automobile distribution - bib.kuleuven.be · automobile distribution • a decreasing automobile market in a difficult economic context • D’Ieteren Auto performance affected mainly

automobile distribution• a decreasing automobile market in a difficult

economic context• D’Ieteren Auto performance affected mainly by the

drop in sales of the Volkswagen make• D’Ieteren Auto overall market share at 18.0%• continuing improvements to the quality of the

network and local after-sales service

preparing the way ahead

26

activities andresults

D’Ieteren Auto revenue amounted to EUR 1,877.6 million, a fall of 9.6% compared with2001, largely due to lower sales volumes in new cars and commercial vehicles. Thenumber of new vehicles sold was down by 16.5% to 95,900 units. The impact of this fallwas however partly offset by an improved product mix – with higher sales of Audi andPorsche cars – and the good performance of long-term car rental activities at D’IeterenLease and sales of spare parts and accessories.

D’Ieteren Auto operating profit, including the operating profit of the financial andservice activities, stood at EUR 52.8 million, down by 31.4%, leading to an operatingmargin of 2.8% compared with 3.7% in 2001. This reduction is mainly due to the fall insales volumes, sustained promotional activities and provisions among others to coverthe cost of restructuring the networks.

Net financial costs(1) fell by EUR 3.5 million to EUR 8.8 million due to a reduction in thelevel of debt and in interest rates.

The current earnings after taxes(1), group’s share, of the automobile distribution activi-ties amounted to EUR 35.6 million, down by 26.0%.

(1) After allocation of a financial result after taxes of EUR 7.5 million (EUR 7.8 million in 2001) associated with the investment in vehicle glass; anet impact of a financial cost of EUR 13.4 million (EUR 14.0 million in 2001) and a tax credit of EUR 5.9 million (EUR 6.2 million in 2001).

automobile distribution• activities and results• strategic developments • prospects

Key figures(in EUR million) 2002 2001 Var.

New vehicles (units) 95,900 114,896 - 16.5%

Revenue 1,877.6 2,076.3 - 9.6%

Operating profit 52.8 77.0 - 31.4%

Operating margin 2.8% 3.7% - 0.9% pt

Profit before taxes 44.0 64.7 - 32.0%

Current earnings after taxes (1), group’s share 35.6 48.1 - 26.0%

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VEHICLE SALES

A decreasing automobile market - Themarket for new cars in Belgium shrankby 4.3%. Following four good monthsafter the Motor Show in January, salesdeteriorated, recording a fall of 12% inthe second half of 2002. In total, 467,569new cars were registered comparedwith 488,683 in 2001.

The commercial vehicle market wasdown by 16.4%. This fall extended to allsegments of the market up to 6 tons.

The contraction of these two markets islargely due to the deterioration in theeconomic context, which resulted in areduction in expenditure, particularly inthe company fleet segment. The post-ponement of investments to replaceageing vehicles aggravated this down-ward market trend. Faced with this situ-

ation, all makes in the Belgian marketimplemented various sales promotioncampaigns in order to sustain sales,thereby increasing the already fiercecompetition in Belgium.

D’Ieteren Auto market share at 18.0%In the new car market, the total shareof D’Ieteren Auto fell from 19.8% in2001 to 18.0% in 2002.

The expected downturn in market shareis mainly due to the Volkswagen make,which represents more than half of newregistrations for D’Ieteren Auto. Themake saw its market share eroded inthe majority of European markets. InBelgium, its market share in 2002 stoodat 10.0% compared with 11.9% in 2001,due to the late renewal of its currentrange and its absence from the keymarket segments of small people

carriers and 4x4, which together repre-sent 17% of the Belgian market.Another factor was the temporary pricegap between Volkswagen and thecompetition following moves made byVolkswagen to harmonise its pricesacross Europe. The new modelslaunched during the last four months of2002 had only a marginal impact onsales but made an important contribu-tion to the Volkswagen make image.These models are the Phaeton, a veryhigh-class model, and the 4x4 Touareg,launched respectively in Septemberand December 2002.

Despite the weak market, the Audimake had a record year, consolidatingits position in the luxury make market.Its A4 range, renewed in 2001, regis-tered strong growth in new registra-tions compared with 2001, substantially

Breakdown of revenue by activity (in %)

2002 Var.

New vehicles 72% -12.4%

Used vehicles 10% -9.8%

Parts & Service 8% +3.7%

Garages 2% +3.1%

D’Ieteren Lease 5% +12.6%

D’Ieteren Sport 3% -7.2%

D’Ieteren Auto -9.6%

600,000

400,000

200,000

0

20

15

10

5

093 94 95 96 97 98 99 00 01 02

Market of new cars and market share of D’Ieteren Auto over 10 years

marketmarket share

18.0

17.9

19.6

19.8

20.5

19.8

20.1

19.6

19.8

18.0

375,

409

387,

348

358,

868

397,

359

396,

240

452,

129

489,

621

515,

204

488,

683

467,

569

%units

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Market share of the distributed makes (new car registrations) (in %) 2002 2001 2000 1999 1998

Volkswagen 10.00 11.94 12.34 13.10 12.45

Audi 4.26 3.86 3.45 3.58 4.11

Seat 2.25 2.45 2.68 2.44 2.29

Skoda 1.38 1.47 1.03 0.88 0.85

Bentley / Lamborghini – – – – –

Porsche 0.13 0.10 0.11 0.11 0.13

Total D’Ieteren Auto 18.02 19.82 19.61 20.11 19.83

increasing its market share in the fleet segment. The new A4 convertible and A8models launched during the second half of 2002 reinforced its luxury image of themake, but without generating large sales volumes.

The market share of Seat was down to 2.25%, although the number of registrationsremained above 10,000 units. The new generation of Seat models arrived on theBelgian market with the launch of the new Ibiza in April and the Cordoba in September2002. The arrival of smaller engined versions in January 2003 enhanced the attractionof the make amongst young motorists.

Despite falling sales, Skoda achieved its objectives for 2002, thanks to a sustainedmass-market communication campaign, actions towards fleet managers and a dynamicsales policy. The Fabia, in a range of different versions, remains the flagship modelwith more than 50% of registrations for the make. The Superb, launched in May 2002, isabove all an image builder for Skoda, helping to improve the make awareness of theentire range.

The prestige makes Bentley and Lamborghini, which have been gradually extendingthe D’Ieteren Auto portfolio of makes since 2000, enable it to penetrate the highlytargeted luxury niche. The distribution of Rolls-Royce, a make which left theVolkswagen group, came to an end in late 2002.

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Porsche put in an excellent perform-ance in 2002. Its outstanding model, the911, generated record sales volumes.The make is confident in the success ofthe new Cayenne, launched in Belgiumsince January 2003. This prestige 4x4extends the range and enables it topenetrate a new niche market.

In the commercial vehicle market up to6 tons, D’Ieteren Auto’s overall marketshare, achieved through theVolkswagen, Seat and Skoda makes,stood at 11.3% compared with 12.3% in2001. The competitive position ofVolkswagen in this market has beenunder pressure due to its limited rangeand the delay in renewing its models.

In the new motorcycle market – whichimproved slightly in 2002 (+ 1.3%) with

21,503 registrations – the Yamahamake, marketed by D’Ieteren Sport,maintained its second position with ashare of 20.1% (20.3% in 2001). The50cc scooter market saw a furtherslowdown in 2002 (- 11.3%). With itsYamaha and MBK scooters, D’IeterenSport has been the leading supplier formany years. Over 2002 as a whole, thisD’Ieteren Auto subsidiary achievedturnover of EUR 53.9 million, down by7.2%, covering sales of motorcycles,scooters and quads, as well as acces-sories and spare parts for two-wheeledvehicles.

automobile distribution

(1) VW, Seat and Skoda light commercial vehicles up to 6 tons

45,000

30,000

15,000

098 99 00 01 02

Commercial vehicle market andD’Ieteren Auto market share(1)

marketmarket share

20

15

10

5

050,2

54

58,1

80

54,1

22

58,1

38

48,5

91

15.2

13.9

13.7

12.3

11.3

%units

22,500

15,000

7,500

098 99 00 01 02

Motorcycle market andYamaha market share

marketmarket share

20

15

10

5

021,5

53

28,0

61

25,3

19

21,2

29

21,5

03

16.4

19.8

21.1

20.3

20.1

%units

30

Sales of used vehicles slowed down in2002, mainly due to a fall in the numberof vehicles purchased from short-termcar rental companies. In the recent carmarket (1 to 5 years old), “My Way”, thesales centre of D’Ieteren Auto, sold1,577 cars, all makes combined.D’Ieteren Auto pursues its efforts tostrengthen this innovative conceptlaunched in April 2000.

ADDITIONAL ACTIVITIES

D’Ieteren Lease offers its customerslong-term car rental formulas as well asfinancing and financial leasing pro-ducts. Its business grew strongly in2002, with turnover growth of 12.6% toEUR 85.1 million. On 31 December 2002,it had a fleet of 14,622 vehicles. Its

financial leasing and financial products,sold in partnership with ING LeaseBelgium and the Volkswagen Bank, areenjoying growing success.

Sales of spare parts and accessories tothe networks, mainly by the Parts &Service department, generated arevenue of EUR 152.5 million. This is upby 3.7% compared with the level in2001. Sales of accessories sufferedfrom falling sales of new vehicles whilstsales of spare parts were favourablyimpacted. This is largely dependent onthe number of vehicles in circulationdistributed by D’Ieteren Auto – namely891,518 cars and 48,443 commercialvehicles on 31 December 2002 – and isunaffected by economic fluctuations in

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Evolution of the “Block Exemption” - The new European regulation concerning auto-mobile distribution came into force on 1 October 2002. In the so-called “selective”system, chosen by the majority of manufacturers, certification of members of thedistribution networks providing sales and/or after-sales services depends on theirability to satisfy certain qualitative and/or quantitative criteria necessary to guaranteethe quality of the service and the safety of products.

The contracts concluded by D’Ieteren Auto with its dealers will be reviewed in 2003 inthe light of these new rules, along with the implementation of the make separationpolicy recommended by the Volkswagen group.

Separation of the Volkswagen and Audi makes - This move is based on the desire topromote the image of each make to ensure optimum development of its individualpotential, in response to growing demand for targeted personalised services providedby specialised professionals.

A successful separation of the two makes requires different conditions, including the needto provide the dealer with the business potential necessary to ensure his profitability,whilst preserving local sales and after-sales services for the customers.

automobile distribution

strategic developments the automobile market. It is a vital partof the automobile trade and acted in2002 as a stabilising factor in theresults of D’Ieteren Auto.

The exclusive service formulas devel-oped by the department (the WECAREmaintenance contract and theWECOVER insurance contract) areenjoying growing success. About 15,500WECARE contracts and 1,200 WECOVERcontracts have been concluded sincetheir introduction in 1998 and 2001respectively. These services contributeto customer satisfaction amongstpeople looking for a global service.

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The selected dealers have the financialsolidity and management capabilitiesnecessary to make the investmentsrequired for make specialisation. Anextended showroom displays a widerrange of cars, with architecturereflecting the image and values of themake, will enable them to generategreater sales potential. The ongoingtraining and sales team assessmentprogramme is complemented by regularcustomer satisfaction surveys. The busi-ness capacity of garages will also beextended, in particular to deal withgrowing overload resulting from thereduction in number of dealers. Localcoverage of after-sales service andsales of accessories will be retainedthrough the creation of Shop & Servicecentres. About forty of these decen-tralised units managed by the dealer forthe region in which they are located will

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be created between now and 2007. FourShop & Service centres were opened in2002.

In the field of commercial vehicle distri-bution, a market with huge developmentpotential, D’Ieteren Auto is looking forspecialisation and more extensivemarket coverage. D’Ieteren Auto intendsto boost its presence through a targetedprospecting policy, greater expertiseand improved operational flexibility inthe network. These developments arebeing pursued, having in mind the forth-coming renewing of pratically the entirecurrent Volkswagen range. The newTransporter and Caddy models, sched-uled for respectively summer 2003 andthe first half of 2004, are aimed at abroader target audience, both profes-sional and private.

Reinforcing the Seat and Skodanetworks - D’Ieteren Auto also wishes

to improve the image and boost thequality of Seat and Skoda services. Theoptimisation of the number of points ofsale continues, with the presence ofboth makes in every major consumerzone in the country. Significant invest-ments have been made by the dealersto comply with factory requirements.These investments cover both the salesinfrastructure and the tooling neces-sary to provide high quality after-salesservice.

Intensification of the role of D’IeterenAuto - The expected greater diversity ofranges, the increasing technicalcomplexity of vehicles and the growingdemands of consumers are the reasonswhy D’Ieteren Auto is determined toreinforce the role of an effective distri-bution coordinated at national level. Itsaim is to extend the services providedto its partners in order to boost their

skills and to increase their competitive-ness.

Measures taken therefore include theintensification of training coursesdispensed at the D’Ieteren AutoTechnical Training Center. The skills oftechnicians are now validated by a qual-ification certificate, based on anaverage of 2.5 training days a year. Thelevel of training is scheduled to growover the coming years to an average of5 training days a year per person in2005.

Rapid deliveries of spare parts to thenetworks, at least once a day, and therigorous preparation of orders also helpto improve the quality of after-salesservice throughout the networks. Theexcellent performance achieved by theParts & Service department in this fieldis held up as an example by the manu-facturers. It has been achieved through

automobile distribution

teams trained in customer satisfaction

34

constant innovation, higher staffproductivity and the deliberate use ofnew technologies.

Modernisation and specialisation ofthe services in the Brussels agencies -In parallel with its role of providingnetwork leadership, D’Ieteren Auto isactive in the Brussels region, whichhas the highest concentration of vehi-cles in the country, through 7Volkswagen and Audi agencies, 1 SeatCenter, Bentley Belgium and 1 Porscheagency. This approach gives D’IeterenAuto a direct access to the market.

An after-sales service quality improve-ment programme is currently beingcarried out in the Brussels agencies.This project sets out to bring markedimprovements to customer satisfaction

levels and to forge a quality image forthe services provided by the agencies.This project goes hand in hand with thespecialisation of agencies. Transfers ofmakes will take place progressively,creating new pilot units by make. 2002saw the Porsche agency move to newpremises on the edge of Brussels bettersuited to the make’s new requirements,and the creation of the first Shop &Service run by a D’Ieteren Auto agency.This will enable it to handle thegrowing demand for mechanical andbodywork repairs.

Major investments continue despite thedifficult market conditions, showing thedetermination of D’Ieteren Auto to rein-force its quality and quantity leadershipin the Brussels region.

35

Volkswagen

Touran spring 2003

Touareg 2.5 TDI spring 2003

New Beetle convertible spring 2003

Phaeton V10 TDI spring 2003

Transporter summer 2003

Golf automn 2003

Caddy 1st half of 2004

Audi

Audi A3 spring 2003

Audi A4 S4 spring 2003

Seat

Ibiza Cupra R winter 2003

Leon Cupra R 2004

Skoda

Octavia spring 2004

Bentley/Lamborghini

Bentley Continental GT winter 2003

Lamborghini Gallardo winter 2003

Yamaha

Fazer 600 2004

Fazer 600 naked 2004

XT660 2004

XT660 supermotard 2004

Porsche

911 GT3 spring 2003

Carrera GT automn 2003

Calendar for the launch of new models 2003 – 2004

automobile distribution

prospectsThe beginning of 2003 was marked by a major crisis of confidence amongst consumersexpecting the Iraq conflict. As in the rest of Europe, the deterioration in the economyshould continue to make households, companies and fleet managers postpone majorexpenditure. As a result, the new car market is expected to achieve 450,000 new regis-trations, down by 5% compared with 2002.

In 2003, D’Ieteren Auto aims to achieve a market share of more than 18%, backed by adynamic sales policy of launching special series cars and the arrival of the smallpeople carrier, the VW Touran, scheduled for the second quarter of 2003.