Australian Market Report Q1 2015 - Manheim Auctions · manheim.com.au 3 Introduction (ossible image here) H ello and welcome to the Q1 edition of our Quarterly Australian Market Report

manheim.com.au

5201Australian Market Report Q1

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2

Introduction 3

International News 4

Local News 6

Quarter 1 Overview 8

Guest Contributor - Ashton Bishop, Step Change Marketing 12

Market Analysis 15

Insights 18

Initiatives 21

Contents

manheim.com.au

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Introduction

(possible image here)

Hello and welcome to the Q1 edition of our Quarterly Australian Market Report.

We kick off 2015 with a look at how the market has commenced in the first three months of trading. All predictions are for another ‘million plus’ year of new vehicle sales and the quarterly results certainly indicate this will be the case. February and March sales were the best ever on record and year to date the market is up 4.2% on 2014.

This quarter we bring you stories about driver’s fears of self-driving cars impacting their jobs, views on diesel vehicles and their future role on company fleets, local research on new car buying intentions and the internet vehicle research habits of potential buyers.

We also follow with our regular review of the Manheim used car market and the trends we have identified in our various sale segments. Overall we are seeing a shortage of high quality stock in our sales channels, which is leading to particularly strong demand for the vehicles we do have on offer.

Our report wouldn’t be complete without providing you with some commentary and insight from leading figures within the automotive industry. This quarter we have another special report which we hope you find interesting. We introduce you to the new concept of ‘Predatory Marketing’ as described in an article by Aston Bishop from Stepchange Marketing.’

We hope you find this report informative and a valuable addition to the market intelligence you already receive. We welcome any feedback as our aim is to bring you information you find relevant and useful each and every quarter. Please feel free to let us know your thoughts at [email protected].

We hope you had a successful start to 2015 and we look forward to working with you throughout the remainder of the year.

Mark Hankey Director of Sales

Manheim

All predictions are for another ‘million plus’ year of new vehicle sales & the quarterly results certainly indicate this will be the case.

Q1

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4Source: http://fleetworld.co.uk/news/2015/Mar/55-percent-of-young-business-drivers-fear-being-replaced-by-driverless-cars/0434018918

Q155% of young business drivers fear being replaced by driverless cars

55%

DRIVERLESS MODE

55%

ONDRIVERLESS MODE

ON

International News 55% of young business drivers fear being replaced by driverless cars

New data reveals more than half of young drivers fear they will lose their jobs to self-driving vehicles.

One in four business drivers are concerned that they’ll be replaced by autonomous

vehicles in their working lifetime, rising to 55% of younger drivers, according to new research from UK firm Masternaut.

The fleet telematics specialist surveyed 2,000 UK employees who drive as part of their job, to find out their attitudes towards driverless cars and the effect this will have on their job in the future.

If they had to work with autonomous vehicles in the future, 15% of professional drivers said that they wouldn’t like it and change jobs, whilst almost a quarter (23%) said that they wouldn’t like it but would stay in their job. Almost one in ten business drivers said that they would prefer working with autonomous vehicles.

As driverless cars go on trial on UK roads, business drivers believe that the biggest barrier for entry for driverless cars rolling out onto UK roads is integration with regular vehicles (41%), followed by updating road infrastructure (37%) and insurance and liability issues (34%).

Meanwhile 33% are apprehensive about viruses & computer glitches affecting the car’s performance and 30% said changes to driving regulations would present a stumbling block to autonomous vehicles.

Steve Towe, chief commercial officer and UK managing director, commented: “Driverless car technology is a very exciting development for the automotive industry & represents a major step change for UK roads, one of the biggest changes in history.” “Previously a science fiction dream, driverless cars are now very real and are being tested on our roads, and we’re intrigued to see what the future holds for the technology.”

One in four of all business drivers in the UK are concerned they’ll be replaced by autonomous vehicles in their working lifetime.

He continued: “It’s very important that in order to get the true picture on the future of driverless cars, that we consider the potential impact on a very important group of stakeholders; the business driver, the people who use the roads every day as part of their job.” “We haven’t heard a great deal from professional drivers on how driverless car technology could affect them in the future, which is something that needs to be taken into consideration, especially considering that to date in 2015, 56% of new vehicle registrations have been fleet vehicles.”

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5Source: http://www.energyglobal.com/downstream/petrochemicals/25112014/Fleet-fuel-choices-1680/

Q1International News Diesel unlikely to be ‘fleet default fuel choice’ within a decade

With stricter emission controls and new generation petrol engines offering strong competition, diesel vehicles will no longer be the default choice for fleets in Europe according to GE Capital.

The company points out that the growing cost and complication of meeting

future emissions standards for diesel is creating a disincentive. At the same time, a new generation of petrol engines is competing closely with diesels on emissions while returning strong fuel consumption figures, and a whole range of hybrid and electric options are creating further relevant choices.

Also, there is an intensifying mood against diesel vehicles and their overall effect on air quality. This was most recently highlighted in a Cleaner Transport for a Cleaner London report that points out that NOx and PM10 problems caused by the diesel penetration of the UK car parc.

Gary Killeen, Managing Director for GE Capital Fleet Services, commented: “The historic popularity of diesel has been driven by very relevant factors such as its petrol beating CO2 performance, excellent fuel consumption and strong driving characteristics.”

“However, there is growing unease over the effect of diesel on air quality thanks to emissions issues surrounding the level of NOx and PM10.” “While current Euro 6 emissions standards arguably, to a large extent, reduce some of these problems, concerns remain.”

“At the same time, developing diesels capable of meeting each successive new EU emissions standard is becoming more expensive, difficult and time consuming.” “It will be interesting to see the criteria set for diesels in the planned Euro 7 emissions standards, currently proposed for 2020.”

“While these factors are starting to weigh against diesel, viable choices are beginning to appear,” Killeen added.

“There is growing unease over the effect of diesel on air quality thanks to emissions issues surrounding the level of NOx and PM10.”

“The new generation of small petrol engines has, generally, a much lower impact on overall air quality in terms of NOx and PM10 than diesels, and are much easier to engineer than the latest ‘cleaner’ diesels.” “While these power units are not quite up to diesel standards when it comes to CO2 and fuel consumption, they have closed the gap considerably and are likely to continue to do so.”

“Also, while fleet uptake has been slow, there are a whole range of hybrids now available that are likely to continue to proliferate and offer emissions figures that no conventional diesel or petrol vehicle could hope to meet.”

“Finally, electric vehicle technology will continue to develop over the next few years, especially in regard to range and battery life, becoming more suitable for a range of fleet applications.”

Killeen said that convincing fleets to adopt new fuels was a process that took time and would not happen overnight.

“Those of us who have been around the industry for some time can remember when petrol was the default choice. The overall switch to diesel took many years and it will take some time for the next overall change to occur.”

“However, our estimates are that within another decade, we will be seeing a much wider range of drive-train technology on fleets. Diesel will continue to be very popular but will no longer be the automatic choice.”

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Q1

http://www.roymorgan.com/findings/6086-new-car-intention-starts-year-on-positive-note-201502240358

New car buying intentions

Intend to buy a new car in the next 4 years - 2,249,000

Intend to buy a new car in the next year - 537,000

Local NewsNew car intention starts the year on a positive note

Latest research figures from Roy Morgan Research point to a positive sales year in 2015.

The number of potential new car buyers in Australia has increased over the last few

months, with the latest figures from Roy Morgan Research revealing that 2,249,000 people plan to buy a new car in the next four years. Despite recent growth, the current pool of people in the market for a new car remains marginally below the equivalent period in 2014, but has moved back above the long-term average.

Intention has also improved among people intending to buy a new car in the next 12 months, climbing by 56,000 units to 537,000 in January 2015.

Jordan Pakes, Industry Director – Automotive, Roy Morgan Research, says “After a sustained period of contraction over much of 2014, the number of Australians in the market for a new car has started to grow again over the last few months.”

“Consumer confidence remains relatively stable, with the predicted positive impact of lower petrol prices being off-set by the declining Aussie dollar. It will be interesting to see if the February rate cut has a further positive effect on the overall market size.”

“Among the brands driving this overall growth, Subaru and Mazda have been the big movers since October 2014. In fact, an additional 65,000 Australians are now in the market for a new Subaru compared to three months ago.”

The improved outlook amongst new car intenders certainly impacted the market in the first quarter. With record car sales in February and March, the new market was up 4.2% YTD.

Intention has improved among people intending to buy a new car in the next 12 months, climbing by 56,000 units to 537,000 in January 2015.

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Estimated number of Australians (000’s)

Figures exclude fleet, government and rental buyers

3 Month moving average

Base: Australians 14+

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7Source: http://www.roymorgan.com/findings/6100-car-buyers-going-online-for-research-december-2014-201503030031

30%

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Q1Local NewsInternet gives intending car buyers their auto fill

Whether consumers are in the market for a new car or not, research data shows 30% of potential buyers research cars online anyway.

Up from just 17% in 2002, 30% of Australians 14+ (5.8 million) now research

cars online in an average six month period—whether they’re in the market for a new one or not, the latest data from Roy Morgan Research shows.

Of course, those who are actively intending to buy a new or used car within the next 12 months are much more likely to research online: 59% of people looking to buy a brand new car in the coming year have researched at least one aspect of cars or dealers online, as have 47% of those planning on getting a used car.

The most common online research areas among new car intenders are vehicle features (44%), prices or quotes (39%), locating a dealer (27%) and making general enquiries (25%).

Used car buyers are more likely to be checking prices (32%) than features (25%), while 17% have used the internet make enquiries and 14% to locate a dealer.

Jordan Pakes, Industry Director – Automotive, Roy Morgan Research, says “The majority of Australians (59%) who are planning to buy a new car within the coming year have used the internet in the last six months to research cars. 44% used the internet to check vehicle specs and 39% to check prices. It is also notable that 27% of intenders went online to locate a dealer and 25% made enquiries.”

“Despite the market showing signs of recovery after a period of contraction from mid-2014, the volume of potential car buyers remains below the equivalent levels from 12 months ago.“ “In a more competitive environment, manufacturers and dealers will need to keep an extra close eye on the channels people use to research, and then decide on their potential next vehicle.”

44% used the internet to check vehicle specs and 39% to check prices.

Percentage of people who used the internet for

vehicle research purposes in last six months

30%

Total used the internet

Check vehicle features available

Check prices or get a quote

Locate a dealer

Make generalenquiries

59%

47%

16%

44%

25%

18%

39%

32%

10%

27%

14%11%

25%

17%

All Australians (14+)

Those who intend to buy a new car within next year

Those who intend to buy a used car within next year

Research data shows 30% of potential buyers research cars online whether they are in the market for a new car or not.

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Q1Sales in the month of March were up 8% year on year and early indications of a rise in new car buying intentions (as per our ‘Local News’ section) are clearly being felt in the market place.

Looking on a state by state basis, with the exception of WA, every state was up in the first quarter 2015 compared to 2014.

With a growth of 8% for Q1 Tasmania recorded the highest growth over the first quarter last year, followed by Victoria, Queensland and NSW.

WA is still feeling the effects of the slowdown in the mining sector and continued the trend of the last few months of 2014, with sales down 5.2% quarter on quarter.

Quarter 1 OverviewTotal New Vehicle Sales by State - Passenger & Commercial

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

100,000

NSW VIC QLD WA SA ACT TAS NT

Total New Vehicle Sales by State | Q1 2015 v Q1 2014

Looking on a state by state basis, with the exception of WA, every state was up in the first quarter 2015 compared to 2014.

26,775

2,603

57,261

89,544

4,442

4,333

75,489

17,127

Q1 2015 Q1 2014

Source: Federal Chamber of Automotive Industries; VFACTS National Reports (January, February, March)

A key factor impacting the supply and mix of the used car market is obviously new cars sales. There are both short and long term impacts felt by each quarter’s sales. Some are felt immediately, such as an increase of trade-ins which are soon seen flowing through the auction lanes. Some take time and are only evident in 18 months or so, such as a change in the mix of the type of makes & models being purchased over time.

Each quarter we will examine VFACTS and provide you with an update as well as some insights into the potential effects on the used vehicle market.

Following up on a year that finished with 1.1m sales, the market could have struggled

in the first few months of 2015 if sales had been pulled forward by brands striving to achieve end of year targets.

However with sales up 4.2% YTD compared to 2014, this is certainly not the case. February and March were best ever months and the FCAI prediction of another year of over 1.1m sales seems to be well on track.

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Q1The results within the market

categories in Q1 were quite varied despite the fact

sales for the quarter were up in general by 4.2% compared to the first quarter last year.

SUV sales keep going from strength to strength, with year on year growth of 15.4% supported by strong quarterly results within all but one of the SUV body types. Only the Upper Large segment fell (down 0.5%) while Small (up 30.6%), Medium (up 14.3%) and Large (up 7.9%) all continue to grow in popularity with buyers.

The Hyundai ix35 picked up from where it left off at the end of 2014, and led the way in the Small SUV segment for the first quarter of sales in 2015.

Likewise it was the Mazda CX-5 topping the Medium SUV category after finishing 2014 on top and it was the Toyota Prado in front in the Large segment. The Toyota Landcruiser was the top selling model in the only SUV segment to decline in Q1 2015 compared to Q1 2014; Upper Large.

Quarter 1 OverviewNew Vehicle Market - Sales by Segment

Top 15 Total New Vehicle Sales by Marque (Passenger)

Top 15 Total New Sales by Marque (SUV)

Top 15 Total New Vehicle Sales by Marque (Light Commercial)

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Market Segmentation by Vehicle Body Type

!

Market Segmentation by Vehicle Body Type | Q1 2015 vs Q1 2014†

The Hyundai ix35 picked up from where it left off at the end of 2014, and led the way in the Small SUV segment for the first quarter of sales in 2015.

The shift away from Passenger Vehicles continues, with sales down 2.7% for this quarter compared to last year. While it is not a massive drop, it is interesting to note that the mix of sales across the market is also changing, reflective of consumer demand.

Looking at the same time period, Passenger vehicles now account for 3.3% less of the total volume of sales, while SUV sales account for 3.3% more of the total mix. Clearly buyers who were previously purchasing Passenger vehicles are choosing SUV body types.

Only two categories grew quarter on quarter. The Light segment saw an increase of 15.6% and the Medium segment grew 8.2%.

First quarter sales fell in all other categories compared to 2014. Most notable drops were in the Micro (down 45.5%), the Large (down 12.4%) and the Small (down 6.1%) segments.

For Light Commercials, 2015 first quarter sales were up 4.6% over the same period last year.

The largest growth was recorded in the PU/CC 4x4 segment which recorded an increase of 10% year on year for the quarter. The gain was seemingly at the expense of their 2 wheel drive counterparts (PU/CC 4x2) which were down 13.5% compared to Q1 in 2014.

Q4 2015 Q4 2014

Federal Chamber of Automotive Industries (FCAI) chief executive Tony Weber said sales of Light Commercial Vehicles grew by 33.4% with “the versatility of these vehicles making them a popular choice for many Australians, providing the capacity needed for work, leisure and family activities.”

† Source: Federal Chamber of Automotive Industries; VFACTS National Reports (January, February, March)

The Mazda CX-5 topped the Medium SUV category

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!

Quarter 1 OverviewNew Vehicle Market - Top 15 Sales by Marque

Suzuki, Subaru and Mercedes-Benz were standouts for their performance in the first quarter of 2015.

Top 15 Total New Vehicle Sales by Marque (Passenger) | Q1 2015 vs Q1 2014† Q1 2015 Q1 2014

† Source: Federal Chamber of Automotive Industries; VFACTS National Reports (January, February, March)

Passenger Vehicles Toyota led the market once again in Q1 making a strong start to the year. With 23,256 units sold, the result was an improvement of 7.1% on Q1 2014. Reflecting the full year 2014 results, their best selling models for the quarter were the Corolla, the Camry and the Yaris.

As reported earlier, Passenger vehicles sales for the quarter were down 2.7% compared to Q1 2014. As such a number of brands recorded falls in sales however there were a number which bucked the market trend.

Brands with the largest falls in Q1 this year compared to last year were Ford, Mitsubishi and Nissan. Suzuki, Subaru and Mercedes-Benz were standouts for their performance in the first quarter of 2015 with growth rates of 28.9%, 25.8% and 19.1% respectively.

The top selling passenger vehicles in Q1 2015 were the Toyota Corolla (11,672 units), the Mazda 3 (11,059 units) and the Holden Commodore (6,737 units).

Mercedes-Benz C-Class sales are up 93.6% YTD

Q1

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Top 15 Total New Sales by Marque (Light Commercial) | Q1 2015 vs Q1 2014†

Top 15 Total New Sales by Marque (SUV) | Q1 2015 vs Q1 2014† Q1 2015

Q1 2015

Q1 2014

Q1 2014

Source: Federal Chamber of Automotive Industries; VFACTS National Reports (January, February, March)




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!Q1Brands who recorded the most significant drops in Q1 SUV sales this year compared to 2014 were Ford, Holden and Subaru.

The top selling SUV models for Q1 2015 were the Nissan X-Trail (4,989 units), the Hyundai ix35 (4,836 units) and the Toyota RAV4 (4,379 units).

Sports Utility Vehicles

Reflecting their market leadership in total New Vehicle sales, it was Toyota

also leading the way in the SUV segment during Q1. Even though they recorded a drop of 4.0% compared to Q1 2014, a total volume of 13,223 SUV sales saw them finish in front of the strong performing Nissan brand.

As you would expect, with a 15.4% increase in Q1 SUV sales this year compared to last year, there were many big improvers.

Honda led the charge with a massive 78.6% increase during the quarter, fuelled mainly by their new HR-V model. Nissan also recorded an impressive increase of 59%, driven by strong sales of the X-Trail (up 108% YTD) and the Pathfinder (up 39.3% YTD). Other top performers in the segment were Mitsubishi (up by 43.3%) and Mazda (up by 22.5%).

Quarter 1 OverviewNew Vehicle Market - Top 15 Sales by Marque

As you would expect, with a 15.4% increase in Q1 sales this year compared to last year, there were many big improvers.

In the Light Commercial segment, Toyota was also the clear winner. Following their dominance in

2014, they recorded a Q1 sales volume of almost double that of their closest competitor. They led the market in Q1 with a market share of 28.2% of all sales.

Light Commercial sales grew by 4.6% in Q1 2015 compared to 2014. The growth was led by Mitsubishi who recorded a 46% increase in sales compared to Q1 2104. Their star performer was the Triton 4x4 model which is up 80.5% YTD.

Isuzu Ute and Renault also recorded strong growth, with sales up 30% & 13% respectively. Nissan and Holden were among the few brands which recorded a drop in sales during the first quarter compared to Q1 2014.

The top selling models in Q1 2015 were the Toyota Hilux 4x4 (6,057 units), the Mitsubishi Triton (4,947 units) & the Ford Ranger (4,932 units).

Light Commercial Vehicles

manheim.com.au

12

Q1In our quest to continually provide first-class services for our customers, at Manheim we engage some of the world’s leading business services companies and expert practitioners in their field.

As part of our Quarterly Report, from time to time we will share some of

their key learnings and insights with you. In this edition we bring you an article by Ashton Bishop of Step Change Marketing, about a new concept that can apply to all of our businesses: Predatory Marketing.

The most powerful lesson ever taught to me by my marketing mentor, Dave Trott, was about Predatory Marketing. He taught me how to use it to strike at the weakness that arises out of your competitor’s greatest strength.

Predatory Marketing is a new way of looking at things. It comes from the understanding that something goes wrong with most marketing.

For instance: if you see an ad for a hamburger, and you didn’t quite catch the ending, who is it for? Three, two, one: Maccas! Absolutely. This demonstrates what’s known as the 5/9 law. This law of marketing communication is actually mis-attributed to the brand leader. All the challenger brands and small businesses out there tend to put out generic messages, which just end up making the market leaders even stronger.

Every year in Australia, more than $13.3 billion are spent on marketing, and that money translates into more than a million advertising messages per year, or around 3,000 per day. At least 80% to 90% of those messages are totally ineffective; they are so generic they don’t change consumer behaviour. Those generic messages actually strengthen the market position of competitors. Often small businesses will advertise what they do, but consumers only hear part of that message and assume that it comes from their competitors - the exact opposite of what we want our marketing to achieve.

When you strike at the weakness that arises out of their greatest strength, you inflict the most damage and you make response the most difficult.

Special Report What is predatory marketing? It’s simple, it’s just not easy

How to strike at the weakness that arises out of your competitor’s strength.

When you strike at the weakness that arises out of their greatest strength, you inflict the most damage and you make response the most difficult. Do you get it?

The question arises: how can we create marketing messages that will be heard and utilised by the public? The answer is Predatory Marketing.

The method begins with answering four questions: 1. Find out who has your money.

The dollars you are striving for are within the economy. If you are going to grow your business, you need to look at both your small and large competitors and decide if they have “your money” or if your money is totally outside of your industry. Whoever has your money is your competitor.

By Ashton Bishop, Head of Strategy at Step Change Marketing.

manheim.com.au

13

One of my favourite examples was when ‘Skins’ came to this market. The competitors were all the other sportswear companies that owned everyone.

2. Once you determine who has the money, figure out what their greatest strength or advantage is. 3. Now, look for the weakness that comes out of that greatest strength.

4. Take that weakness and strength, then utilise both of them for your relative advantage within the market. This is your predatory opportunity. One of my favourite examples was when ‘Skins’ came to this market. The competitors were all the other sportswear companies that owned everyone.

The formula for marketing sportswear in Australia is that you find a sports star, you pay them a stack of money, you put the logo everywhere, and you even get a bonus point if you can get a tattoo on their kid.

Unfortunately all the stars were taken and Skins only had a little money - so they had to think. What they found out was that there was an inherent weakness within the sports star sponsorship model.

What’s the weakness of the sports star sponsorship model?

You can’t relate to the stars? No, that’s not it!

I would’ve thought relatability was an issue, but it’s not. All the tracking tells us that people have this wonderful aspiration where they think that when they pull on a pair of running shoes, they suddenly become Usain Bolt.

Remember John Law’s cash for comment? Yeah, it was bullshit! Tiger Woods isn’t great because Nike sponsors him. Tiger Woods is great because he was more talented, focused and trained harder than just about anybody else before him.

Skins dug deeper and discovered that these sponsored athletes were wearing their product underneath their Nike and Adidas clothing. The resulting campaign was nothing short of brilliant.

Skins won the Millward Brown Gold Pinnacle Award at the 9th AFA Advertising Effectiveness Awards. Compared with the previous year, it produced a 694% increase in gross sales.


manheim.com.au

14

Q1

694694%

The success of the campaign had a massive effect on the company, successfully establishing the brand in Australia, New Zealand and the UK. As I’ve already said, when you’re being predatory and it inflicts the greatest damage, it makes response the most difficult. How do you respond if you’re Nike or Adidas when the lie has been exposed? You can’t just drop all the stars.

Another great example of these principles put to work is a recent campaign by Burger King in the US. Their greatest competitor is McDonald’s, the hamburger industry’s number one behemoth. McDonald’s greatest strength is that every hamburger being served by them conforms to their company standard or, in other words, all products are uniform. On a certain level this is a good thing, as consumers are assured that they will always receive the same product. However, uniformity also implies rigidity or no change.

Burger King took this concept, applied it to customer wants, and turned it around for the company into a campaign that read: “Have It Your Way”. What customer would not want more choice in what they eat? McDonald’s couldn’t react to this campaign because their strength is intrinsically linked to their core brand offering.

There are marketing basics that still apply when employing this novel marketing strategy. Any marketing campaign should have three things: impact (do you get noticed?), communication (are you clear and objective?), and persuasion (are you persuasive enough?). In addition, you need to have a good product or service before you even start a campaign.

Predatory Marketing is a new way of looking at things. Take a look at your competitor’s business through a predator’s eyes - you might just see them in a whole new light.


Take a look at your competitor’s business through a predator’s eyes - you might just see them in a whole new light.

Ashton Bishop

Ashton Bishop, Head of Strategy, Step Change Marketing, is Australia’s Predatory Marketer – an expert in pinpointing how brands can grow by outsmarting their competitors.

He’s run million dollar campaigns for billion dollar brands, received film awards, guest lectured at leading universities, won creative and strategic recognition from his peers and, in a world first, brought marketing strategy together with digital technology.

Predatory marketing produced a 694% increase in gross sales in Skins Sportswear’s sales

manheim.com.au

15Source: Federal Chamber of Automotive Industries; VFACTS National Reports (January, February, March); Manheim Used Car Market Report

Q4Manheim Market AnalysisNew vs Used – Fuel Type

As we reported last quarter, the price disparity between diesel models and their petrol counterparts seems to be harder to justify in the minds of new car buyers. The mix of petrol sales vs diesel sales across both business and private buyers in Q1 continued to reflect the 2014 trend of a 70%/30% split for petrol/diesel purchases.

Given the large increase in SUV sales in the new car market, one might expect diesel sales to be increasing, as traditionally buyers of SUV models have tended towards diesel powered vehicles.

However as the SUV body type is becoming more and more a mainstream model choice, engine choice is reflecting the general market preference for petrol driven models.

With highly efficient petrol engines continually evolving, buyers no longer feel the need to choose a diesel engine for fuel economy reasons.

Diesel sales at Manheim have remained steady but lower than that of the new car market.

0%

10%

20%

30%

40%

50%

60%

70%

80%

Jan

2014 2015

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Diesel New

Petrol New

Diesel Manheim

Petrol Manheim

Fuel Type Sales Proportion - New Car Market vs Manheim Used Car Market^

As we have been reporting, another factor influencing engine type choice is the price disparity between diesel models and their petrol counterparts. It continues to be harder to justify in the minds of new car buyers according to the latest sales figures.

As the graph illustrates, petrol sales at Manheim rose slightly in Q1 compared to the last three months of 2014.

Diesel sales (the majority sold to private buyers) at Manheim remained steady but are still lower than that of the new car market.

We still expect the demand for diesel and LPG vehicles to keep growing steadily over the next 6 to 12 months, as more diesel models find their way into Manheim sales channels, particularly in the SUV segments. However this trend will be one to watch as fleet managers begin to move away from diesel vehicles as predicted in the Local News story on page 6.

Q1In Q1 2015, sales of petrol driven SUV’s

are up 15% compared to Q1 2014

manheim.com.au

16

0%

5%

10%

15%

20%

25%

New car market share

Manheim used car market share Public Auctions

Percentage Market Share by Marque - Q1 2015†

Q1Mazda, Hyundai & Volkswagen stand out as having stronger market shares of the new vehicle market compared to their volumes at Manheim. A disproportionately higher result in the new car market as compared to our used vehicle sales for a particular marque for example, can indicate recent strong sales performances in new car sales for that brand. As the volumes of vehicles on customer fleets and in the hands of private buyers build up, over time we will see the share of these brands increase in our used vehicle sale volumes as they are on sold.

On the other hand, Holden and Ford continue to post high shares in used vehicle sales at Manheim, with used market shares of approximately double their new market share compared to Q1.

This higher used car market share indicates the popularity of a particular brand’s models on our customer’s fleets over a long period of time, with higher volumes of these vehicles subsequently coming off fleet during the quarter.

Once again in Q1 we are taking a look at the mix of brands being sold

through our public sales channels. As consumer tastes vary and the full force of external market conditions take effect, the Manheim used vehicle market eventually reflects these changes.

Obviously a key factor which affects the mix is the choice our selling customers are making when it comes to determining the make-up of their vehicle fleets. Another factor is the desirability of the brand and its models in the eyes of the buying public.

Reviewing our sales for Q1 2015 against those of the new car market over the same timeframe illustrates some interesting findings. Toyota’s presence in used vehicle sales at Manheim continues to dominate, due to many years of market leadership and hence large volumes of vehicles moving into our sales channels. 22.1% of vehicles sold in Q1 at Manheim wore a Toyota badge, bettering their Q1 market share of 17.6% of all new car sales.

Obviously a key factor which affects the mix is the choice our selling customers are making when it comes to determining the make-up of their vehicle fleets.

Manheim Market AnalysisNew vs Manheim Used – Market Contribution by Marque

Source: Federal Chamber of Automotive Industries; VFACTS National Reports (January, February, March), Manheim Used Car Market Report

Holden posted high shares in used vehicle sales at Manheim

manheim.com.au

Manheim Market AnalysisManheim Used Passenger Cars by Segment

† Source:: Manheim Used Car Market Report

Manheim Used Passenger and Commercial by Month

020,00040,00060,00080,000

100,000120,000140,000160,000180,000

200,000

Manheim Used Car Market Kms by Segment

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Manheim Used Car Market Avg Sale Price by Segment

0

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4

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Manheim Used Car Market Avg Vehicle Age by Segment

Jan

-13

Feb

-13

Mar

-13

Ap

r -1

3

May

-13

Jun

-13

Jul -

13

Au

g -

13

Sep

-13

Oct

-13

No

v -1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r -1

4

May

-14

Jun

-14

Jul -

14

Au

g -

14

Sep

-14

Oct

-14

No

v -1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Jan

-13

Feb

-13

Mar

-13

Ap

r -1

3

May

-13

Jun

-13

Jul -

13

Au

g -

13

Sep

-13

Oct

-13

No

v -1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r -1

4

May

-14

Jun

-14

Jul -

14

Au

g -

14

Sep

-14

Oct

-14

No

v -1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Jan

-13

Feb

-13

Mar

-13

Ap

r -1

3

May

-13

Jun

-13

Jul -

13

Au

g -

13

Sep

-13

Oct

-13

No

v -1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r -1

4

May

-14

Jun

-14

Jul -

14

Au

g -

14

Sep

-14

Oct

-14

No

v -1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Kms



020,00040,00060,00080,000

100,000120,000140,000160,000180,000

200,000


$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000


0

2

4

6

8

10

12

14


Jan

-13

Feb

-13

Mar

-13

Ap

r -1

3

May

-13

Jun

-13

Jul -

13

Au

g -

13

Sep

-13

Oct

-13

No

v -1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r -1

4

May

-14

Jun

-14

Jul -

14

Au

g -

14

Sep

-14

Oct

-14

No

v -1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Jan

-13

Feb

-13

Mar

-13

Ap

r -1

3

May

-13

Jun

-13

Jul -

13

Au

g -

13

Sep

-13

Oct

-13

No

v -1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r -1

4

May

-14

Jun

-14

Jul -

14

Au

g -

14

Sep

-14

Oct

-14

No

v -1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Jan

-13

Feb

-13

Mar

-13

Ap

r -1

3

May

-13

Jun

-13

Jul -

13

Au

g -

13

Sep

-13

Oct

-13

No

v -1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r -1

4

May

-14

Jun

-14

Jul -

14

Au

g -

14

Sep

-14

Oct

-14

No

v -1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15


020,00040,00060,00080,000

100,000120,000140,000160,000180,000

200,000


$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000


0

2

4

6

8

10

12

14


Jan

-13

Feb

-13

Mar

-13

Ap

r -1

3

May

-13

Jun

-13

Jul -

13

Au

g -

13

Sep

-13

Oct

-13

No

v -1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r -1

4

May

-14

Jun

-14

Jul -

14

Au

g -

14

Sep

-14

Oct

-14

No

v -1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Jan

-13

Feb

-13

Mar

-13

Ap

r -1

3

May

-13

Jun

-13

Jul -

13

Au

g -

13

Sep

-13

Oct

-13

No

v -1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r -1

4

May

-14

Jun

-14

Jul -

14

Au

g -

14

Sep

-14

Oct

-14

No

v -1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15

Jan

-13

Feb

-13

Mar

-13

Ap

r -1

3

May

-13

Jun

-13

Jul -

13

Au

g -

13

Sep

-13

Oct

-13

No

v -1

3

Dec

-13

Jan

-14

Feb

-14

Mar

-14

Ap

r -1

4

May

-14

Jun

-14

Jul -

14

Au

g -

14

Sep

-14

Oct

-14

No

v -1

4

Dec

-14

Jan

-15

Feb

-15

Mar

-15


Years

Manheim Used Car Market Avg Sales Price by Segment

Sales Price

Government

Corporate

Rental

Dealer/Trade

As you may expect these vehicles were also younger in age, which somewhat explains the lower distances travelled, with an average drop in age of 5.5% for Rental vehicles sold in the first three months of this year.

With the extra volume of Rental vehicles coming off fleet, prices remained strong, with a half a percent rise in prices during the first quarter. It is interesting to note that compared to two years ago, Rental vehicles are almost 25% older in age in 2015 when they are moved off fleet and into our sales channels.

Other trends to watch as the year continues are emerging in the Government and the Corporate sectors. For Q1 versus full year 2014 sales, Government vehicles on average were slightly older (1.2%) and had almost 4,000 more kilometres on the clock (up 5.5%). Early indications suggest vehicles are staying on fleet a little longer while sales results are holding relatively firm, with a negligible drop of half a percent compared to last year’s average prices.

With an increase of approximately $500 per vehicle, the Corporate sector performed strongly in the opening quarter. Both the age (-1.2%) and the kms (-0.7%) were down and with good quality stock in short supply in this segment, competition for sought after vehicles was high.

Each quarter we will continue to report on the performances of our different market segments, to provide you with an overview of the trends in the age, kms and prices of vehicles making up the Manheim used vehicle market.

Looking at the graphs, one can see that in the first quarter of this year, most segments maintained

fairly stable values for average kms, age and sales price.

A notable exception however was the performance of the Rental segment. When comparing Q1 results against full year 2014 figures, some interesting trends are evident in early 2015. The average kms of Rental vehicles sold in the first three months of 2015 compared to 2014 sales, fell 9.9% to an average of 68,249 km compared to 75,759 km.

Other trends to watch as the year continues are emerging in the Government and the Corporate sectors.

SegmentAvg Vehicle

Age (Years)Avg Kms

Avg Sale

Price

Government 4.2 79,132 $16,620

Corporate 6.1 112,856 $13,967

Rental 3.3 68,249 $16,152

Dealer/Trade 11.4 182,422 $5,244

Passenger & Commercial - Manheim Used Segments Q1

17

manheim.com.au

18

Manheim InsightsBuyer Composition

Each quarter we will be examining interesting developments and trends within our industry and our markets. Using the power of our comprehensive data sets, our aim is to provide you with additional insights into the industry in order to assist you with your own business challenges and help meet your remarketing objectives.

In previous Market Reports we have taken a deep dive into the type of vehicles being sold in our

sales channels. In every issue you can learn more about the nature of the vehicles being sold within our different seller segments, which are grouped according to where the stock is sourced from, as can be seen on page 17 of this edition.

What about our buyers however? With years of extensive sales data we have a very good picture of who our buyers are and what vehicles they are buying. Boasting the largest tracked physical and online resale marketplace we have over 850,000 visitors to our physical locations each year, not to mention the 600,000 plus visitors to our website each month.

The accompanying graph shows the relationship between the market share of each buying group over the last three years.

Reviewing data from the start of 2010, trade purchases account for 53% of the volume of vehicles bought at Manheim. This figure has remained relatively stable over the past five years.

We have over 850,000 visitors to our physical locations each year, not to mention the 600,000 plus visitors to our website each month.

Q1

Average sale price and purchase % split trade% private% average price




70,000

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On the flip side, private purchases comprise 47% of the volume bought in our sales channels, also a figure as you would expect which has remained steady.

Clearly Manheim is frequented by a large and loyal trade buyer base, sourcing stock for resale through their dealerships, both large franchised networks and smaller independently owned retail sites.

Statistics show trade buyers are active through all price points however favour younger vehicles with less kilometres than private buyers, which results in a higher average buy price for this very important buying group. Analysis shows trade buyers are targeting premium stock, with an average buy price 19% higher compared to the average purchase price across all makes and models.

On the other hand, private buyers are motivated by finding a bargain amongst the vehicles that meet their varying personal budgets. We have always enjoyed strong public attendances at our auctions and large numbers of private buyers are buying cars at every price point.

manheim.com.au

19

Manheim InsightsBuyer Composition

The balance of both buyer groups is a vital aspect of the Manheim marketplace.

Q1From ‘first’ cars, tool of trade vehicles to luxury models, public buyers search for vehicles to meet their particular transport needs. Compared to the average price for all vehicles sold at Manheim private buyers are buying vehicles on average, at approximately 26% less than the overall average purchase price.

That is not to say trade buyers are paying more and private buyers are paying less when it comes to like for like purchases. Competing in an open market each vehicle will sell for market rates, regardless of who is purchasing the car. The buy price analysis reveals significant differences in buying preferences, although there are certainly large areas of cross over. Largely however they are buying different types of vehicles, of varying ages and condition which results in different spending patterns and hence different average purchase prices, within each buying segment.

The balance of both buyer groups is a vital aspect of the Manheim marketplace. Clearly our selling customers have a wide range and breadth of vehicles for sale and our role is to find buyers for each and every car offered.

Ensuring our buyers have access to the right type and quantity of vehicles is our complimentary objective. Ensuring the dynamic balance of buying and selling meets both party’s needs, is a mutually beneficial outcome and creates a strong and vibrant marketplace.

Note – The information contained in this article and graph is comprised of ‘public auction’ data only. Part of our core business is running Dealer only auctions on behalf of automotive manufacturers and importers. We also run several trade only auctions which exclude private buyers from participating. These auctions have been excluded from this analysis so only purchase prices where both trade and private buyers were able to participate in sales have been considered.

manheim.com.au

20* Source: Manheim Used Car Market Report

Manheim InsightsTrends for Age, Kilometres and Sale Prices

Vehicles sold in 2014 were on average 61% older than those sold in 2006.

It will come as no surprise to read that the age, kilometres and the sale prices of used vehicles are

intrinsically linked. They influence a vehicle’s value and demand in the used vehicle marketplace, regardless of the way they are offered for sale. Whether they are sold at auction or via BuyNow at Manheim, or listed for sale online or even in a newspaper, car buyers are conditioned to take all three variables into account when determining their view of a vehicle’s value.

While the condition of a vehicle, previous ownership, service history, new car affordability and the location of a vehicle are just some of the other factors affecting its market price, the three aforementioned variables no doubt have the greatest impact on the price buyers are prepared to pay.

Economic conditions and industry trends influence the prevailing market in a number of ways. If consumer confidence is low for example, new vehicle buying intention is often affected. Private buyers delay the purchase of a new vehicle, despite the attractive interest rates and great drive away deals, racking up the kilometres & increasing the age of their vehicle before they are finally ready to buy.

Likewise for large vehicle fleets. Events such as the GFC and subsequent periods of economic instability, impacts business confidence and the propensity to invest in new vehicles. Leases are extended and company owned vehicles are held onto, with the average age and kilometres quickly growing as businesses wait out for signs of economic recovery.

So what happens to the used vehicle market when the economy picks up and consumer and business confidence starts to improve? Combine older vehicles with higher kilometres, all coming into the used vehicle sales channels at the same time and price is clearly impacted.

Looking at our sales data, our analysis is portrayed in the figures. Using the year 2006 as a base for comparison of these three variables, the average age, kilometres and buy price were assigned a value of 100. By comparing values from 2009 (just as the GFC was hitting), 2011 (when we were almost through the worst of it) and 2014 (economy improving and 3 years in a row of 1m+ new car sales) we can see the relationship between all three.

Between 2006 and 2009, the average values for all three variables were very stable. As the full force of the GFC was felt in Australia in mid 2009 and 2010, vehicles starting to come off fleet as the outlook improved in 2011 were considerably older (up 24%) and had higher kilometres (up 20%). At this stage the price buyers were paying on average was 6% lower than in 2006, with the value helped by the relative short supply of used vehicles in the market over the preceding years due to the reasons mentioned earlier.

From 2011 to 2014, the economic outlook improved and new vehicles sales reached record heights. Private buyers were trading in their cars and business fleets were being refreshed in large numbers. The impact of the extension of vehicle leases and delaying the purchase of new vehicles could finally be felt in the used vehicle market place.

Vehicles sold in 2014 were on average 61% older than those sold in 2006. They had 43% higher kilometres. As a result of the increased age and distances travelled, buyers were making new assessments of vehicle’s values.

Despite the average age of vehicles rising a full two years & the average kilometres increasing by almost 30,000 compared to vehicles in 2006, buyers were still paying 80% of the prices paid 8 years ago.

The relationship between the variables may seem obvious, however interpreting these results with a wider economic and industry perspective can shed some light on the values over time. More importantly they can help us understand the flow on effects of today’s fleet management decisions and new vehicle sales have on future remarketing results.

Variable 2006 2009 2011 2014

Av. Age 100% 106% 124% 161%

Av. Km 100% 104% 120% 143%

Av. Buy Price 100% 98% 94% 80%

Q1

2006 2009 2011 201460%

80%

100%

120%

140%

160%

180%

Combined Trends

Av.Age

Av.Km

Av.Buy Price

manheim.com.au

2121

Manheim and parent company Cox Enterprises, has announced an alliance with John Mellor’s GoAutoMedia company.

Q1Manheim Initiatives Alliance with GoAutoMedia Announced

Under the strategic alliance, which involves an equity arrangement in the company and a seat on the GoAutoMedia board, Manheim will become a partner in new initiatives by GoAutoMedia to generate more complete coverage of the retail car industry and wider motor trade as well as an advertising partner of GoAutoMedia’s online industry publications.

Manheim’s Managing Director, Campbell Jones, said, “John Mellor, the publisher and editorial director of GoAutoMedia, is one of the most recognised and respected figures in the automotive industry, with unrivalled experience, especially in the provision of online automotive news and analysis.”

“We look forward to working closely with GoAutoMedia and with John in developing many innovative advancements over the coming years.”

“GoAutoNews is the automotive industry’s ‘bible’ and we are pleased to be announcing an alliance with John and his organisation.”

“The investment will provide the resources for John to deliver his vision for upgrading GoAutoMedia’s business and management coverage of the vital automotive retail industry and motor trade and deliver plans for innovative reader services on his website, GoAuto.com.au.”

“As a company servicing the remarketing needs of the automotive industry and working for its major players, our goal is to provide our customers with meaningful insights and commentary on issues affecting their businesses.” “By partnering with GoAutoMedia we can continue our close relationship with the entire automotive industry and enable John and his team to continue the high standard of motoring coverage which will benefit all industry players and consumers.”

Campbell continued: “We look forward to working closely with GoAutoMedia and with John in developing many innovative advancements over the coming years.”

John Mellor said: “Forming an alliance with one of the world’s leading automotive services companies is the next step in our continued growth.” The investment and our ongoing partnership with Manheim will be the catalyst for introducing new initiatives to inform the 300,000 men and women who deliver the complex matrix of retail, repair and maintenance services to the 16 million-plus Australians who buy and use motor vehicles.”

About GoAutoMedia

GoAutoMedia is an independent automotive publishing company specialising in a wide range of internet-based editorial services for car buyers and for the wider automotive industry. The core of GoAutoMedia is the GoAuto Newsroom which was originally founded in 1979 by its proprietor John Mellor - a leading and widely-respected motor industry writer, analyst and commentator.

GoAutoMedia draws on a team of leading, highly respected and experienced Australian motoring editors, journalists, graphic artists, designers & marketing staff.. .

GoAutoMedia produces a number of online publications and products including GoAutoNews which is the automotive industry’s leading newsletter, published weekly and distributed electronically around the world to car company executives, dealership personnel and executives in support industries. GoAutoMedia’s consumer website, GoAuto.com.au, is also a popular destination for car buyers researching their next new or used car purchase.

Documents

Australian Market Report Q1 2015 - Manheim Auctions · manheim.com.au 3 Introduction (ossible image here) H ello and welcome to the Q1 edition of our Quarterly Australian Market Report