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Too many products?

10th December 1983
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Page 63, 10th December 1983 — Too many products?
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Which of the following most accurately describes the problem?

After years of stability on the British coach market the influx of continental coaches in the eighties has had an unsettling effect in terms of design, market share, prices and profitability. David Wilcox finds out how the dealers view the coming season. A return to stability is what they want

COACH OPERATORS who are currently in the happy position of finalising their vehicle orders for next year have a wider choice of chassis, bodies and integral machines than ever before. The appearance of all these new and eye-catching coaches with a high floor and even higher specification gives the impression that selling coaches is a good business to be in right now. But a closer look shows that beyond the warm glow cast by the new on-board video the picture is not so rosey.

Road service licensing deregulation in October 1980 undoubtedly injected new life into coaching, spawning new express services, excursions and continental work like South of France shuttles.

This change not only meant more coaches but also meant a move towards heavyweight coaches to cope with the higher mileages and extended motorway running. And along with heavyweight chassis came high-floor bodies to offer the much-needed luggage space, plus all the other refinements such as videos and toilets and coffee machines that have become part of coaching in the 80s. So in the last few years the dealers have been busy helping operators enlarge and upgrade their fleets.

But the signs are that this mini-boom has run its course. Coach sales this year have virtually levelled off and the general expectation for next year is for a slight downturn. Excluding direct sales from chassis menufacturers_to public sector operators, coach sales this year will total around 1,600.

Aiming to win their share of this market are at least 11 chassis manufacturers, 12 bodybuilders and eight integral coachbuilders, their number swelled by the continental manufacturers that have joined the fray recently.

Does jostling for a share of a shrinking market add up to healthy competition or economic folly? It is the coach dealers who stand in the middle and who, one way or the other, will feel the effect. So what is it like to be a coach dealer as 1984 breaks?

Glasgow dealer Cotter's goes into the New Year with a new name — Caledonia Coach Sales and Services. Its managing director Ray Daniel places his company in fifth position in the league table of coach dealers, with a turnover this year of around E9m. Like most of the other large dealers Caledonia is a multi-franchise concern, supplying Volvo, Daf and Ford chassis plus Van Hool, Plaxton and Duple bodies, It can also supply Reebur minicoaches and the Ford-based Quest 80 chassis.

In Ray Daniel's view that is "quite a few" franchises but neverthelss a sensible compromise. "There is obviously safety in numbers but I think that it can be dangerous to have too many." He explained that a really wide range of franchises does not guarantee increas. sales but does entail far great stocks of spare parts, demor trators and vehicles. The mon tied up in these can drag a bu ness down, or even under, L less each franchise worthwhile.

Which franchises are held equally important: "We WE fortunate in having Volvo a Van Hool right from the star said Ray, "so we were nic( placed for the move towar heavyweights in the last.cour of years." But he believes t switch towards heavier, higlspecification coaches has mc or less peaked. "I think the b. is over now. Those operatc who wanted to move up marl have probably already done and I can't see coaches genera getting any higher or bet equipped."

This year Caledonia has s( around 100 new coaches a Ray Daniel expects to be able do the same next year as w Considering the total size of 1 British market, he described it "tremendously over-sut cribed" with chassis and bol builders which has lead to so' excessive discounting this ye "You can operate with thE very small margins if you get • volume of sales but not in day's shrinking market."

Ray Daniel said he tries point out to operators t screwing the dealer into i ground for a discount may r be the wisest move in the lor term if he wants after-sales s vice and spare parts in I future. He puts great empha on this aspect of a coa dealership and said that thi are plans to expand the Cale( nia workshops (which are shared with Cotter's Tours).

Another reason why R Daniel expects UK coach sales next year is the effect of the ger life cycle that is budget for with the new ivyweights. Some of the rators who bought lightights and renewed them :ry two years now run vyweights on a four or five

r replacement cycle, so the -nber of coaches being Aght is correspondingly er.

ut this lower frequency of !s is not off-set by a higher -k-up on each transaction ipetition between dealers s not allow it and Ray Daniel I that a more expensive ch does not necessarily earn -e profit for the dealer.

dmething that is yet to be :overed in this country is the Dridhand value of the latest ispecification heavyweights, :icularly the integrals. A Neo

Skyliner or a Van Hool Asnega will look pretty silly on 3o1 contracts.

ay Daniel thinks the answer in refurbishing, provided the standard of body conction will allow a second life, hopes that his workshops

find themselves taking on -e of this type of work in 's to come.

espite the recent prolifera of high specification luxury :hines Ray Daniel does not k it is the end of what he is the "bread and butter" h. "I think to a certain extent

these things are cyclical," :;ommented and would not urprised if demand for lower -...ification coaches returned. donia is to handle the Alexer TC body, launched at last ith's Scottish Motor Show, n alternative to the Laser and Dasic Paramount.

Dnsidering the size of the ket and the number of chas and bodies on offer Ray iel believes that competition become just too hot and that of the big dealers will go er. "It's got to happen. The istry must slim down."

ne type of coach dealer that Daniel finds unacceptable is coach brokerage style of ration. These dealers aim to the buyer and seller of a coach in touch with one her in return for a fee or mission.

though they are not gener involved with new coach s Ray Daniel was still critical heir operation: "They are sites," he declared, claiming they take their money on a but accept no responsibility offer no after-sales service. , he added, by helping the of used coaches they allow e operators to become cash buyers of new coaches and in a position to haggle for a larger discount.

To find out if these allegations are fair or not I visited John Cole of Viewbond in Guildford, the leading example of this type of dealer. An ex-finance man, John Cole started Viewbond in 1981 to marry up the requirements of used-coach buyers and sellers. By keeping his involvement to the minimum he figured his margin would be far lower than the conventional dealer, to the benefit of both parties.

Viewbond does its deals in one of two ways. In 90 per cent of cases Viewbond, having introduced buyer and seller, will actually buy the coach and then immediately resell it at a higher price to the buyer. How much does Viewbond make on the deal? Said John Cole: "On average we have a mark up of about £3 5 0 per unit. Occasionally it might be as high as £1,000 but it's only £100 in an awful lot of cases."

The other method of sale used in a minority of cases is on a commission basis.

One of Viewbond's representatives will normally inspect the coach before it is offered for sale and will advise on a price. It will then join the 200 or so vehicles on Viewbond's books and some of these coaches will appear in an advertisement in Coach mart.

Potential buyers contact Viewbond who arranges a meeting between buyer and seller. John Cole said that sometimes Viewbond may advise a purchaser that a particular coach is not the best buy. He will not take on re-bodied coaches for sale unless the reason for rebodying is known and can be revealed to the buyer. Nor is he too keen on accepting AEC Reliances for sale since he said they are becoming difficult to shift.

By using Viewbond as a sales medium the selling operator can continue to use the coach while it is on the market; it is not stood on a conventional dealer's forecourt.

The business of nationally advertising the coach is also removed since Viewbond does this and will often bring the buyer to view the coach. Because Viewbond buys the coach before re-selling it to the operator this releases the seller from legal contractual obligations to the next operator.

As far as the buyer is concerned, Viewbond is a centralised source of used coaches and so eases the business of searching for a vehicle. It also has arrangements with a finance company.

John Cole claims that Viewbond's prices will normally undercut a conventional dealer's because of the inherent economies of his type of operation. "We have no large premises to pay for and we don't have money tied up in a stock of used coaches standing in the yard." He went on to point out that coaches deteriorate when they are left standing on a dealer's forecourt — "it's far better for the buyer to see the coach still working."

John Cole is well aware that some conventional dealers are suspicious of Viewbond but claims their criticisms about lack of back-up service and no comeback after the sale are not valid. He said that not all dealers can offer any real after-sales service such as repairs and breakdown facilities — they will arrange for these to be done elsewhere in the same way as Viewbond would. "Besides, we actually work for some conventional dealers and their used coaches appear on our books!"

Since it was set up in 1981, Viewbond has sold close on 300 coaches although 1983 has not been so healthy and Viewbond sales have dipped. Acknowledging that the new market will be smaller next year, John Cole said that it is difficult to predict how the used market will fare; it may suffer a similar fate or conversely some new coach business might be transferred to the used market in the shape of late heavyweight coaches that can be re-registered with a cherished number to disguise their age.

John Cole too expects one or more coach dealers may collapse. He believes that his type of low overhead operation will put him in a stronger position than some conventional dealers — "big premises and stocks will be a millstone". But he also suspects that the larger dealers' creditors will keep them afloat and that it could be the smaller ones who are under the greatest threat.

A fresh venture for Viewbond was to take on a new vehicle franchise in October, namely MAN-VW. Until then MAN-VW had been handling the sales of the SR280 integral models direct from its Swindon base. This meant an involvement with purchasing and re-selling used models as well and MAN-VW thought that this was not a good policy for an importer.

Head of MAN-VW coach sales in the UK Richard Noy told me that the company therefore took a long, hard look at the dealership scene before deciding on a new way of selling the SR280 high and low-deck integrals.

Richard Noy said that the company decided that using conventional multi-franchise dealers was not the best way: "They are like supermarkets. We didn't think we would get the brand loyalty from them when they are selling so many other manufacturers' products as well."

Instead, MAN-VW looked for dealers who were prepared to operate a sole franchise for them and so signed up Viewbond to look after the South and Tony Andrews (PSV) Sales in Ayrshire for Scotland and the North.

Tony Andrews already stocks spares and offers service but Viewbond is so far persisting with its sales-only philosophy; any warranty work will be directed through MAN-VW truck dealers. MAN-VW appreciates that this arrangement might not be popular with some coach operators and Viewbond's John Cole confirmed that he is examining the feasibility of setting up an MAN-VW coach centre to provide sales, service and spares in the South.

The insistence on a sole franchise can be dangerous. Wolverhampton dealer Don Everall PSV Sales pulled out of new and used coach sales last month "because of the state of the market" but it is no secret that being dependant on Ford for its only chassis franchise did not help matters.

Recognising this, Richard Noy said that MAN-VW would "view sympathetically" either Viewbond or Tony Andri wanting to take on another f chise, providing that it was in direct competition with SR280. Viewbond has alrE been approached to take another foreign franchise though John Cole has ye make a decision about it.

Someone with some very nite views on the co dealership scene is PI Newman of Ensign Bus in I leet. He is much in agreer with Ray Daniel of Cale& "There are too many dealers too many products. I hope( had seen the end of Mi Mouse prices this year I don't think we have."

He went on to say that I are too many foreign man turers and bodybuilders have entered the UK bec their home markets depressed. But they have h resort to "buying their busir over here, almost "dumr their products to ach volume. Declared P Newman: "Nobody can IN nothing. You can't surviv margins that low."

Ensign Bus is sole cones naire for Berkhof bodies Holland; in the last registi year it sold 50 which is cic half of Berkhof's entire pr.' tion. Peter Newman expe( be able to surpass this current registration year, I ing Volvo, Leyland and Daf sis.

In addition to the BE concession Ensign Bus is buying ex-London Tran Daimler Fleetline double rs. It modifies them as required usually changing them from ivo door to one door and upeating them — before reselling "Nobody can survive selling 0 or 30 coaches a year" said eter Newman, "and that's all ome of these foreign manufacJrers can do irethis country." He ast some doubt on the secondand value of some of the newer reign coaches in the UK and aid that buy-back promises are at to over-valued — if the aaler/concessionaire has failed

the manufacturer has with-awn from the UK the buy-back -omise is worthless.

He agrees with Caledonia's ay Daniel that the refurbishent of good heavyweight )aches could well become immon practice; dealers who ) not have the facilities to offer is type of work will suffer said ater Newman. Sales alone will A be sufficient and service will the name of the game.

Ensign Bus therefore already ,ncentrates on this, and is ex'riding this aspect by appoint Graham's Bus Service of aisley as Berkhof spares )ckists and is shortly to antunce other stockists in the n-th and Midlands.

Peter Newman disagrees with iy Daniel on some other ints. For instance, he does not lieve that integrals will be the iy forward, questioning the rability of those built by bodyilders using a collection of aprietary components.

le also thinks that the days of 3 lightweight have disapared for ever and that coaches I continue to move up-mar. "We've seen nothing yet" he d, listing features he expects see in coming years; air-cononing, proper sleeper seats, Jble deckers on three axles, ger life vehicles.

ooking forward to the next ir or so, Peter Newman also iects one or two of the fairly je coach dealers to either colse or be taken over. In the In term he said that this ..11d drive down used-coach ces because dozens of ches would be sold by the aivers at rock-bottom prices I this in turn could put some the smaller dealers out of mess.

ut in the long term, a reducin the number of products dealers would be beneficial: Vvould bring stability and I k that's what the coaching Iness needs right now."

an established importer of tinental coaches, the Lough)Ugh-based Moseley Group be in a good position to assess their arrival in the UK. It does hold conventional dealer franchises for Daf, Volvo, Van Hool, Duple, Plaxton and Reebur but is best known for importing the Portugese Caetano bodies sold here under the Moseley name and for the Bova integrals from Holland.

Moseley marketing director Aubrey Martin said that Moseley should be regarded as a manufacturer since it has a substantial shareholding in Bova.

Aubrey Martin believes that the success of the Bova since its introduction into the UK in 1981 — over 200 have been sold — encouraged other continental manufacturers to try their hand over here. "They had depleted markets in their own countries and too many vehicles in stock. So they came over here thinking Britain was a bottomless pit. They've been proved wrong."

He thinks things will be even tougher next year. "The days when you bought a lightweight, ran it for a season and then sold it for a profit because of inflation are over. Those sales just aren't there now."

Aubrey Martin is convinced that integral construction will become the accepted method of coachbuilding and already 75 per cent of Moseley's sales are integral — the Bova Europa and new Futura, the Duple-bodied Bova Calypso and the Van Hool integral models.. The good power to weight ratio of an integral plus its ability to provide plenty of uninterrupted luggage space without the need for excessive dragcreating height are factors which Aubrey Martin believes will win an increasing market share for integrals.

While agreeing that the dealer of the future will have to offer maintenance and repair facilities he is not convinced that refurbishment will be the way of getting the most out of heavyweights.

He cites the example of the new bulbous-fronted Bova Futura which is reported by Dutch operators to achieve close on 21.7 1/100km (13mpg) with its Daf DHS 250bhp rear engine. If this shape and trend for fuel saving bodies is copied by others Aubrey Martin reasons that a refurbished square-bodied coach will become unaccept able.

The Moseley Group foresees that the foreign manufacturers currently selling only 20 or 30 a year in the UK will withdraw in the near future. "Their margins are so small that the return on capital is not sufficient." said Au brey Martin.

He sees the broker type of operation as "filling a niche" in the market, particularly in selling repossessed coaches on behalf of finance companies. But this need he thinks, will virtually disappear as the industry settles down again after the last few years of turmoil.

Too many coach operators are charging unrealistically low mileage rates that do not reflect the cost of modern high specification coaches according to the Moseley Group, and this was confirmed by other dealers, I spoke to. They are concerned because every operator that goes out of business means the release of yet more under-priced coaches into the market and the removal of a potential future customer.

Moseley does not mind competition from the new importers in the UK according to Aubrey Martin. "They come in and they go out and undermine the mar ket. Operators will learn to distrust them and come to the established and stable names like Moseley."


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