are taking 5% of the market.”

Carmaker consolidation
“We will lose some – in 10 years’ time there will be five or six manufacturers. Ford and Vauxhall will still be around but the gap between them and the rest will be much smaller than the 3-4% it is now. Four or five carmakers will fight it out for around 8-9% market share.”

Dealer consolidation
“Over the next 10 years we will see a 15-20% fall in sales sites, due to growth in internet sales sites, acquisitions and closures.”

The UK market
“Probably the most expensive place outside of Japan to do business in terms of marketing, distribution and selling the car.”

Block Exemption
“It has done nothing but add cost. It doesn’t benefit consumers, authorized repairers, dealers or manufacturers. I believe it should be dropped altogether.”

The future
“Selfridges is the ideal model, where a big store sells space to franchises to enable consumers to compare products under one roof. But the manufacturers won’t agree to that. What we’ll see is a fall in dealerships in the south-east, replaced by small units in retail parks with five or six cars and the after-sales facility on an industrial estate.”

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