European Car Sales Slump To Record Low

[Venger]

Thought this deserved a mention, and this was the most recent car-thread running.

Car buyers' incentive plan backfires in Southeast Asia's Detroit

BANGKOK | Sun Sep 22, 2013 5:16pm EDT

(Reuters) - An incentive program for first-time car buyers in Thailand has backfired with more than 100,000 indebted consumers defaulting, leaving the big global manufacturers that dominate Southeast Asia's largest auto market struggling to defend their margins.

The tax breaks, which the World Bank estimates cost Thailand $2.5 billion, were intended to revive auto manufacturing in the region's biggest car-making hub following devastating floods in 2011. But much like the U.S. "cash for clunkers" program in 2009, the incentives distorted the market, creating a boom in demand that collapsed once the tax breaks expired in December. Research from IHS Global Automotive shows around 10 percent of the 1.2 million Thais who signed on to the incentive scheme have either changed their minds or couldn't pay monthly installments.

Japanese automakers, who control 80 percent of the local market, reported a 30 percent drop in sales on average in the second quarter of 2013. Once buyers canceled, the vehicles were seized by auto finance companies and sold as used cars. "Our prices have plummeted. On average they've fallen 20 percent this year," said Narongrod Chataratipa, general manager of Center Used Car which operates two showrooms in Bangkok.

more http://www.reuters.com/article/2013/09/22/us-thailand-autos-idUSBRE98L0JJ20130922

[Eddie_George]

Thought this deserved a mention, and this was the most recent car-thread running.

Amateurs, the Thai politicians. Everyone knows that you can never expire these schemes. They must go on for ever. Just like SMI, HTB, HTB2, QE....

[JPJPJP]

Setting up PCP deals with high GFV and setting up lease deals that imply high future values is, as far as I can see, simply the car finance companies kicking the can down the road

Here is a real example

List price of car £52,450. This is on a Mercedes ML350CDI Grand Edition - the run out variant just before it was replaced with one that's a slightly different shape...

Lease cost (direct from manufacturer and with manufacturer's finance co supplying funds to the selling dealer) for 36 months and 45k miles = £19k

If that means the manufacturer is working on a 3 year old 45k mile example of that car being worth anything close to £33,450 then they are, quite frankly, living in a fantasy world.

I expect the car would be worth £16k - £19k at that point

As it is a fixed term lease, who is eating the difference?

Now we can argue about list price versus real price and what value already produced stock of a soon to be replaced model all day. But to me, this has been going on too much and for too long - the can has been well and truly kicked down the road. Unless volumes / margins start to pick up in time, that is a very risky strategy.

[Lagarde's Drift]

Indeed, this thread has me wondering what will happen to used car prices - surely they will crash at some point in the foreseeable future?

Will the car manufacturer tweak the "GFV" and demand that drivers provide a "top-up" payment to compensate for the difference?

[The Knimbies who say No]

Indeed, this thread has me wondering what will happen to used car prices - surely they will crash at some point in the foreseeable future?

Will the car manufacturer tweak the "GFV" and demand that drivers provide a "top-up" payment to compensate for the difference?

Seems likely that used car prices to be hit eventually, the first cars sold under the scrappage scheme will be 5 years old in spring 2014. Once the PPI refunds decline, there ought to be a lot of cars chasing a few buyers, unless Govt. is keen to get them off the road via another scrappage scheme or aggressive taxation changes etc.

The incentive for manufacturers to keep sales high is to set a GFV at a level which means the motorist has some 'equity' to 'put towards a new one at the end of the contracted period. Most folks will probably not be able to stump up the GFV to get themselves off the carousel, even if they wanted to, so they probably think they are getting a good deal.

[Executive Sadman]

They should ship the second hand cars to Britian to maintain prices in Thailand.

I was thinking that, so looked at prices...

http://www.thaicar.com/en_showroom1.php?GID=10000016303&customer_id=Tent1246

Nearly 30k for a ten year old one...would probably be under 5k here.

http://www.thaicar.com/en_viewpic_step2.php?band=TOYOTA&model=HARRIER&bn=3&idcar=279&type=4

One thing the UK is cheap for is second hand cars, particularly big guzzling ones.

[fluffy666]

Indeed, this thread has me wondering what will happen to used car prices - surely they will crash at some point in the foreseeable future?

Will the car manufacturer tweak the "GFV" and demand that drivers provide a "top-up" payment to compensate for the difference?

I suspect it's a way of offering discounts without appearing to offer discounts. Helps with maintaining list prices and getting the odd cash buyer.

Or the discounts appear in the sales figures 3 years after the sales themselves, which is good if you are on a annual commission based type of bonus..

[onlyme2]

Quite interesting stats here. Suspect a lot of the pickup in car sales is not only the availability of credit, but the push towards fuel efficiency, bulk of population being pushed eventuallly to the lowest price / economical small car sector. There's stats here for disposable income being spent on cars by manufacturer. "Prestige" marque data is interesting, although the purchasers have higher net incomes they are spending proportionaly more of that dispoble income to buy the brand. What happens when the second hand market is small car saturated?

http://www.creditplus.co.uk/blog/why-bmw-vauxhall-and-ford-are-dominating-the-uk-car-market-6986672/

[fluffy666]

One thing the UK is cheap for is second hand cars, particularly big guzzling ones.

It's a paradox found in used car markets. Where there are very few new cars sold - either because of general poverty or trade restrictions - used car prices are very high because used cars are scarce. Cars are kept in service until they literally disintegrate.

Whereas in countries like the UK, lots of new cars are sold, so there is a large supply of used cars and hence lower prices, and the point at which cars become uneconomic to repair comes much quicker. A lot of cars are driven to the scrapyard here.. that doesn't happen in Cuba.

[Lagarde's Drift]

Seems likely that used car prices to be hit eventually, the first cars sold under the scrappage scheme will be 5 years old in spring 2014. Once the PPI refunds decline, there ought to be a lot of cars chasing a few buyers, unless Govt. is keen to get them off the road via another scrappage scheme or aggressive taxation changes etc.

The incentive for manufacturers to keep sales high is to set a GFV at a level which means the motorist has some 'equity' to 'put towards a new one at the end of the contracted period. Most folks will probably not be able to stump up the GFV to get themselves off the carousel, even if they wanted to, so they probably think they are getting a good deal.

So, someone down the line will have to "eat" the loss, unless the government bails them out? Sounds familiar.....

It's a paradox found in used car markets. Where there are very few new cars sold - either because of general poverty or trade restrictions - used car prices are very high because used cars are scarce. Cars are kept in service until they literally disintegrate.

Whereas in countries like the UK, lots of new cars are sold, so there is a large supply of used cars and hence lower prices, and the point at which cars become uneconomic to repair comes much quicker. A lot of cars are driven to the scrapyard here.. that doesn't happen in Cuba.

Agreed. Scrapped my old car for a bunch of £20 notes because the head gasket was leaking. Would have definitely been repaired in other countries (or perhaps continually topped up with fluids).