The Pendragon PLC Group is leading the change in the automotive online retail sector and has a clear strategic plan in response to changing customer needs.
Our initiatives are focussed on growth in the following order of priority: used vehicles, aftersales and repair and new vehicle markets.
Our strategy in each of these growth areas is underpinned by strategic pillars which are: Choice, Value, Customer Service and Convenience and is supported by our ‘People’ foundation.
Our principal differentiator in the retail automotive market is our online and IT superiority and ownership of our intellectual property.
The used vehicle sector comprises the selling of vehicles by one party to another for all vehicles except newly registered vehicles. The used car market was 7.9 million, with growth of 6.0% on the prior year. Around half of these transactions are conducted by franchised dealers, with 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.
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 recently risen to 34 million vehicles (cars only). The car parc can also be segmented into markets representing different age groups. Typically, around 22% 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 61% is greater than seven year old cars.
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 4% and expect this to grow by around 4% in 2017.
The new vehicle sector consists of the first registration of cars and commercial vehicles. In 2016, the UK new car market, the second largest market in Europe, increased by 2.3% over the prior year, with 2.693 million registrations (2015: 2.634 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 customers 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.