GM says owning a car in a city “is the last thing you should do”

Consumer demand

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EU autos Jul15Something strange is happening in the European auto market, as the above chart from the industry association shows:

  • Normally there are seasonal patterns, with March seeing the highest sales of the year
  • But the trend of increase or decline is normally fairly stable in either direction
  • This year, however, both March and now June have shown bumper percentage increases
  • March was up 10.6%, well above the rest of Q1: June was up 14.6%, again well above the rest of Q2

It seems unlikely that seasonal patterns have suddenly changed quite so much, especially as March has always been a strong month.

Instead, it seems more likely that dealers are self-registering new cars in order to meet quarterly sales targets from the manufacturers.  Thus the Financial Times reports that in reality UK sales are actually flat or falling – even though 7% more cars were registered as sold in H1 2015 versus 2014.  It note:

  • More than a quarter of registrations in June came on the last day of the month
  • “As many as half the registrations were being recorded in the final four days of the month as dealers push to meet targets
  • “(These are) so-called self-registrations, where dealers sell the cars to themselves to meet incentive targets from manufacturers. The cars are typically held for 90 days and then sold on as used vehicles.”

Estimates for UK self-registration suggest it now accounts for at least 11% of total UK sales, and higher percentages in other key markets such as Germany.  And this is despite average discounts in Germany now reaching 20%.

Leading manufacturers, of course, know that this is simply putting a sticking-plaster on the problem.  Ford, GM and BMW are all now pushing hard into the car-sharing market, even though they know this will reduce their overall sales:

  • Opel (part of GM) will offer “car sharing for everyone” via a dedicated Opel app on its CarUnity programme
  • From next year, BMW will allow Mini buyers to rent their car via its DriveNow network in London and in the US
  • Ford are allowing 12k London customers to rent their cars via peer-to-peer platform easyCar Club

As GM’s president said last month about owning a car in a city:

“It’s the last thing you should do because you buy this asset, it depreciates fairly rapidly, you use it 3 per cent of the time, and you pay a vast amount of money to park it for the other 97 per cent of the time”.

Auto manufacturers, unlike car dealers, have alternatives when it comes to confronting the challenge of car-sharing.  Smart ones will realise that increasing numbers of people are no longer interested in owning cars.  And so instead, they will focus on developing new income streams based on the megatrend of mobility.

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