Auto trader consumer survey report 2010

Consumer Feedback on Key Questions Facing the Industry Tim Peake Commercial Director 29th September 2010

Summary • Auto Trader collected key questions / concerns from dealers at the beginning of September 2010 • These questions were analysed and the top 15 were incorporated into a survey • The survey was placed on the Auto Trader Website • 5,000 consumers responded to the survey between 15th September to 25th September 2010 • The following slides summarise the answers from these consumers • The report is intended to help dealers understand how the market may change based on current consumer sentiment. It will hopefully drive some useful debates within your dealership. • If you have any further questions or would like further detail / discussions on some of the possible implications this report outlines, please contact Tim Peake: Research Audit & • Repository Update tim.peake@tradermedia.co.uk Email; • 2 Slide Phone: 01189 239 103

Consumers confidence is stronger now than 12 months 700,000 more consumers seeking to change their car (based on Auto Trader 10m unique users) September 2009 September 2010 800,000 consumers 950,000 2.4 million 1.7 million consumers consumers consumers 6.4 million 7 million consumers consumers Research Audit & Repository Update Slide 3

The impact of this improvement in confidence is not clearly feeding through into NCR forecasts for next year, with SMMT forecasting 2.5% decline New Car Registrations New Car Registrations 20 % Forecast by SMMT H1 – First Half of the Year 3,000,000 -2.5 % 1,400,000 1.2 % 5.1 % 2,500,000 1,296,486 1,200,000 1,267,299 1,247,479 1,241,921 2,439,718 2,404,007 2,344,864 1,108,662 1,000,000 2,000,000 2,131,795 2,069,000 2,018,000 1,994,999 924,955 1,968,000 800,000 1,500,000 600,000 400,000 1,000,000 200,000 500,000 0 H105 H106 H107 H107 H109 H110 0 2005 2006 2007 2008 2009 2010f 2011f 2012f It is likely that the second half of 2010 will be down Research Audit & year-on-year as it laps Scrappage Scheme impact. Repository Update Slide 4

This may be partly explained by Consumers being confused about the impact of changes in VAT “Will the VAT increase in January 2011 affect your decision to buy a new/used car?” Research Audit & Repository Update Slide 5

VAT confusion is leading to consumers bringing forward their purchase “How will the VAT increase affect your decision to buy a new/used car?”¹ (September 2010) Planning to buy new car Planning to buy used car Research Audit & Repository Update Slide 6

VAT created a pull forward in demand in the German market when they increased VAT. VAT increased in Jan 2007, demand in Q4 2006 increased and subsequently NCR in the following year declined January 2007 VAT Increase in Germany (from 16% to 19%) created a dip in purchases post the tax increase day (Q1 down by 10% YoY, Q2 and Q3 -6% and Q4 -13% YoY). German New Car Registrations SIS Impact January 2007 VAT Increase Impact 45% 375,000 35% 275,000 25% 175,000 15% 75,000 5% -25,000 Jan-06 Mar-06 May-06 Nov-06 Jan-07 Mar-07 May-07 Nov-07 Jan-08 Mar-08 May-08 Nov-08 Jan-09 Mar-09 May-09 Nov-09 Jul-06 Sep-06 Jul-07 Sep-07 Jul-08 Sep-08 Jul-09 Sep-09 -5% -125,000 -15% -225,000 -25% Research Audit & New Car Registrations YoY % Repository Update Slide 7 Source: ACEA (equivalent SMMT in Europe)

Having the right car at the right price is key to winning new business What are the 3 most important criteria when deciding to purchase? Research Audit & Repository Update Slide 8

The Right Car….is more difficult to source given historic declines in NCR are leading to an aging car parc. Competition between dealer segments is increasing Franchise Stock Distribution on AutoTrader.co.uk Franchised Stock Distribution by Age March 2009 45% Franchised Stock Distribution by Age July 2009 Franchised Stock Distribution by Age March 2010 40% Franchised Stock Distribution by Age July 2010 40.5% 39.8% 39.2% 35% 35.6% 34.1% 30% 30.2% 28.0% 25% 23.9% 20% 20.3% 15% 15.5% 15.3% 15.2% 14.6% Research Audit & 12.5% Repository Update 10% Slide 9 5% 5.6% 5.1% 5.0% 4.4% 2.0% 1.8% 2.2% 2.0% 3.8% 3.5% 0% 0-1 YEARS 2-3 YEARS 4-5 YEARS 6-7 YEARS 8+ YEARS UNLISTED Source: Internal Data

The Right Price…..majority of consumers are not prepared to pay a premium for buying from a franchise dealer Are you prepared to pay a premium from buying from a franchise dealer? 39% Yes 61% No Research Audit & Repository Update Slide 10

The Right Price….there are regional differences in terms of what Consumers are prepared to pay as a premium from a franchise dealer Research Audit & Repository Update Slide 11

The Right Price…..of the 39% that are prepared to pay a premium 75% are prepared to pay up to £299 and 25% are prepared to pay more than £299 More than £500 extra 10% An additional An additional £300 - £500 £0 - £99 16% 29% An additional £200 - £299 An additional 21% £100 - £199 25% Research Audit & Repository Update Slide 12

However Franchise dealers price is £500+ more than Independents. As Franchise move into older age stock the price differential has been decreasing (last yr vs, this yr) Average Price of Car by Stock Band £16,000 July 2009 £14,000 £14,808 £14,556 £12,000 £12,467 £10,000 Franchised - Average Car Price July 2009 £10,787 £10,127 £8,000 £5,963 Independent - Average Car Price July 2009 £7,726 £6,000 £7,098 £6,504 £5,429 £4,000 Jul 2009 Fr-Ind Price Difference £4,763 £4,326 £3,348 £2,000 £0 -£252 £660 £628 £666 £977 -£2,000 0-1 YEARS 2-3 YEARS 4-5 YEARS 6-7 YEARS 8+ YEARS Average Price of Car by Stock Band £20,000 July 2010 £15,000 £16,111 £15,450 Research Audit & £12,787 Franchised - Average Car Price July 2010 £10,000 £11,598 Repository Update £10,806 £5,770 £9,060 Independent - Average Car Price July 2010 £8,291 Slide 13 £7,017 £5,000 £6,329 £5,630 £4,734 £3,681 July 2010 Fr-Ind Price Difference £0 -£661 £792 £769 £699 £1,053 0-1 YEARS 2-3 YEARS 4-5 YEARS 6-7 YEARS 8+ YEARS -£5,000

Furthermore the majority of consumers are searching on a national basis and hence are exposed to “national prices”. Hence understanding price specifically is key. Furthermore communicating points of differentiation are even more important given price transparency (e.g. Trust, Reputation, other products / services). Search radius AT.co.uk Consumers who selected a radius when searching on AT.co.uk (i.e. did not default search to National) Research Audit & Repository Update Slide 14

Pricing tools are going to become even more important. Market Tracker provides visibility of AT advertised price, CAP retail and CAP Trade prices and is updated daily (with AT prices) Price distribution for Ford Focus 1.6 Zetec 5 dr (climate pack) 07 Plate Research Audit & Repository Update Slide 15

An example of innovation in products and services to build trust is Guaranteed Buy Back. Of the 17% of consumers who were not planning to buy a car in the next 12 months, 58% could change their mind if a dealer guaranteed to buy back their car. Hence using products to build Trust can pull in more consumers “If a dealer guaranteed to buy back your car for an agreed price in the future, would this influence your decision to purchase?” 287,000 consumers 721,000 consumers 691,000 consumers Research Audit & Repository Update Slide 16

The majority of Consumers visit between 2-3 dealerships when making a purchase decision 9% of consumers will not visit a dealership, suggesting they buy from Friends, family or get someone else to conclude the transaction (could also be online opportunity) Research Audit & Repository Update Slide 17

Consumers, when choosing a dealership value reputation, trust and knowledgeable sales staff (enhances trust) Pushing manufacturer brands would allow Franchise to win in their segment (1-3 yr old cars), whilst Independents can price competitively in older age vehicles “What is the most important quality you look for in a dealership?” Research Audit & Repository Update Slide 18

Consumers are agnostic to dealer brands - 65% outlined the dealer brand is unimportant Does dealer branding influence which dealership you buy from? Research Audit & Repository Update Slide 19 Source: 1. Top 10 Dealer Concerns Survey launched on autotrader.co.uk September 2010

Franchise and Independent need to focus on what differentiates them to win different types of consumers in the next 12 months Franchise • Price premium achievement is more likely if messaging is based on: • Trust – manufacturer brand vs. dealer brand vs group – be clear on the value of these • Reputation – consumer user reviews • Additional Products – buy back for guaranteed price, increases consumer demand and demand that can be fulfilled via franchise dealers • Knowledgeable sales staff • What justifies the premium (warranty, checks, approved used schemes) • After sales service • Consistent brand messages • Pricing tools critical • Independent • Priced competitively, acknowledging national price transparency • Pricing tools critical • Trust, knowledgeable sales staff just as important (£425 spent on used cars after purchase to rectify Research Audit & problems) Repository Update Slide 20 • Ageing car parc, similarities in stock profile make the importance of these points of differentiation critical in the next 12 months

Creating trust through your website Research Audit & Repository Update Slide 21

Communicating trust via online stock advertising Research Audit & Repository Update Slide 22

Doing the basics well Research Audit & Repository Update Slide 23

33% of consumers are already prepared to order their new car (used and new) online….that’s potentially 3.3m transactions “Would you like to be able to order your new car online?” 3.3 million consumers 6.3 million consumers Research Audit & Repository Update Slide 24 Do sales staff seek to close the transaction on the phone or do they try and encourage the consumer into the show room?

There are regional differences, with 38% of consumers in London and the South East most likely to order a vehicle online “Would you like to be able to order your new car online?” Research Audit & Repository Update Slide 25

27% of Consumers are willing to purchase their car online “Would you consider buying a used car that you have seen online without physically seeing it?” Research Audit & Repository Update Slide 26 How would this position change if Dealer branding focused on Trust?

Maximising the opportunity in the next 12 months There is potentially a large appetite to begin transacting online The assets required to unlock the opportunity are: Right car, right price (or justification of the right price) Reputation, Trust , knowledgeable sales staff These are the same attributes that consumers value when choosing a dealership offline However consumers do not associate these assets with specific dealer brands Hence the majority are not prepared (or do not necessarily see the benefit) to pay a premium from a franchise dealer (or pay more from one franchise dealer Research Audit & thanRepository Update another) Slide 27

Maximising the opportunity in the next 12 months However Trust is built through clear brand messaging (manufacturer brands, groups, dealers - what role should each play?) Investment in optimising online advertising is key Doing the basics well (photos, clear messaging, brand values) Communicate trust on everything you do - all your advertising Don’t be afraid of user reviews, consumers are more generous than you think Re-align your thinking on brand Focus on evolution of products – e.g. guarantee buy-back, builds trust Fundamentally the market has already changed The key is to unlock the opportunity by changing the business model to benefit from the new landscape Research Audit & Repository Update Slide 28

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Auto trader consumer survey report 2010

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Auto trader consumer survey report 2010 — Presentation Transcript