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Guest opinion: Digital radio switch over could have a massive impact on used car sales

By Robert Forrester, Vertu Motors chief executive

Would you buy a second-hand car with an integral radio which didn’t work? A new poll from ICM for Vertu Motors concluded that 78% would not.

The Government needs to consider the full implications of that answer on the future value of second-hand vehicles if it carries out its long-stated policy of switching off FM & AM transmissions in favour of digital only radio. The policy is to switch off AM/FM transmissions in favour of digital only when more than 50% of all listening uses the new system.

However, the Government’s own preliminary analysis paper published six months ago (Digital Radio Switchover, Preliminary Analysis, Department for Culture Media and Sport in Dec 2013) reveals that at present only 10% of cars have digital radio. It is unlikely that the majority of cars will have integral digital systems anytime soon, despite the growing number of manufacturers that now include them,

The radio industry is pushing for digital switchover with every opportunity it gets. Digital is seen by the media as good; analogue bad. There was even a report in the Daily Telegraph last month headlined “Radio 5 Live could send robins on the wrong flightpath” based on research about the AM signal that the popular station uses.

The Government analysis assesses the costs and benefits of switching to digital radio; however the costs only relate to the price of installing digital devices. The Government admits in its report that, “there are significant evidence gaps on the costs of listening digitally in vehicles.”

One massive gap is the drop in the residual value of any FM only vehicle once digital switchover happens. If digital radio comes about they could stick around on forecourts and have a lower trade-in value as a result. This amounts to a legalised confiscation of part of the value of somebody’s asset.
Reduced residual values don't just impact car dealers, most people own their car and therefore it could devalue the vast majority of cars in the UK; the public will want to ask why.

What is needed is urgent motor industry research into the future differential value of a second hand vehicle with no integral digital radio compared to one with digital fitted. This research needs to be submitted to the Government to fill the gap that it has in its analysis. Our own ICM research indicates that customers take a simple view of matters – if the radio doesn’t work the car is less appealing.

It is possible for cheap devices to be retro-fitted which use internal FM signal to re-transmit digital radio, but this is less than ideal as the clean lines of carefully designed dashboards will be disrupted by aftermarket instrumentation.

The average UK car is seven years old. It will be a long-time before the used UK’s used vehicle fleet has anywhere near 50% access to digital radio. Many new vehicles today do not have the devices fitted – if the Government wants digital radio only it should legislate to force manufacturers to fit the devices and then switch off the transmitters seven years from that date, so that a car of average age is likely to have access to digital radio programmes.

At present, data suggests the 65% of radio listening is at home with only 20% in the car. The 50% listening rule would be easy to achieve as domestic digital sets take over; this is because the percentage referred to is the percentage of the number of hours consumed and not the number of people involved. Under the Government’s rule, someone listening to the radio on a digital set while they were decorating their house would lose their service if they popped out to the shops to buy some more paint using a vehicle with an analogue radio.

It cannot be right to ignore the future value of cars before taking such a big decision. The decision is being taken by a Government department which seems to serve the media industry, based on patchy advice from the Department of Transport. But where is the Department for Business or Treasury in all this? They need to speak up for the value of peoples assets and, after their house, a motor vehicle is often the second highest value asset many people own.

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  • Mal. - 02/06/2014 15:53

    I don't believe the impact will be as large as suggested, bearing in mind there are still 10 year old cars out there with radio cassette players, and cars as young as 3 years old without the ability to plug in your own music, and the demand is still tehre for these cars, albeit they may not appeal to some of the younger generation. But then again there are relaitively cheap convertors on the market to ensure you can still receive radio whilst in your car. I don't believe though that this is the biggest issue or negative point for DAB Stereos, I drive approximately 50,000 miles a year in generally new very well specced cars, and whilst I enjoy listening to a number of channels on digital (Absolute, KISS FM Etc) I regularly find that the only station I can listen too is Radio1 or Radio 2 on FM Channels, as the coverage for digital just is not good enough. There are some obvious places where the signal is poor, for example The Lake District, however there are others that are just wholly unacceptable, for example all of Northern Ireland, huge parts of Scotland, huge chunks of the M6 and M1, The Lake District etc etc, so to my mind the coverage needs to be significantly improved before consideration is given to switching off the FM Transmitters.

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  • laurenceh - 03/06/2014 11:15

    The article and the research is very interesting. I work for Digital Radio UK and we are owned by the BBC and commercial radio broadcasters and the Society of Motor Manufacturers and Traders is also a Board member of ours and supporter of digital radio. Robert is correct that digital radio switchover is the policy of the current government and was first introduced by the previous Labour government. However, FM will not be switched off and smaller local and community stations will remain on FM. Digital is the future of radio and that is because listeners love digital radio, not because the Department of Culture, Media and Sport is supporting the policy. All the consumer research on this shows us that once they have tried it, at home and in-car, people love the sound quality and extra choice on digital radio and would not go back to analogue-only. Listening to digital-only stations is growing faster than any others and consumers are choosing to go digital. We have been working with the SMMT and the vehicle industry over the last 4 years to help plan and prepare for a digital future for radio. New car registrations with DAB as standard have risen from 5% in 2010 to 55% in April this year. Vehicle manufacturers have been very supportive and we believe 90% of new cars will have DAB as standard by the end of 2016. A lot has been achieved but there is more work to do, especially with used cars and the aftermarket. We're working closely with DAB adapter manufacturers and the range of digital adapters is starting to grow and improve. Not all the products require additional units on the dashboard and can be fitted behind the dash. Others may also choose to listen to radio apps via their smartphones. We would like to work more closely with used car dealers and understand how they can help their customers. Could they offer adapters at point of sale or even convert cars on the forecourt before sale for those who want it? Any switchover is some years away but used car dealers will have an important role to play. We need to be confident the vehicle parc can be converted and broadcasters do not want to lose listeners so we will need to see growth in digital listening in-car. Broadcasters and government are also building out DAB coverage over the next 2 years in a multi-million pound investment. This will take national BBC DAB coverage from 95% of the UK population to around FM equivalence and local DAB coverage will increase to 90%. This investment doubles the number of UK DAB transmitters and the road network coverage will also be greatly improved (an additional 7,000km of roads getting local DAB alone).

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  • Kevin Hunt - 09/06/2014 12:39

    Yet another ill thought through piece of "policy". If we must have DAB and I concede it does offer more stations, albeit at lower quality than FM, then it should be in addition to existing TX methods, not instead of!

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  • Duncan Colman - 10/06/2014 14:21

    Super article. Whilst DAB is a big potential market / aftermarket, surely mobile device integration trumps DAB in terms of impact? After all, this is the device that holds *all* of your contact information, powerful satellite navigation, streaming music and road accident/traffic data from the web.

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