Pendragon PLC

Our Markets




The new vehicle sector consists of the first registration of cars and commercial vehicles. In 2015, the UK new car market, the second largest market in Europe, increased by 6.3% over the prior year, with 2.634 million registrations (2014:2.476 million).

The UK new car market is primarily divided into retail and fleet markets.The retail market is the direct selling of vehicle units to individual consumers and operates at a higher margin than the fleet market. The fleet market represents selling of multiple vehicles to businesses, and is predominantly transacted at a lower margin and consumes higher levels of working
capital than retail. The retail market is the key market opportunity for the Group and represents just under half of the total UK market.

The Society of Motor Manufacturers and Traders expects the UK market to be 2.629 million new cars in 2016.

The UK commercial vehicle market, consisting of light commercial vehicles and trucks, had a market size of 424 thousand units in 2015, an increase of 16.7% over the prior year. Following a decline in the truck market of 26.2% in 2014, this reversed, with growth of 25.5% in 2015; and light commercial vehicles grew by 15.6% in 2015.

The Group has a small and successful representation in California. The USA new vehicle market was 17.3 million in 2015, an increase of 5.5% over 2014 and the highest vehicle market since 2006. The National Automobile Dealers' Association expects the USA market to be 17.7 million vehicles in 2016, an increase of 2.3%.

In our last interim management statement we indicated that the 2015 UK new car market would exceed 2.6 million units and we had previously commented that the total new car market would run at its natural level of between 2.5 million to 2.6 million units. Whilst the 2015 new car market was actually at the upper end of this natural level, we maintain our view that the market will be relatively stable in the near term. Increases can be expected in the long term due to increases in car ownership and population growth. We are maintaining our view that the 2016 new car market will be stable. Approximately 75% of all UK retail cars retailed in the UK are now sold with finance agreements in place.

The used vehicle sector comprises the selling of vehicles by one party to another for all vehicles except newly registered vehicles. We had previously expected the market to grow by around 1.6% in 2015. In the first three quarters of 2015, the used car market was 5.526 million, with growth of 1.9% on the prior year. Around half of these transactions are conducted by franchised dealers and the balance by independent dealers and private individuals.

We have previously modelled the impact of the new market volumes on the used car market and continue to believe we will see growth of around 2% per annum over the next three years. When we segment the used market by age of vehicle, our analysis of the next three years shows that the supply of vehicles that are less than six years old will continue to grow more rapidly than those over six years old. We have been tracking our used volume vehicle performance to the used vehicle market for those cars aged between one and eight years old, which represents our key market segment.  Since 2009, through implementation of our used car initiatives and strategies, we have more than doubled our market share from 2.5% to 5.3%.

Aftersales encompasses the servicing, maintenance and repair of motor vehicles, including bodyshop repairs, and the retailing of parts and other motor related accessories. The main determinant of the aftersales market is the number of vehicles on the road, known as the 'vehicle parc'. The vehicle parc in the UK has risen to 34 million vehicles (cars only), having been typically around 32 to 33 million vehicles in the prior three years. The car parc can also be segmented into markets representing different age groups. Typically, around 21% of the car parc is represented by less than three year old cars, around 17% is represented by four to six year old cars and 62% is greater than seven year old cars.

The size of each of these age groups within the car parc is determined by the number of new cars entering the parc and the number exiting the parc. The demand for servicing and repair activity is less impacted than other sectors by adverse economic conditions, as motor vehicles require regular maintenance and repair for safety, economy and performance reasons.

The aftersales servicing and repair business will benefit from increased new and used car activity. As a result of the increased new vehicle supply, we have seen growth in the less than three year old car parc of around 9% and expect this to grow by around 5% in 2016. Interestingly, in 2015, within the four to six year old vehicle parc, there was no growth following a number of years of decline. We expect this segment of the vehicle parc to grow by 4% in 2016. Overall, we expect at least for the next three years to see good continuing growth in the vehicle parc for cars up to six years old.