Fleet Focus: Sweden

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Brian Madsen, Autorola Sweden’s country manager explains the massive hike in sales in June and how export is helping balance a restricted demand for used diesels.

June signalled a major change in the Swedish new car market

June signalled a major change in the Swedish new car market recording the best-ever sales month in the country’s history. In total, 66,244 new cars were sold in June – a 73% increase – on the basis that the government has introduced new incentives for low emission cars in July, which would, in turn, penalise more polluting vehicles.

Inspired by the French system, the price of new cars is set to rise as well as the cost of ownership if you have a diesel car or larger petrol engine model. Despite that, 2018 is projected to be another strong new car year with 380,000 sales forecasts, as the buoyant Swedish economy enables consumers and corporates to continue to replace cars on a regular basis.

 

Strong brands in Sweden

Not Surprisingly, Volvo is the biggest marque, accounting for 21.6% market share followed by Volkswagen at 15.2%. They are well ahead of manufacturers such as Toyota (5.9% market share), BMW (5.5%) and Kia (5.4%). The Volvo S90/V90, the Volvo XC60 and the Volkswagen Golf are the current best-selling cars.

Diesel cars have been falling in popularity for some months accounting for 40% of new car volumes in June 2018 as opposed to 50% in June 2017. Only the major fleets tend to lease diesels now with the country’s focus on plug-in hybrid and petrol models. Monthly diesel contract hire rentals are creeping up on the back of lower residual values as domestic demand for used cars continues to fall.

This situation has caused a major challenge for dealer groups as they continue to receive a high percentage of used diesel cars back from private leases. One in four new cars is now underwritten on a private lease and you can secure a brand-new car for as little as €200 a month, which puts pressure on used cars that are priced at a similar level when bought on finance.

Autorola is helping dealer groups and leasing companies to analyse and plan the right remarketing strategy by using smart data. By translating the vendor’s market data on stocking days, prices and vehicle volumes, we can plan which country to sell the cars in to optimise prices. Our job is all about working with the dealers to solve market conditions where supply exceeds demand. We are not trying to solve the problem once the used car has come back at the end of its contract, but identifying which cars are coming back and when and then starting to pre-sell the cars.

That means turning to a wider European market and export. Currently 95% of used car sales on our online portal are being exported to other European countries. Export is solving a countrywide problem and dealers are receiving a good market price for their cars. We are proactively selling cars which is keeping stocking days very low and prices high in what is a very difficult market.

 

Vital dealer insights

Autorola’s Indicata real-time used vehicle management portal is providing strong dealer insights into key metrics such as local market prices and demand. Autorola can help dealers identify which cars are struggling in their current region and the current volumes available. Based on these insights the dealer can immediately decide whether to export a car or put it on their forecourt at the end of a lease contract.

This point is relevant to all cars, not just diesels. These insights are proving powerful for OEMs on a national basis as it can help them keep the national supply of used cars under close control, including management cars or rental buy backs, as well as national dealer stock. We like to call it retail driven, wholesale where high supply and low consumer demand immediately pushes the used cars into the wholesale market.

The Swedish market experienced a 43% growth in EV and plug-in hybrid sales in June and cars such as the Golf GTE are becoming very popular. Like so many countries, the charging infrastructure is still in its infancy with charging points springing up in retail shopping malls and fast food outlets with the offer of free electricity being offered by retailers.

Autorola has started to see Golf GTEs come back into the Swedish used market and has already exported cars to Denmark, Norway and Holland. Swedish consumers are very well informed and they do a great deal of homework online to evaluate used car prices. They know what they want and what they will pay for a car before even setting foot inside a dealership, even though generally from region to region prices are consistent.

Drivers can be very fickle and will travel 150km to view a used car if it means saving a few thousand Krona. INDICATA is being used by dealer groups to help adopt consistent pricing for stock to ensure dealers in different towns don’t compete with each other.

Indicata enables dealer groups to adopt specific pricing on high demand models safe in the knowledge that they are not undercutting each other. A group used car manager can analyse the situation on a daily basis and will quickly liaise with a dealer if they are falling out of line with group strategy and reducing prices.

 

Sweden economics

According to preliminary figures released by Statistics Sweden on 30 July, the country’s economy expanded a notable 1% over the previous quarter in seasonally-adjusted terms, up from Q1’s revised 0.8% figure (previously reported: +0.7% quarter-on-quarter) and double market expectations. Growth reached 3.3% in working-day adjusted year-on-year terms, matching the prior quarter’s figure. However, the Q2 figures are likely to be revised down in the coming months, as sequential data for the quarter–from the services PMI, the manufacturing PMI and the Economic Tendency Survey–had not pointed to such a strong outturn.

The domestic economy performed well in Q2. Despite weaker consumer sentiment, private consumption growth was a robust 0.9% quarter-on-quarter, likely supported by a healthy labor market and wage gains.

The external sector strengthened in the second quarter. Exports of goods and services were up 0.5%, likely supported by solid activity in regional trading partners, while imports dipped 0.1%. As a result, the external sector contributed 0.3 percentage points to growth, following a 0.4 percentage-point subtraction in the first quarter.

Going forward, growth is likely to continue outpacing the EU average, as high capacity utilisation and strong sentiment spurs business investment, export growth stays solid and fiscal policy becomes more supportive. On the downside, the weaker housing market will likely dampen residential investment. Downside risks stem from elevated household debt levels–particularly once monetary conditions tighten–and greater global protectionism.

The economy likely lost some steam in the second quarter, although fundamentals are still healthy. Both the services and manufacturing PMIs averaged lower in Q2 relative to Q1, despite remaining well in positive territory, while annual growth in industrial production also shifted into a lower gear in April and May following a stellar first quarter. The economic tendency indicator paints a similar picture; readings are below the highs seen at the end of 2017, but still point to robust economic activity. Furthermore, the labour market is firm, with the smoothed unemployment rate at a multi-year low and strong employment gains in April and May. However, consumer confidence dropped to a near two-year low in June, likely influenced by recent softness in the housing market. Property prices resumed their month-on-month decline in the same month following a brief rebound, and were down over 4% in annual terms.

Looking ahead, growth should be brisk, supported by strong exports, fixed investment, and a more expansionary fiscal stance. In addition, higher wages should aid private consumption, despite more pessimistic consumer sentiment. However, weaker housing investment will likely dampen activity, while elevated household debt poses a downside risk. FocusEconomics panelists see GDP rising 2.6% in 2018, unchanged from last month’s forecast, and 2.1% in 2019.

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