Glass's reviews key product for 2014
With 2014 now well under way we have a clearer view of what the year is likely to hold from a new car registration and used car demand perspective and, to be honest, it is looking positive all round. The improvements in the economy are going to be key for sales success, but it is also worth considering the impact of some of the new products due to hit the new car showrooms during the course of the year. New vehicles and technological developments not only affect the new car market but also their predecessors. This is a point that manufacturers and retailers sometimes underestimate, specifically the impact this may have on both their brand and the used car values.
One of the most important launches for 2014 is the introduction of the new Mercedes C-Class, which needs to make a significant impact on the fiercely competitive Premium Upper Medium segment. Pre-launch events and vehicle images show a stylish car akin to the S Class and thus far it seems to have been well received by the motoring correspondents. On-board technology appears to be impressive but most importantly the drive and NVH levels are a great improvement over the outgoing car which were its weak points against its key competitors the A4 and 3 Series. Indeed, the C-Class has already been heralded as the new market sector leader by some.
The success of this model is crucial to Mercedes Benz as their volume and growth aspirations for 2014 are significant. For the current model, and others in the Mercedes portfolio, the level of new car deals and resulting discount levels are of concern to the trade and it will be important for Mercedes to avoid pushing the new C-Class in the same way. Both Audi and BMW are already marketing the A4 and 3 Series hard this year to try and mitigate the arrival of the C-Class, but their discount levels are likely to result in both depreciation and over supply for their cars in the used market over the coming months.
More importantly it is vital to remember that the desirability of the C-Class to the Retail buyer is as significant as the demand created within the business market in which it seeks to dominate. As we are already seeing, some of the older less desirable Mercedes Benz product is struggling to find used car buyers unless the price is lower than the both the manufacturer would like and the trade expected hence values are dropping. This in part is driven by oversupply caused by fantastic looking lease deals that started 18 months to 2 years ago in the pursuit of increased market share, and it is this historical activity that is threatening to undermine the prestige image of the brand. Also key is the importance of desirability of a given model to the Retail buyer once it has finished the first part of its life as a business car, and at present that desirability factor appears to be missing.
Another key model for the market at large is the new Vauxhall Corsa, due in the summer. The outgoing variant has started to lag behind its competitors in performance, economy and desirability terms in the last 12 months or so, although effective advertising and the creation of a number of special editions has helped prolong the life of the car in a hugely competitive market sector. There has been a little confusion and crossover with the Vauxhall Adam, but in sales terms one must acknowledge the fact that Corsa was the second best seller in volume terms in December 2013 and sat in the Top 5 best sellers all year. However, it was Ford’s Fiesta that took the number one ranking in volume terms in all but one month when it dropped to second place, and it is here that Vauxhall need to make their mark by launching a Fiesta beating car.
It is also important not to enter the pre-registration game that can beleaguer models in this segment: a quick look at the online retail car advertising sites shows a plethora of registered, sub-100 mile models for sale far in excess of the number on sale from Corsa’s competitors. Prices for these pre-registered cars are under constant pressure from the numerous new car PCP deals that are inevitably forcing prices for the late cars lower, although conversely there is still stability at three years old resulting in a very odd shaped depreciation curve.
Whilst on the subject of Ford, they are launching their new entry into the small Crossover SUV sector in the form of the Indian built Ford EcoSport, which is due in the showrooms in the next few weeks. This is an attempt to join a growth market sector with a funky, competitive and popular model in a sector that may become mainstream in years to come. This is a vibrant sector with some strong competition in the form of Renault’s Captur and Peugeot’s 2008, and it would seem that early reports indicate there may be some more work to do for Ford to take the lead in this arena. However, you have to be in it to win it and it goes without saying that Ford will continue to build on the lessons they have learnt in terms of over production and heavy discounting in recent years, looking to protect residual values by effective volume planning and allowing sales to be driven by latent demand rather than discount.
As market sectors such as the small Crossover SUV begin to expand it is important for the manufacturers to remember not to stress the market. Unrealistic volume aspirations and poorly executed products will just hasten the rate of depreciation of a given model, damage desirability but, more importantly, may over expose the market sector. This is something that can happen very fast and the real success has come in recent years from creating new and innovative products and thus creating new market sectors to appeal to the ever hungry retail buyer.
The Electric Vehicle sector is one part of the UK and European market that is still looking for a true way forward. Pioneering work from Nissan, Renault and Vauxhall to name but a few has seen massive changes in the product on offer and specifically the latest BMW I3 has helped give impetus to growth and recognition of the sector. However, it is the collaboration between Mitsubishi Corporation, Bosch and Yuasa that provokes specific interest as they push to develop the next generation of batteries that will transform Electric Vehicles by providing a more practical driving range. In addition, the recent introduction of Tesla with real life long range batteries right now will help demonstrate whether there is a real long term future for Electric Vehicles. Introduction of models with reliable, usable long ranges will transform the desirability and therefore sales growth of this sector, whilst second generation batteries will take away concerns over infrastructure. Together, these should help to reduce concerns over the viability of battery only powered vehicles.
Until that hurdle is jumped, it is the Hybrid vehicles that remain the only acceptable way forward. There are a number of key manufacturers offering hybrid technology, the first of which that has displayed continuing success is the Toyota Prius. 2014 will see a number of new entrants and improved offerings: Audi’s new A3 E-tron will be available from late 2014 and will, in all likelihood, be a big success off the back of the A3’s popularity as a whole, and may in turn bring Audi to the forefront of hybrid offerings.
So, 2014 will be an interesting year for new model activity and it is extremely important for the trade as a whole to remember both the excitement of the new cars but also the potential downsides a new contender can bring, in particular the damage a new model can do to residual values if not managed appropriately. However, it should not be forgotten that new models can also bring a short term halo effect for the model it replaces and many a short term opportunity has been created as a result. Plan effectively, trade accordingly and enjoy the new product and technology that 2014 will bring.