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Glass’s Monthly Car Market ReportFebruary 2018

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Contents

Glass's Monthly Market Report – February 2018 2

Foreword 3

New car market

Overview 4

The rise of alternative fuels 5

Forecast 6

Live retail market

The UK’s Fastest Selling Used Cars in January 7

Volkswagen Golf – the RV evolution of an icon 8

Used car market

Overview 9

Electric and Hybrid 10

Residual values

Measuring our accuracy 11

Performance and setting 12

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Foreword

This month we introduce another of our valuation editors, Rob Donaldson. Rob is

responsible for valuing several manufacturers and key model ranges. In this edition Rob

looks back on the iconic Volkswagen Golf to see how it has fared over the years.

The latest new car registration figures released by the SMMT are stark. Registrations fell

by 6.3% compared to last January, with diesel sales down a quarter. It’s worth

remembering that in January 2017 the new car market was up by almost 5,000 units

compared to 2016, which was unexpected at the time. However, a fall of almost 11,000

new cars is another blow for the market. It is clear that diesel has had a major part to

play in the decline, being down by over 20,000 units.

The wholesale market, on the other hand, has come alive. This is presumably as a result

of increased demand from consumers moving away from new cars to used. As Jonathan

Brown, another of our valuation editors, put it in our recent market outlook video, the

used car is becoming king. The buoyant activity observed in wholesale channels is not

across the board. While diesel cars are holding their own in general, the premium sector,

particularly large cars from premium German brands, appear to have struggled to

achieve prices that are in line with vendors’ expectations. This together with the huge

volume of cars that were offered throughout the month led to overall hammer prices

being more subdued than would normally be expected in January.

As a result Glass’s trade accuracy, which compares February values with market

observations gathered throughout January, shows that we are within 2.7% of the market.

However, February is expected to get stronger as stock supply diminishes, which should

bring the market back in line with our values.

Jayson WhittingtonChief Car Editor

Glass’sGlass's Monthly Market Report – February 2018

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New car market –overview

4

The UK market is suffering following its decline in 2017, as January saw another decline in sales compared to the same period in the previous year.

The figures released by the Society of Motor Manufacturers and Traders (SMMT) reveal that in January, 163,615 vehicles were driven off the country’s forecourts, a fall of 5.3% compared with the same month last year. This represents the 10th consecutive month of decline in the country’s market.

Demand fell across all sectors of the industry, with business registrations down 29.7%, fleet purchases falling 1.8% and private sales dropping 9.5%. Meanwhile, continuing trends seen towards the end of the year, the SUV market was the only vehicle segment to register growth, with demand up 6.6% and a market share of 20.2%. Demand in all other segments fell, with the biggest declines affecting the mini, MPV and executive segments.

In fuel segments, registrations of petrol vehicles rose by 8.5%, while alternatively fuelled vehicles (AFVs), including hybrid and electric, grew by 23.9%, albeit on smaller margins. However, these gains were not enough to cover a huge drop in diesel registrations, which were down by 25.6%. This is partially due to government policy on the fuel, and recent press demonisation of the issues surrounding emissions.

In April 2017, the country’s vehicle excise duty (VED) system was amended to remove favourable rates for diesel cars, while the UK Government announced in November last year that it will again amend rates for the first year of registration for all new diesel vehicles from April 2018.

To prove their worth, the SMMT has highlighted the importance of diesel cars and engines to the UK economy. Last year, more than two in five of the cars leaving British production lines were diesels, while manufacturers also produced more than 1 million engines, directly supporting some 3,350 jobs and, combined with the UK’s petrol engine output, delivering some £8.5 billion (€9.6 billion) to the economy.

SMMT chief executive Mike Hawes commented: ‘The ongoing and substantial decline in new diesel car registrations is concerning, particularly since the evidence indicates consumers and businesses are not switching into alternative technologies, but keeping their older cars running. Given fleet renewal is the fastest way to improve air quality and reduce CO2, we need government policy to encourage take-up of the latest advanced low emission diesels as, for many drivers, they remain the right choice economically and environmentally.’

While the figures may appear startling, it is worth remembering that the first three months of 2017 saw unprecedented growth in the UK market. January is always considered to be a slow month for new car sales. However, the impending implementation of new VED rates meant sales were higher than average for the first three months of the year. January 2017 was up by 2.9% on the same month the previous year, although 2016 then went on to break sales records. Compared to two years ago, January’s figures are down 3.6%.

Simon Benson, head of motoring services at breakdown firm the AA, added: ‘With the market now in its 10th month of decline, motorists are wary about purchasing a new vehicle. Only time will tell whether this trend will continue into March, marking a full year of falling sales. The government needs to act now to incentivise new car buyers back to forecourts before this decline causes real damage.’

Glass's Monthly Market Report – February 2018

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New car market – the rise of alternative fuels

Over the last few years, the petrol and diesel markets have fluctuated, with

small gains and large drops depending on the month and fuel type. But, one

market that has shown great rises is the alternatively-fuelled vehicle (AFV)

segment, incorporating hybrid and electric vehicles.

However, if you look at the numbers in more detail, you will see that the figures

are not all that impressive. For example, in January 2018, SMMT data shows

the AFV market growing 23.9%. When compared to traditional fuels, petrol

grew 8.5% and diesel collapsed by 25.6%, this rise seems highly impressive.

Such growth did not stop registration figures falling by 6.3% in the first month

of the year.

This is because the sector only saw 9,020 vehicles registered in the month.

While this is still a very good figure, this was less than 10% of petrol sales, and

only rose by 1,741 units compared to the previous year.

In fact, throughout the whole of 2017, the AFV market grew by 34.8%.

However this only represented an extra 30,930 registrations, with a total of

119.821 units and a market share of 4.7%. Therefore, while headline increases

seem impressive, these numbers do not yet represent the market making real

inroads into established concepts.

Each month, the SMMT also releases figures for EV registrations, vehicles that

are eligible for the government’s Plug-In Car Grant. Since 2011, there have

been 130,553 vehicles registered through this scheme. This covers both

electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs), not

standard petrol or diesel hybrids. Looking at these figures, in January 2018, the

EV market dropped by 37.1% compared to January 2017, with just 635

registrations. However, the PHEV sector grew by 61.2%, totalling 2,631 new

vehicle sales. Therefore, total registrations through the government grant, for

the cleanest emission sector, grew by 17.2% to a modest 3,044 units.

In the hybrid segment, petrol-electric engines saw a rise of 25.4% with 5,704

sales, while diesel-electric dropped to 50 units, down from 72 the previous

year.

This suggests the UK public is not yet ready to move into full electric vehicles,

especially while the choice is limited and the travelling range is still small. The

PHEV market, together with petrol-electric hybrids, remain the strongest

elements of what is still a niche market, with drivers opting to move on from

diesel with a petrol vehicle, dip into the used market for a diesel which will not

be taxed as heavily, or simply holding onto their current vehicles a bit longer.

5Glass's Monthly Market Report – February 2018

0

10000

20000

30000

40000

50000

60000

70000

80000

2010 2011 2012 2013 2014 2015 2016

EV vs Hybrid sales

EV Petrol hybrid

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New car market – forecast

At the end of January 2018, the SMMT released its official forecast for new

vehicle sales in the UK for 2018 and 2019.

The industry body revises its forecasts on a quarterly basis in January,

April, July and October, through a survey of participating market analysts,

with an average taken from each response to develop a picture of the

country’s likely sales scenario.

The body expects the UK market to drop again in 2018, with a 5.6%

reduction in sales compared to 2017’s 2.54 million units. However, the

most drastic statistic in the forecast is that of the diesel market, which the

SMMT forecasts will decline to just a 37.3% market share, with 900,000

units sold. This is a drop of 30.4% on 2016 sales.

For 2019, the SMMT estimates that registrations are likely to drop 2.1% on

what it believes will be achieved this year, with diesel falling 8.2% on

2018’s forecast, to a market share of 35.2%

At Autovista Group, our forecasts are based on a number of factors,

including the seasonally adjusted annual rate (SAAR), economic trends

and rate movements. Due to uncertainty surrounding Brexit, and the type of

relationship the UK will have with the European Union, a base case is

presented, assuming that the economy will be broadly stable, punitive

customs tariffs will not be introduced, interest rates will remain low, and the

pound will not suffer significant further devaluation.

This suggests a contraction in UK registrations of 4% during 2018, with the

market rising by 1.5% in 2019 as the country finalises its deal with the EU,

interest rates stabilise as a result and consumers are encouraged to spend

again.

For 2018, given the higher base of registrations in the first quarter of 2017,

monthly year-on-year contractions are expected to be more pronounced in

the first quarter of 2018. Changes to VED rates will take effect from April

and could have an effect of pulling demand forward from later in the year,

as occurred in 2017, but the changes are less dramatic than in 2017, and

so any impact is expected to be comparatively limited.

6Glass's Monthly Market Report – February 2018

2.0

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

UK

new

car

regis

trations (

mill

ions)

New car registrations 2012-2019

Base Case Downside Upside

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Live retail market –UK’s fastest selling used cars in January

MAKE AND

MODEL

AVERAGE

DAYS TO

SELL

Skoda – Kodiaq 32

Dacia – Logan MCV 34

Fiat – 500X 39

BMW – i3 40

Dacia – Sandero Stepway 40

MAKE AND

MODEL

AVERAGE

DAYS TO

SELL

Land Rover – Discovery 4 39

Vauxhall – Zafira 42

Mazda – Mazda2 42

Land Rover – Range Rover Evoque 44

Land Rover – Freelander 2 44

7

Every month we analyse our Live Retail Pricing data, powered by Radar, to tell you what the UK’s fastest selling used cars were the previous month.

Based on over 8.4 million annual real trade car adverts on the UK’s leading advertising portals, with a minimum of 50 observations, this data gives you an indication of what’s selling well across the UK’s used car forecourts. Our interactive online map allows you to filter the data by region or vehicle segment so you can see exactly what models are popular in your area or stock profile.

NATIONWIDEThese were the UK’s fastest sellers at a national

level in January (with 50 or more sales).

FOCUS ON… South WestThese were the UK’s fastest sellers in the South

West in January (with 50 or more sales).

Access the full interactive map

Glass's Monthly Market Report – February 2018

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Volkswagen Golf – the RV evolution of an icon

Do you remember the 1980s VW Golf adverts? If you don't, or are too young to remember, the premise was that your world around you may be crumbling

but you could always rely on your Golf; the strap line being ‘If only everything in life was as reliable as a Volkswagen’.

Being responsible for Glass’s Volkswagen values, I thought it would be interesting to see how this respected model has fared in recent years both from a

residual value and popularity point of view.

The VW Golf started out in Mk1 form in 1974 and, although not the first, it quickly became one of the go to cars for early adopters of the new hatchback

body style. Sharp styling and good build quality were key (and still are) and once the hot hatch GTI was launched with such success, it has never looked

back. Plenty of generational updates followed along with estate and cabriolet variants and also a saloon version, known separately as the Jetta. We are

up to Mk7 now but the Mk1 DNA still runs through and now the Golf continues adapting to world demands with electric and hybrid offerings as well.

Analysis of data compiled with the help of Autovista Group’s analytics team focusing on the performance of the Golf from 2001 onwards makes interesting

reading. Firstly, let's track the popularity of the Golf in the UK. Chart 1 below tracks the overall position ranking of the model by registrations (source:

SMMT). As you can see the VW Golf has steadily risen up the rankings from a creditable 9th in 2001 to an excellent 2nd place last year, even overtaking

the Ford Focus, historically the UKs most popular car until its little sister, the Fiesta, took over the number one spot.

Chart 2 shows the number of new car UK. Registrations yearly from 2001 to 2017 (source: SMMT).

8Glass's Monthly Market Report – February 2018

New car VW Golf registration ranking by volume Yearly VW Golf new car registrations

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Volkswagen Golf – the RV evolution of an icon

What is interesting in the previous charts is that although we're witnessing

the relentless rise of the crossover, much to the detriment of hatchback C

segment cars over the last 10 years, VW Golf sales stay pretty consistent

with only a small dip through the financial crash. It has then picked up

again in recent years. Whereas the Focus has declined, albeit from very

lofty heights.

So does this continuing popularity and thus the plentiful supply of used

examples in the wholesale market mean problems for residual values?

The table below shows the Glass Trade values of cars at 3, 5, and 7 years

of age expressed as a percentage of original cost new price for the whole

market, C segment (medium size hatchback) and VW Golf. It is clear to see that the Golf is currently outperforming both the whole

market and its segment, at all three age examples. This shows that the car

still has plenty of appeal in the used market, whatever the age or mark.

However, with more Golfs registered than ever before in 2017, the

challenge will be to manage the used supply closely over the coming

couple of years in order to keep outperforming the market.

So whether you agree with the 80s advert strap line or not, and plenty of

people do judging by the Golf's performance in the charts and table above,

Volkswagen can definitely say to themselves ‘if only everything in life was

as reliable as a Volkswagen Golf’.

9Glass's Monthly Market Report – February 2018

Age Avg Trade RV%

Whole Market 3 Years old 46.00%

Segment C 3 Years old 38.90%

Golf 3 Years old 47.90%

Age Avg Trade RV%

Whole Market 5 Years old 33.40%

Segment C 5 Years old 26.10%

Golf 5 Years old 34.10%

Age Avg Trade RV%

Whole Market 7 Years old 23.20%

Segment C 7 Years old 16.90%

Golf 7 Years old 25.60%

Rob Donaldson

Car Editor

Glass’s

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Using Autovista Group data, the 2017 used car market finished 2.5% up on the previous year. Tracking auction data, January 2017 started strong,

while February was in line with previous years. March was the strongest it has been for some years, however April, May and June saw poor sales,

before the strong performance for the rest of the year.

With first time conversions, performance was extremely strong at the start of 2017, before tailing off throughout the rest of the year. This is partially due

to the strong sales in the new car market during 2017 which saw an influx of part exchange models coming through auction channels. Therefore many

vehicles did not sell first time around, affecting figures.

When it comes to fuel type comparison, Petrol outstripped first-time conversion figures for diesel throughout 2017, despite a narrowing of the gap in

March and September. This suggests there is more diesel stock than petrol available as the new market sees drivers swapping between the fuels and

giving up diesel through part exchange.

Regarding sales value, in the fleet market, diesel figures are higher than petrol, indicating the type of car coming through, with premium models filtering

into auction houses.

Used car market –overview

10Glass's Monthly Market Report – February 2018

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In the auction market, petrol and diesel are the dominant fuel types, with very few hybrids, and even fewer electric vehicles coming through.

Manufacturers tend to hold on to them and sell them through their own channels rather than presenting used stock to auction where it is less likely to

convert the first time. This could be partially due to weak demand – especially as new vehicle sales are low – but also down to concern over

maintenance and overall knowledge of the vehicle. Independent dealers who are not trained in their maintenance would not want to touch them.

Research by the Institute of the Motor Industry (IMI) suggests that of all technicians in the UK, just 1% are trained to work on electric vehicles. Many

have been through manufacturer-backed training schemes, especially Toyota technicians, with Prius sales making up most new hybrid purchases.

With the growth of the alternatively-fuelled vehicle market in the new registrations sector, inevitably there will soon be a number of used vehicles hitting

auction sites as consumers upgrade to newer models. The market-leading Nissan Leaf has recently launched its second-generation model, while other

manufacturers are starting to bring EVs to market, giving those looking to trade in their existing model more choice.

Of vehicles that went through auction in 2017, in the hybrid sector, 20% were Toyota Prius’, while 13% were Toyota Auris models. The Mitsubishi

Outlander made up 12%. For EVs, 54% of vehicles that sold were Nissan Leaf models, with the Renault Zoe accounting for 23%, highlighting their

dominance of the market.

Used car market –electric and hybrid

11Glass's Monthly Market Report – February 2018

Wholesale -

Hybrid mix

Wholesale -

EV mix

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Residual values –measuring our accuracy

12

How accurate are our current Glass Trade values?

Glass’s closely monitors the wholesale auction market and all observations gathered are used to help us to achieve our target of the Glass Trade Value

being within 2% of the auction sale price. When our February values are compared to our most recent batch of auction observations, we find that we are

2.7% above the market on average.

The image to the left is a snapshot

of our accuracy reporting

dashboard. Glass’s subscribers get

full access to our accuracy

dashboard each month and can

filter by vehicle type, fuel type,

manufacturer and more. This

means they can see just how

accurate we are on what matters

most to them.

Get full access

to our valuation

accuracy dashboard

Glass's Monthly Market Report – February 2018

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Residual values –performance and setting

13

Until May 2016, residual values measured as a percentage of original list

price after 36 months and 60,000 miles of petrol and diesel vehicles

remained close. Figures had converged by the time the Volkswagen

Dieselgate scandal broke, and while diesel has remained below its January

2015 figure, petrol values have grown at a higher rate.

Following the announcement in early January that CO2 levels had risen for

the first time in 20 years, the industry is wondering whether the UK

Government will change its stance on the technology’. With a new vehicle

excise duty (VED) rate expected in April for new diesels, in their first year of

registration, this may push buyers into the used market

February is a good used car month, not a lot of new vehicles will be sold as

March is the month of new registrations. In January 2017, a lot of stock was

held back, while December 2017 was stronger than expected, as auction

houses decide not to fall into the same state, instead keeping a constant

flow through the sales floors. With this in mind, the Glass’s residual value

policy committee agreed not to revise residual values for February.

The used car market could experience a boost in stock levels and demand

during 2018, following successive years of growth in the new registrations

market until last year. Adding in the new VED rates on diesels, and those

looking to purchase may decide to choose a used model, due to more

favourable tax rates. This may put pressure on diesel values, especially as

consumers increasingly look to bigger areas of the diesel market, such as

the SUV segment, where VED hikes will hit new sales.

Glass's Monthly Market Report – February 2018

30%

33%

36%

39%

42%

45%

48%

Jan-1

5

Ma

r-1

5

Ma

y-1

5

Jul-1

5

Sep-1

5

No

v-1

5

Jan-1

6

Ma

r-1

6

Ma

y-1

6

Jul-1

6

Sep-1

6

No

v-1

6

Jan-1

7

Ma

r-1

7

Ma

y-1

7

Jul-1

7

Sep-1

7

No

v-1

7

Jan-1

8

Residual values, 36 months / 60,000 miles, trade percentage, January 2015-February 2018

Petrol Diesel

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Glass’s Monthly Market ReportFebruary 2018

Author:

Phil Curry, Data Journalist, Autovista Group

Contributors:

Jayson Whittington, Chief Car Editor, Glass’s

Jonathan Wyatt, Analytics Manager, Glass’s

Andy Cutler, Car Editor, Glass’s

Media enquiries: media@glass.co.uk

Glass’s, part of Autovista Group

5th Floor, Wellington House

125 Strand

London

WC2R 0AP

w: www.glassbusiness.co.uk

e: customer@glass.co.uk

p: +44 (0)20 3897 2500

T: @GlassGuide

Published by Glass’s Information Services Ltd. All material © Glass’s Information Services 2018. 14

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