Pub. 58 2017-2018 Issue 2

42 SPECIAL TOPIC Chapter C: Insights fromEurope In today’s globalized world, we cannot ignore developments abroad. Yes, “all retailing is local ” in some ways, but concepts that originate abroad can always come here: just look at your local Ikea store. And we do know that the OEMs are global, and are constantly looking to see which ideas that work in country A can be brought to country B. T h u s w e a s k e d o u r f r i e n d s a t the Internationa l Ca r Distribution Programme (ICDP), which is the premier consu ltanc y look ing at automot ive retailing around the world, to consider what the Dealership of Tomorrow might look like in Europe and China – the other two global regions with a car market of similar size to the USA’s. These chapters are based on their research and consultancy activities with the industry in both regions. Neither Europe nor China can be viewed as single markets, of course, due to a wide divergence of economic performance across countries and provinces, and the strong influence of local legislation and regulation. But nevertheless there is much insight to be garnered by examination of these huge, dynamic, and differentiated markets. We’ll start with Europe. Europe: Today’s Situation andKey Trends The Market (Supply and Demand) • New car sales have been flat in Europe, and look to stay that way. There has been less recovery from The Great Recession than in the US. 48 But in the major EU markets, fleet sales are over 30% of the market, versus under 20% in the USA. • Service work is declining due to stable units in operation (UIO), greater vehicle reliability, longer service intervals, and lower annual driving distances (Europe hit “peak driving” earlier than the USA, which arguably has not). This will be exacerbated through the 2020s by reduced service work content in EVs and hybrids, and lower crash repair as autonomous technologies are introduced. • ”Digital” is having a huge impact here as everywhere: almost universal is new car research before any dealer visits, as is marketing of used cars through various portals; and there is gradual penetration of digital into service bookings, parts sales, finance quotes, and more. On the other hand, some developments are slower than in America, due to greater EU sensitivity to data privacy. • There is growing interest in “mobility” options (e.g. car pooling and rideshare) but little evidence that the consumer is ready to abandon the personal car. So while there are many pilots and start-ups, so far few are commercially viable – yet. • However, a shift in customer attitudes from ownership to usage can be seen in growing penetration of leasing, often with bundled service plans. This varies widely by market, but up to 80% of private customers in the UK (e.g.) take out a lease. • Factor y over-capacit y resu lts in a continuous product push by OEMs, but there is still higher use of build-to-order (BTO) and buy-from-pipeline (BFP) than in the US. European production capacity was little—and insufficiently— cut during the Great Recession, so aggressive sales targets and stock push remains strong across all brands. “Pure” BTO (ordering a car that the OEM has to slot into its production schedule) is higher than in the USA: in America it represents no more than 5% or so of sales, whereas in Europe it ranges up to about 20% or more, depending on count r y and brand. However, OEMs of all types in Europe have converged around 50% of customer orders being fulf illed from pooled physical inventory and reallocation or late amendment of orders already in the build schedule, which is well ahead of the USA. This “virtual” BTO allows specific customer requirements to be met without high dealer stock or unacceptable lead times (exhibit). European BTO: %of Sales From theOrder Pipeline (showing only vehicles manufactured in Europe) 48 Going forward, both the US and the EU are forecast to have very little if any sales growth. But while the US is up some 70% from its admittedly deeper recessionary trough, the 5 main European markets (Germany, France, Italy, Spain, and the UK) are up less than 5% from their 2008 sales trough.