UK Sales story

Saab of Great Britain have enjoyed the kudos that come with having several great sales years. 2005 was their best ever year and whilst 2006 will likely see a 10% drop, they’ll still be Saab’s second largest market in 2006 – and that ain’t to be cried about. Their success has been a major contributing factor in the distinct possibility that Saab may set a record this year for global sales.

Saab GB Director, Jonathon Nash, is currently lobbying for Saab’s BioPower models to be exempt from London’s congestion charge. This fee slugs drivers 8 quid whenever they enter designated zones in the city. The charge is tipped to go up to 25 quid per trip, which would make a trip into town even more prohibitive. Hybrids such as the Prius are currently exempt and Saab UK figure that with BioPower’s low fossil fuel emissions it should be exempt as well.

He may have a fair argument, but let’s be quite open here – the driving force behind the campaign is a quest for more British Saab sales. That’s his job after all.

Saab have seen great success in Sweden with BioPower as the government there has treated the ethanol industry quite favourably. 9-5 sales have increased around 26% in Sweden this year on the back of BioPower. It’s a similar story in Ireland, where BioPower vehicles are actually cheaper to buy than regular gasoline or diesel powered vehicles thanks to a cut in government duties payable on purchase. The fuel’s also much cheaper, thanks again to favourable government treatment that benefits local dairy producers (ethanol’s made from cows milk there) as well as the environment.

Back in November Saab launched it’s 2.3 litre BioPower engine in the UK and J-Nash used the occasion to call for more support for the fledgling British ethanol industry. He figures the government isn’t yet doing enough to encourage the sort of switch that will really make a difference – and he’s probably right. GB Saab dealers are quite possibly looking to their Irish counterparts and thinking “There but for the arsehat Gordon Brown go I”.

Gordon Brown recently endorsed a UK partnership for more ethanol production in Brazil, Mozambique and South Africa, though all that fuel would be used in Southern Africa. The British would just be the benevolent partner lending a hand. Still, J-Nash was all over it, grasping any positive news about ethanol with both hands and renewing the call for better government ethanol subsidies in the UK.

So why all this angst?

Well, whilst Saab has enjoyed record sales in Britain, all is not necessarily as it seems. A BioPower infusion could just be the catalyst for some genuine sales, either private or fleet, that will take some of the pressure off UK dealers.

What pressure, I hear you ask?

Like most business, selling cars is a numbers game and Saab GB have numbers piling up in sales forecourts like you wouldn’t believe. You see, a huge proportion of those record sales are actually registrations made out to the dealerships themselves, where the cars sit at some discounted prices to be sold to private owners.

I received this in an email from a former Saab employee there, who I’ll keep as anonymous:

….The main change [in Saabs sales fortunes] being that Saab GB (SGB) entered the fleet market in a big way, using the fleet selling teams of Vauxhall to get leverage in to Britain’s biggest companies and fleet operators.

The arrival of the 1.9 Diesel helped in no small way, as it had good CO2 figures for the power of the car (company cars are taxed according to their emissions of CO2 in the UK) which helped to put the car on to a lot of fleet lists. Another factor that helped the “sales” was that SGB began retailing cars to daily rental companies, which pushed up the registrations but hurt the residual sales figures of the cars; this year there will be some 3,000 cars registered in this way, which is a large chunk of the total for the year.

All of the dealers were being forced to pre-register cars (sell them to themselves to create a registration) as nobody was getting anywhere near to the retail sales targets that were imposed on us by SGB, at quarter ends we were routinely registering 120 odd cars in the last two days to get to our own targets with SGB then trying to make us do some more to plug gaps left elsewhere in the network…. Most of the dealers in the UK are losing money hand over fist as the sales growth is all in the low margin fleet business…..

…..The effect of this new type of business has been to lower residuals on used cars which (in my opinion) diminishes the brand values, as people wonder why their premium product does not hold it’s value…..

…..dealer registrations are not that uncommon in the UK, but it is the level of them that is the problem, if you look at any big UK Saab dealers website then you will see lots of ex-demo and pre-reg cars being sold, but they are being used to a greater extent now as the only way that a dealer can get a “retail” (as opposed to fleet) sale is by registering it to themselves and then trying to find a buyer. Most people are now buying new cars via contract hire, which do not count towards dealers targets for bonuses.

Jonathan Nash is under the same amount of pressure as the rest of the dealers, the person who calls the shots is Bill Parfitt, who is the head of Vauxhall and Saab in the UK and Eire, his catchphrase would seem to be “you’ll be OK as long as you hit your numbers” and so at the end of each month the people at Saab GB are desperately trying to hit whatever target that they have been locked in to, the consequences of which are that enormous pressure is put on individual dealers to register cars to themselves that it is not in their interest to do.

It gets the figures up to the required level but does not do much for the brand.

I’d had commenters here note the composition of UK sales before, and the potential effects. This was some time ago and I’m still learning a bit about the way things work. This full explanation from the inside goes a long way to pointing out what’s going on and its effects.

Any record year is a good year on the whole, but it would do Saab some greater justice to have a look at what sales are comprised of and what is needed to bring figures into the “genuine” column. I’ve got no doubt that the practices mentioned above are also happening with other companies and in other locations, but as mentioned above, it’s doing the brand a long-term disservice.

Saab GB should keep on plugging away at that BioPower exemption. If it can work the wonders that it’s worked in other markets then it could be just the temporary tonic that Saab GB dealers need to put a slight hold on those dealer registrations. Of course, some new and improved product wouldn’t hurt either, but that’s even further from Saab GB’s control zone.

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2 Comments

  1. Intersting stuff…. However there has to be a value of increasing the sales to get more awareness on the market. Saabs marketshare is still probably smaller than 0.5%, and at that level you need more cars on the street, so that more people see them – that is the best advertising you can get.

    That the dealers are pre-registering the cars is not great, but below there has to be sales, othervise there would be nothing but unsold cars with the dealers.

    I think that biopower is a great thing, and can not wait until the hybrid/biopower. Ethanol can be sold with existing dealers, does not generate green house gases etc. An electric plugin hybrid with a small ethanol engine = good for the environment and good for the image… Just hope they will introduce it soon. Maybe Detroit?

  2. UK registrations my favourite subject…
    I have commented here many a time ever since TS has been praising Saab GB for their sales success. I fully understand why Saab GB has been forced into this position but the hard truth of it all, is that in three years I have seen the current 9-3 SportSaloon increase by over £1,000 in price and also fall by £3,000 in residual value.
    To have your car lose approximately half its value in 1 year of ownership does not help sell more cars.
    There are currently a lot of customer support programs available to customers, which goes a long way in reducing the ‘money to change’ price, but more needs to be done.
    There has been talk on TS about an enhanced 9-3 due for 2008 MY. In order for this car to sell, residual values need to increase by about £3,000. If not; any Saab owner wanting to exchange their current Saab, will find the gap far from anything acceptable to complete the transaction.
    Wiping thousands of pounds off the value of a car is easy when you saturate the market with cars. Forcing Saab into Vauxhall territory is not difficult either.
    What I will take my hat of to, is when the genius of GM UK’s marketing machine claw back the £4,000 they have flushed away, continue to sell 30,000 units pa. and gain the public opinion that Saab is of Premium Class.

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