AADA was proud to be part of the 2016 China Automobile Dealers Association (CADA) Convention held 9-11 November in the beautiful city of Zhuhai. AADA was represented by AADA Board member and 2014 Chairman, Ian Field, and AADA Convention Director, Patrick Tessier.
The two Australians joined speakers from Dealer associations in the USA, Germany, Brazil, Russia, Hong Kong and British Columbia in presenting to the CADA International Forum.
AADA came away with an increased knowledge and understanding of world markets, including the challenges facing some economies. Presentations included charts on new vehicle registration, used car sales and the mix of electric vehicle sales vs combustion driven cars.
Moderate growth in electrics
All economies other than Hong Kong are experiencing moderate growth in electric car sales. Germany, which saw growth every year from 2008 through 2015, has had a decline in 2016.
German owners keeping cars longer
Used car sales in Germany increased substantially in 2016, while new vehicle registrations stalled. The German Dealer Association pointed to the increase in length of ownership as the main catalyst; the average German car owner keeps their vehicles an average of eight months longer than they did in 2014.
The pivotal challenge for German Dealers is car manufacturers selling cars direct to consumers via the internet, bypassing the dealership network completely. Some OEMs have invested in delivery systems whilst some have forced Dealers to complete deliveries for them on a fee basis. The concern for the German Dealer Association is the OEM demand on Dealers for infrastructure investment is very significant and if Dealers are forced to compete with OEMs on the internet, where no real infrastructure investment is required, the playing field is not level. The German Dealer Association reports that in some brands OEMs are achieving as much as 30% of the available sales. This has been driven by continued campaigns of manufacturer to consumer direct contact in terms of marketing and customer engagement.
Canada’s confidence campaign
In British Columbia the Dealer Association have embarked on a significant confidence campaign for its franchised dealer members utilising internet, television and point of sale marketing to build awareness for its membership. The market is strong and has exceeded 1.8 million sales for three years in a row. Dealer revenues and profitability are also strong with car and SUV demand moving in opposite directions. SUV sales are increasing worldwide and British Columbia are marginally up in these sales.
‘Scrap it’ success
BC’s ‘Scrap It Program’ is an environmentally-driven, government subsidised program yielding significant results. Over 40,000 old cars have been replaced, achieving the removal from the roads of over one million tons of CO2.
Car owners have access to incentives of up to $3,250 to scrap their old cars in favour of an electric, gas or hybrid vehicle, or other environmentally-friendly options. These include public transit passes, new bicycles, car sharing credits and cash. Owners apply online, receive approval within two days, drop off their old vehicles at an authorised location and claim their incentive.
Clean energy is the clear direction of this community.
Challenging times for Russia
Russia is one of the economies finding many challenges. Whilst the global market is growing, the Russian retail auto industry is declining and is down 15% YTD. Like other markets, passenger car sales are under pressure, and most other segments, with the exception of buses, are feeling the pinch.
The used car market is four times the size of the new car market. The Dealer segment of these sales suffered dramatically in 2015 at -34 per cent, but has recovered quite quickly with additional focus from Dealers.
Interestingly, Chinese car brands perform well in Russia, led by Lifan with an increase in sales of 35.4 per cent. The 2016 market leader is the Hyundai Solaris with 66,602 units sold in nine months. Lada still leads the market with a market share of 18.6 per cent.
The Russian economy is the main driver in auto sales, with buyers seeing price increases, economic uncertainty, less purchasing power in household budgets and sanctions against Russia biting hard.
Brazil at rock bottom
Brazil faces enormous challenges with an economy at rock bottom. Sales year on year are down by 23 per cent with no signs of the decline abating.
The dealership footprint has shrunk from 8,000 to 6,299 dealers. Dealership employment has reduced by 16,000 jobs and the tax on cars has, on average, increased to 30.4 per cent of the purchase price.
Like Germany, 2016 has seen 29 per cent of the sales being made direct by manufacturers. OEMs continue to increase their manufacturing footprint, with Sao Paulo now housing 28 car manufacturing plants.
The Brazil market has serious challenges and government stability will lead to consumer confidence and, ultimately, a better economy.
The CADA International Forum provided invaluable insight into the challenges facing Dealers worldwide. AADA members can relate to many of these. Exposing ourselves to outside experience, lessons and knowledge will help us identify and understand the issues Dealers face going forward, and formulate a plan of action for the future of our industry.
All data provided from CADA 2016 International Forum.