June 2014 - Great American Group

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Automotive Monitor
June 2014 — Automotive Monitor
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Trend
Tracker
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and the margins associated with new or expiring
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NOLVs for OEM parts increased, with
contracts. Gross margins for aftermarket
improvements driven by strong downstream
replacement parts
demand and improved stock management
customer discounts and
practices. NOLVs for aftermarket replacement
manufacturers and distributors due to increased
parts increased primarily due to strong market
competition.
due to increased
for tyre
conditions, while NOLVs for tyre manufacturers
and distributors were mixed based on industry
participants attempting to maintain gross
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Stock levels for OEM parts increased for
companies that secured new contracts.
margins while remaining competitive.
Aftermarket replacement parts exhibited
consistent stock levels due to companies
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Turnover trends increased for OEM parts due to
improving their overall stock mix. Stock levels
improved management of obsolete stock. High
for tyre manufacturers and distributors
levels of new vehicle turnover and an increase in
increased to support growth in demand.
miles driven led to increased turnover trends for
aftermarket replacement parts, while turnover
trends for tyre manufacturers and distributors
increased due to increased demand.
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Pricing was mixed for OEM parts depending on
the ability to secure new contracts. Pricing
for aftermarket replacement parts due
to an increase in discounts given to customers
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Gross margins for OEM parts were mixed,
and
for tyre manufacturers and
increasing or decreasing based on market price
distributors due to increased competition.
fluctuations, the ability to secure new contracts,
June 2014 — Automotive Monitor
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Overview
The European Union (“EU”) is the world’s largest producer of motor
vehicles. The automotive industry is one of the most significant
contributors to the EU’s economy, accounting for the largest portion of
gross domestic product and the largest number of exports. Despite signs
of recovery in the first four months of 2014, increasing 7.4% to 4.34
million vehicles sold, Europe’s car market could face price pressures.
Customer discounts increased and car sales grew at their slowest rate in
five months, down 20% from the same period in 2007, when EU car sales
totaled 5.4 million vehicles.
Industry analysts report a sharp slowdown in new
vehicle demand, after car sales grew
approximately 11% in March, partially due to the
early Easter holiday in 2013. The slower rate of
growth has cast doubt on the strength of the
rebound in demand in the coming months,
leading analysts to believe that the European car
market will continue to face overcapacity and
price pressures.
Industry analysts indicate that although Europe’s
automotive sector is showing signs of recovery
from a six-year slump, excess production, as well
as heavy discounting and incentives, continue to
distort the true level of demand.
April’s sales growth was primarily attributed to
discount incentives offered by automakers and an
increased amount of car owners replacing aging
vehicles. According to Reuters, average retailer
incentives in April increased 12% to
approximately 2,750 Euro per vehicle in the five
biggest European markets, with discounting
outpacing turnover growth.
However, despite the strong rebound in the first
four months of the year, new car registrations
across Europe were generally lucklustre in May.
June 2014 — Automotive Monitor
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Overview
Germany: New car sales in Germany, Europe’s
largest auto market, rose 5.2% in May 2014
versus the same month last year, resulting in a
3% increase in year-to-date turnover. The
growth was primarily attributed to strong sales
performance from Opel, part of General Motors
Peugeot and Citroen, as a result of strong
incentives and discounts offered to customers.
However, auto analysts at LMC Automotive
warn that an extra selling day and weak
turnover in the same month last year distorts the
year-on-year comparison.
U.K.: The U.K. posted its highest turnover
figures in May 2014 in 10 years, with turnover
rising more than 7% from a year earlier.
However, the increase was smaller than April’s
annual increase of 8.2% and March’s 17.7%
jump. Furthermore, the Society of Motor
Manufacturers and Traders indicates that it
expects car sales in the country to slow down.
Spain: Spain once again delivered the best
performance by far, with new car sales in the
country increasing 17% in May 2014 versus May
2013, and up 16.3% over the first five months of
the year. Spain’s May sales marked the ninth
consecutive month of increases. The increase
was largely driven by a government subsidy
program that allowed car owners to take a price
reduction of up to £2,000 for exchanging their
old car for a brand new one. The
aforementioned subsidy was partly funded by
the Spanish government, as well as by
carmakers.
Italy: Car sales in Italy, Europe’s fourth-largest
car market, fell 4% in May 2014 versus the same
month the prior year, with car sales for Fiat
Chrysler Automobiles down 11%. However, car
sales increased 3% so far in 2014 to 1.4 million
vehicles.
France: The automotive market in France
continues to stagnate, with car sales remaining
unchanged in May 2014 versus May 2013.
However, industry analysts project a 1% decline
in turnover for the remainder of 2014.
June 2014 — Automotive Monitor
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Overview
Country
April 2014 (Units Sold)
April 2013 (Units Sold)
% Change
Austria
Belgium
France
Germany
Italy
Netherlands
29,240
53,319
166,959
274,097
119,099
28,479
30,807
53,036
157,749
284,444
116,838
30,408
(5.1%)
0.5%
5.8%
(3.6%)
1.9%
(6.3%)
Spain
80,174
62,317
28.7%
Sweden
U.K.
27,543
176,820
24,175
163,357
13.9%
8.2%
Source: European Automobile Manufacturer’s Association (“ACEA”)
Most major automotive companies reported
positive turnover results for April 2014. Car
turnover for Volkswagen Group (“VW”), the
largest automotive manufacturing group in
Europe, rose 4.1%, with turnover for its Audi
luxury division up 1%.
Jaguar Land Rover, the U.K.’s leading
manufacturer of premium luxury vehicles,
delivered a record breaking turnover
performance in April, retailing 37,171 vehicles
in the month, up 30% versus the same period
last year. During the first four months of the
year, Jaguar Land Rover sold 161,947 vehicles,
up 12% versus 2013. In April, Jaguar Land
Rover reported a 27% turnover increase in
Europe alone.
Andy Goss, Jaguar Land Rover’s director of
group sales operations commented on April’s
performance stating, “Alongside the F-TYPE, all
three Range Rover models delivered record
April turnover performances, reflecting the
global appeal of our strongest ever vehicle line
up.”
The overall industry-wide growth in April was
aided by a 16% increase in turnover for Renault
SA, an 8.7% increase for Ford Motor Co., and a
5.2% increase for Paris-based PSA Peugeot
Citroen, Europe’s second-largest auto
manufacturer.
June 2014 — Automotive Monitor
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Overview
Opel, the German brand of Detroit-based
General Motors Co., and its sister, the Vauxhall
division in the U.K., sold 7.4% more cars in
Europe in April 2014 versus the same month in
2013.
Daimler AG’s Mercedes-Benz division, which
ranks third in global premium-vehicle turnover
after BMW and VW’s Audi, posted a 1.9%
increase in the month.
Bayerische Motoren Werke AG (“BMW”), the
world’s largest maker of luxury cars, sold 1%
more autos in Europe in April, as a 3% gain at
the namesake brand compensated for an 11%
drop at the Mini small-car marque, which is
updating its lineup.
Fiat’s European turnover rose 2% in April, with
the namesake’s brand deliveries rising 3% and
demand at its SUV division increasing 52%.
April turnover for Asian auto manufacturers
were not so promising, with 8.2% and 4.1%
turnover declines for Tokyo-based Honda Motor
Co. and Seoul-based Hyundai Motor Co.,
respectively.
Toyota Motor Corp. the world’s largest auto
manufacturer, sold 3.1% more vehicles in
Europe in April, primarily due to a 37% growth
for its Lexus brand.
June 2014 — Automotive Monitor
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Overview
According to business consulting firm McKinsey
& Company, global profits for automotive
OEMs are expected to rise by approximately
50% by 2020. The increase will primarily stem
from growth in emerging markets and, to a
lesser extent, the U.S., Europe, Japan, and South
Korea will be stagnant in terms of profit growth.
McKinsey & Company indicates that the
European OEM market will face challenges, as
according to the ACEA, the market is facing
significant overcapacity. A number of lowercost brands have recently entered the European
OEM market, further increasing competition.
The country's OEMs have announced capacity
reductions of 750,000 vehicles by 2015. Analysts
predict that if OEMs in Europe do not revise
their production footprint beyond the
announced capacity adjustments, it could be five
years before the industry gets back to its precrisis utilisation rates and related profitability
levels.
While the European aftermarket is forecasted to
post a healthy compounded annual growth rate
of 1.9% over the next four years, analysts
indicate that the future does not look as bright at
the individual product level. As a result, many
aftermarket parts manufacturers will need to
focus on product innovation.
Market research firm Datamonitor indicates that
over the next four years, aftermarket
manufacturers will start to shift their focus
towards a number of emerging markets. Russia
will become the largest tyre market for Europe
by volume, up from its previous fourth place,
and will replace Spain to join the top five
markets in both brake pad and disc volumes.
It is anticipated that other European markets
will not do so well, as ongoing high
unemployment rates will stall a recovery in
private consumption, shifting the volume
growth of some aftermarket products, such as
shock absorbers.
Price growth in Eastern European markets will
remain low as economies continue to recover
and volumes increase revenue for the
aftermarket industry.
Analysts indicate that recent legislation in
Germany will ensure that higher-priced winter
tyres are fitted during the colder months. This
will allow the export giant to retain 30% of
European tyre revenues.
Across Europe, the last two years have been a
testament to the European government’s heavy
influence on the automotive sector, as it bailed
out and subsidised the industry. However, the
original equipment supplier’s success was the
aftermarket’s sudden downfall, as scrappage
schemes throughout Europe led to a large
number of older vehicles, whose parts were due
for replacement, being exchanged for newer
cars.
June 2014 — Automotive Monitor
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Recent
Appraisal Trends
The EU’s continued economic recovery and
general austerity has led to an overall increase in
turnover and NOLVs for manufacturers and
distributors of OEM parts.
GA’s engagements exhibited mixed gross
margin trends in the first quarter of 2014. Gross
margins increased or decreased up to three
percentage points, based on market price
fluctuations, a company’s ability to secure new
contracts, and the margins associated with new
or expiring contracts.
Stock levels for companies supplying the OEM
market tend to fluctuate based on the number of
contracts won or lost from one year to the next.
In the first quarter of 2014, most engagements
exhibited fairly consistent finished good stocks,
as these products are typically shipped soon
after completion. The level of raw materials and
work-in-process stock increased to support
higher demand.
replacement parts were positively impacted by
new vehicle turnover and an increase in miles
driven.
Gross margins decreased up to two percentage
points year-over-year. Deterioration in gross
margins has been driven by an increase in
discounts given to customers, as the aftermarket
replacement parts market is typically very price
sensitive.
GA observed fairly consistent stock levels in
most engagements. Companies have increased
the level of products that are selling well, while
managing down slow-moving stock levels,
improving the overall mix.
The aforementioned factors have had a positive
impact on NOLVs for participants in the
aftermarket replacement parts sector. Values
increased up to two percentage points in the
first quarter of 2014 as compared to 2013.
NOLVs for OEM parts increased one to four
percentage points in the first quarter of 2014
versus 2013. Gains were driven by increased
turnover and improved management of obsolete
stock. Gains were slightly offset by an increase
in lower-recovering raw materials and work-inprocess.
Turnover of aftermarket replacement parts
increased up to 10% in the first quarter of 2014
versus 2013. Turnover of aftermarket
June 2014 — Automotive Monitor
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Recent
Appraisal Trends
Tyre turnovers were positive in the first quarter
of 2014 as compared to the previous year.
Demand for tyres was driven by an
improvement in new car turnovers, an increase
in miles driven, and general recovery in the
economy. However, industry participants
continue to be impacted by the reduction of anti
-dumping tariffs and increased competition.
As a result of the aforementioned factors,
NOLVs continued to be mixed in the first
quarter of 2014 as compared to 2013. Values
were positively impacted by increased turnover
volumes, but were negatively impacted by
competitive market conditions and gross margin
erosion.
The aforementioned increase in competition has
resulted in slight erosion to gross margins. In
most engagements, GA observed a relatively
small decrease in gross margin of one
percentage point due to price competition.
Stock levels have increased up to 5% year-overyear to support increasing demand.
June 2014 — Automotive Monitor
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Experience
GAEV and its subsidiaries have worked with and appraised numerous companies within the
automotive industry. While our clients remain confidential, they include companies
throughout the automotive supply chain, including manufacturers, importers, distributors,
and retailers of aftermarket, performance, replacement, and OEM parts and accessories.
GAEV and its subsidiary’s extensive list of appraisal experience includes:
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A remanufacturer and distributor of alternators
and starters for imported and domestic vehicles.
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A producer and recycler of automotive and
industrial lead acid batteries, with locations
throughout the world.
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An internet retailer of aftermarket replacement
automotive parts, including auto body and
engine parts, as well as accessories, to customers
worldwide.
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OEM parts suppliers to large automakers
including manufacturers of transmission,
interior, wheel, and accessory products.
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A distributor of replacement passenger, light
truck, and commercial truck tyres including
winter, four-season, and high-performance tyres.
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A wholesale distributor and retailer of
aftermarket automotive parts and accessories,
including engine and exhaust components such
as fuel injectors, steering and suspension parts,
oil and air filters, performance parts, shock
absorbers, chassis parts, gaskets, water/fuel
pumps, brake drums and rotors, and other
related aftermarket automotive replacement
parts.
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A designer, manufacturer, and distributor of
speciality products for the performance
automotive aftermarket, specializing in
motorcycles and boats, with products including
fuel, air, and internal engine management
systems, which are designed to enhance vehicle
performance through generating increased
horsepower and torque.
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A manufacturer and distributor of aluminium
light alloy wheels, serving three OEMs in the
automotive industry: VW, BMW, and Mercedes.
An importer and distributor of OEM replacement
parts for major brands, including the Audi,
BMW, Mercedes, Mini Cooper, Porsche, VW, and
Volvo brands.
GAEV and its subsidiaries have also liquidated a number of manufacturers
and distributors of OEM and aftermarket parts, including Midas Corporation,
Trak Auto, Smittybilt Outland Automotive Group, Inc., and American Products
Company, Inc. In addition to our vast liquidation and appraisal experience,
GAEV maintains contacts within the automotive industry that we utilise for
insight and perspective on recovery values.
June 2014 — Automotive Monitor
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Monitor
Information
The Automotive Monitor relates information covering most automotive products, including
industry trends, market pricing, and their relation to the valuation process. GAEV provides
our customer base with a concise document highlighting the automotive industry. GAEV
strives to contextualise important indicators in order to provide a more in-depth perspective
of the market as a whole. This publication will provide you with market value and industry
trends for a variety of products within the automotive sector.
GAEV internally tracks recovery ranges for parts, but we are mindful to adhere to your
request for a simple reference document. Should you need any further information or wish to
discuss recovery ranges for a particular segment, please feel free to contact your GAEV
Business Development Officer.
GAEV’s Automotive Monitor provides market value and industry trend information for a
variety of automotive products. The information contained herein is based on a composite
of GAEV’s industry expertise, contact with industry personnel, liquidation and appraisal
experience, and data compiled from a variety of well-respected sources believed to be
reliable. We do not guarantee the completeness of such information or make any
representation as to its accuracy.
About GA Europe Valuations Limited
Based in the United Kingdom and focusing on European business, GA Europe Valuations Limited delivers appraisal services that accurately
reflect the recovery value of assets such as stock, plant and machinery, accounts receivable, and intellectual property. The company is on the
panel of all primary lenders and is a trusted partner to banks, private equity houses, and asset based lenders.
14 Berkeley Street Mayfair
Lancaster House
London, W1J 8DX
67 Newhall Street
+44 (0)20 7318 0570
Birmingham, B3 1NQ
+44 (0)121 236 9992
www.gaevaluations.co.uk
June 2014 — Automotive Monitor
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European Team
Matthew Parker MRICS
Gordon Titley
Associate Director
Head of Valuations
[email protected]
[email protected]
Main 0121 236 9992
Main 0207 318 0570
Peter Bache FRICS
Helen Kendrick MRICS
Director of Appraisal
Associate
[email protected]
[email protected]
Main 0121 236 9992
Main 0121 236 9992
Ryan Mulcunry
Executive Vice President
Lester Friedman
[email protected]
Chief Executive Officer,
Main 0207 318 0570
GA Advisory & Valuation
[email protected]
Dan Edgar
(818) 746-9634
Associate Director
[email protected]
Milton Guffogg
Main 0207 318 0570
Chief Executive, GA Europe
[email protected]
Main 0207 318 0570
U.S. Team
Mike Marchlik
National Sales & Marketing Director
[email protected]
(818) 746-9306
Ken Bloore
Chief Operating Officer
[email protected]
(818) 884-3737
David Seiden
Executive Vice President, Southeast Region
[email protected]
(770) 551-8114
Thomas Mitchell
Project Manager, Automotive Parts/Petroleum Specialist
[email protected]
(818) 746-9356
Bill Soncini
Senior Vice President, Midwest Region
[email protected]
(312) 777-7945
Drew Jakubek
Managing Director, Southwest Region
[email protected]
(972) 265-7981
Jennie Kim
Vice President, Western Region
[email protected]
(818) 746-9370
June 2014 — Automotive Monitor
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