Eurotaxglass's Quarterly Market Analysis

NEW CAR REGISTRATIONS

The SMMT reported that registrations in February fell 3.2% year-on-year. In view of the fact that



registrations in this month only account for a little over 3% of total annual sales we should be



cautious about placing too much interpretation upon them. The combined results for the first 2 months



of 2007 are showing that the market has grown by 2.5% - helped by a depressed market in January 2006.



However, it is doubtful whether new sales in March - the biggest of the year - will have come close to



the total for the same month last year, with the prospect that the first quarter of 2007 will produce



a negative variance when compared to 2006.



RETAIL SALES

Dealers felt that the footfall into the showrooms improved a little from the last week in February.



Where the improvement was noticeable the issue then became one of securing the right stock and



quickly. Quite rightly, part exchanges were the first and obvious source but, as usual, they could not



be relied upon to meet short term stocking needs. Even the modest improvement in sales still left many



dealers to reflect that market conditions were slightly more favourable 12 months earlier.



WHOLESALE MARKET FOR OVER 1 YEAR OLD CAR

So far this year Eurotaxglass's have commented that the amount of buying activity has fallen a little



short of expectations and whilst this was still true in the first half of March Eurotaxglass's sensed



that the sentiment was a little more up-beat.



Not surprisingly, there was a significant increase in the volumes of part-exchanges generated from a



rise in new car demand following the arrival of the '07' plate. Fleet and leasing companies also



contributed to the greater numbers with an influx of 3 and 4 year old cars. Given that the wholesale



market has not shown significant strength or momentum so far this year there was always the risk that



the rising supply would create an imbalance with the prevailing demand. In the event this appeared not



to happen but this statement does require qualification. The demand for well presented cars of



reasonable specification, colour, mileage and provenance was insatiable. Most of the dealer overage



cars fell into this category and both the demand and the sales proceeds were often a pleasant surprise



to the vendors. The problem was that for a typical auction entry, there were too few cars matching



this description.



Taken at face value it would appear that the numbers of indifferent and below average cars had



increased relative to the better examples but, in reality, this mix had not changed significantly, it



was just that there has been a greater desire to purchase the better cars for stock. Vendors were



generally satisfied with conversion rates in the region of 80%.



WHOLESALE MARKET FOR UNDER 1 YEAR-OLD CARS

Demand for 6 month to 1 year old cars is best described as reasonable but variable. The variable



elements are dependent upon two factors: the supply of ex-rental cars offered to the trade, and the



number of self registered 3 to 5 month old cars sitting on the forecourts of franchised dealers. For



individual manufacturers' cars, demand can be anywhere between the extremes. For both these variable



elements the number of Fords - relative to their new car market share - has been low, so the trade



demand is relatively good, and a similar situation exists for Vauxhall. The converse has tended to be



true for Volkswagen and Peugeot; and for BMW it is not the ex-rental numbers that are a cause for



concern but the high number of '56' plates.



PRICES

Leaving aside the variability of the late used car market, strong competition kept prices for the best



2 to 7 year-old trade cars high, but for most other cars prices wavered a little. The difference



between a middle of the road 3 year old ex-fleet car in good condition, in an attractive metallic



colour with air con and a mileage below 70,000 could have made £750 more than a model of similar age



and mileage but inferior in all other respects. The encouraging thing to note was that the indifferent



and poor examples were attracting successful bids, which is only possible when the retail market is



performing reasonably well.



Looking at wholesale prices for 3 year old cars in their entirety, the trend of recent years is for a



month on month improvement in January and February. Whilst this has also been the case so far this



year, the rate of improvement has been more subdued. The cumulative effect of rising prices in the



first 2 months was 2.3% compared to 5.9% last year.



PROSPECTS

The market will now be handling the highest level of wholesale supply seen at any point so far this



year, because of the arrival of the '07' plate. This will also represent its biggest test unless there



is sufficient retail demand to fuel trade demand and support prices. On the evidence of retail



business transacted in recent weeks this is unlikely. However, no one is predicting anything worse



than a marginal downturn, based on the opinion that customers will be adopting a slightly more



cautious attitude to their spending. The one thing in support of this view is that the market has been



very steady in the last 6 months.



GUIDE VALUES

We believe a balanced view of market conditions translates into a 1% reduction in values this month.



Convertibles and sports coupes are expected to be coming into season and values are unchanged.



Even though values in the first 3 months of 2007 have been less robust than a year ago the residual value position, year-on-year, is still some 3% higher.



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