NFDA Consumer Attitude Survey:

NFDA Consumer Attitude Survey: Results 1st Half 2016 Prepared by:

Contents: Introduction Explore current market perceptions of franchised dealerships and their competitors Understand current consumer aftersales behavior Examine factors influencing consumer aftersales decision making Determine consumer opinions of the aftersales offering at franchised dealerships Assess awareness and understanding of the franchised dealership aftersales offering Manufacturer Recall Confidence and Trust Conclusions NFDA 201 Great Portland Street London W1W 5AB Tel: 020 7580 9122

Introduction: The National Franchised Dealers Association ( NFDA ) commissioned a survey to research consumer attitudes in the automotive sector. The survey was executed by Public Knowledge. Between 1 and 9 December 2015, 1,000 consumers across the UK were polled in a 10 minute online survey. Public Knowledge considers the results statistically significant at a 99% or above confidence level. The survey was undertaken with five major objectives: Explore current market perceptions of franchised dealerships and their competitors Understand current consumer aftersales behavior Examine factors influencing consumer aftersales decision making Determine consumer opinions of the aftersales offering at franchised dealerships Assess awareness and understanding of the franchised dealership aftersales offering As well as answering the five major objectives the survey gave guidance on manufacturer recall confidence and consumer trust in the servicing industry. The sample composition of consumer s survey revealed that 49% of the participants were female, 51% male. The breakdown in location is shown in Figure 1: Figure 1 8 % 3 % 4 % 11 % 8 % 5 % 8 % 9 % 7 % 9 % 14 % 13 % Of the 1,000 people surveyed the choice of aftersales care was an even split of 33% between: using a franchised dealer, using an independent garage and using both. Finally a significant demographic is that 98% of people surveyed are private car drivers, 2% were Company car drivers. The NFDA intends to commission the NFDA Consumer Attitude Survey twice annually so that clear trends are built up providing valuable information for all members on the five main objectives. The Consumer Attitude Survey will give members knowledge of their target market and will allow them to adjust their aftersales offering to suit the feedback from potential and current customers. 01

Explore current market perceptions of franchised dealerships and their competitors: Of the 1,000 people surveyed by Public Knowledge 92% of respondents know what a franchised dealership is. The survey revealed two major themes when judging the consumers perception of franchised dealers, independent garages and independent retailers. The first of those themes is the consumers believe that the main strength of an independent garage is the quality of service. Figure 2 reveals that 26% of consumers believe that the main positive of an independent garage is the service and the second major positive is the value for money. Figure 2 How would you describe an independent garage and the service you get? Independent Garage More personal / friendly / better service Good value for money / cheaper 23 % 26 % Services and sells all makes of car Not owned by or associated with any particular car manufacturer 15 % 18 % By contrast consumers perceive independent retailers as relatively expensive. The main positive of an independent retailer was the efficiency of the service. Figure 3 demonstrates that 31% of the 1,000 people surveyed highlighted the quality of service and efficiency as the main reasons for using an independent retailer. Figure 3 How would you describe an independent retailer and the service you get? Independent Retailer (e.g. Kwik Fit) Good service / efficient 31 % Expensive Sell parts (e.g. tyres, exhausts) Provide servicing / MOT / repairs 12 % 11 % 17 % The perceptions of a franchised dealer was mixed with no single theme being revealed by the survey. Some respondents highlighted the professional nature of the service and the expertise with both used and new cars; others described their experience as expensive and highly priced. Overall there was far less clarity amongst the surveyed consumers as to where a franchise dealers sits within the aftersales market. 02

Understand current consumer aftersales behavior: Currently of the 1,000 people surveyed 89% of consumers used either a franchised dealership or an independent garage for their last service. The breakdown of consumer choice for their last service is as follows: 47% independent garage, 42% franchised dealership, 9% non-franchised national chain and 2% other. The primary reason for consumers using an independent garage was value for money. 87% stated that their last service at an independent garage represented good value for money at an average cost of 135; this compares with an average cost of 163 for a franchised dealership. It is worth noting that 75% of consumer s believe that their last service at franchised dealers represented good value for money. A notable statistic to arise out of the survey was the regularity of service. Figure 4 reveals that 91% of consumers have had their car serviced within the last year. The regularity of service meant that only 5% of surveyed consumers had a breakdown since their last service, this indicates a high quality level of service throughout the UK. Figure 4 How long ago was your last service? Recency of Last Service Within the last 3 months 28 % Within the last 6 months 31 % Within the last year 32 % Within the last 2 years 6 % Over 2 years 3 % A notable statistic on consumer aftersales indicated that 77% of respondents have not tried to book their car in for a service, M.O.T. or repairs over the internet. This statistic demonstrates that the majority of servicing and M.O.T. work is either booked over the phone or a drop-in. With other consumer sectors, such as online shopping, seeing fast growth on their digital platforms it seems the automotive service sector has a less well established platform for communicating with consumers. 03

Examine factors influencing consumer aftersales decision making: There are three main factors that affect the consumers aftersales decision making. The first of these factors is convenience. Figure 5 indicates that overall 70% of survey respondents believe it is convenient to get their car serviced at an independent garage, 49% think it is convenient to get their car serviced at a franchised dealer and 44% think is convenient to get their car serviced at non franchised national chain. It is clear that convenience is viewed by many as an overriding factor in where they get their car serviced and it is also apparent that consumers view franchised dealers and non-franchised national chains similarly when it comes to convenience. Perhaps what the franchised dealer considers to be convenient, actually isn t convenient in the minds of the consumer. Figure 5 How convenient do you think it is to get your car serviced at the following companies? Franchised dealership Independent garage 26 % 45 % 23 % 25 % 11 % 10 % 25 % 17 % 5 % 4 % Non franchised national chain e.g. Halfords / Kwik Fit 19 % 25 % 26 % 10 % 11 % Very Convenient Convenient Neither Inconvenient Very Inconvenient 04

A second factor in consumer aftersales decision making is the whether the car was bought as a used car at the point of sale. 76% of consumers that drive a pre-owned car also use an independent garage to service the vehicle rather than a franchised dealer. If the car was new at the point of sale then the consumer is significantly more likely to use a franchise dealer, as demonstrated in figure 6. Figure 6 Was your car purchased used / pre-owned at the point of sale? 76 % 64 % 64 % Yes No 36 % 36 % 24 % I always use franchised dealerships such as Arnold Clark, Evans Halshaw, Bristol Street Motors, Stratstone or the main dealer for my brand of car I always use an independent garage (with no affiliation with a car manufacturer) or retailers such as Kwik Fitand Halfords I use both franchised and independents / national chains from time to time 05

The third major factor influencing aftersales decision making is the status of the warranty or service plan. Figure 7 show us that 71% of consumers who use a franchised dealership have a service plan or warranty for their car. If a car is outside of a service plan then 82% of consumers are more likely to use an independent garage. This data demonstrates that once a consumer is tied into a service plan or warranty a franchise dealer is far more likely to see aftersales service than if it is not. Figure 7 Is your car currently under warranty or a service plan and after your warranty or service plan expires, who will you use for your aftersales car care? 71 % 82 % 62% of respondents who currently use a franchised dealership will continue to do so after their warranty or service plan expires 63 % Yes No 29 % 37 % 19 % I always use franchised dealerships such as Arnold Clark, Evans Halshaw, Bristol Street Motors, Stratstone or the main dealer for my brand of car I always use an independent garage (with no affiliation with a car manufacturer) or retailers such as Kwik Fitand Halfords I use both franchised and independents / national chains from time to time 06

Determine consumer opinions of the aftersales offering at franchised dealerships: Of the 334 respondents who always use a franchised dealer 87% are either satisfied or very satisfied with their overall experience. This demonstrates that when a consumer starts using a franchised dealer they are more than likely to be satisfied with the experience. Figure 8 reveals that independent dealers have a far worse record when it comes to the satisfaction of the overall experience. 34% of surveyed consumers stated that they were unsatisfied with the experience at an independent dealer. It is also worth noting that consumers perceive the aftersales offering from a franchised dealer as a far higher quality product than servicing at an independent dealership. 34% of consumers would draw a comparison between a franchised dealer and a high-end supermarket such as Marks & Spencer or Waitrose. This may therefore affect the satisfaction levels as consumers are more likely to pay for a higher level of service if they perceive a franchised dealer to be a high-end product. Figure 8 How satisfied you were with your overall experience at the franchised dealership? I always use franchised dealerships such as Arnold Clark, Evans Halshaw, Bristol Street Motors, Stratstone or the main dealer for my brand of car (334 respondents) 56 % 31 % 9 % 2 % 1 % I always use an independent garage (with no affiliation with a car manufacturer) or retailers such as Kwik Fit and Halfords (144 respondents) 14 % 32 % 21 % 22 % 12 % I use both franchised and independents / national chains from time to time (245 respondents) 24 % 46 % 17 % 11 % 2 % 5 Very satisfied 4 3 2 1 Not very satisfied 07

Assess awareness and understanding of the franchised dealership aftersales offering: One of the key objectives of the survey was to help determine awareness and understanding of what could be done at a franchised dealer as well as other independent and non-franchised dealerships. Figure 9 gives a fulsome overview of consumer opinions on the services available to consumers. The key findings from a franchised dealer perspective was only 65% of consumers believe franchised dealers can install new parts, such as windscreen wipers, and only 62% believe new tyres can be fitted at a franchised dealer. Consumers think the primary service of a franchised dealer is to sell cars. The majority of consumers thought the primary purpose of a non-franchised national chain was to fit new parts, such as windscreen wipers, and fit new tyres. Consumers were aware that the primary functions of an independent garage was to book your car in for a service and an M.O.T. Figure 9 reveals that the knowledge of services available at a franchised dealer are broadly accurate although further education could be done to help consumers understand in greater detail what is available at a franchised dealer. Figure 9 Which of the following do you think that you could do at each of the companies below? Franchised dealership Independent garage Non franchised national chain e.g. Halfords/Kwik Fit 85 % 75 % 81% 57 % 70 % 64 % 70 % 81 % 58 % 65 % 72% 73% 62 % 75 % 73 % 27 % 10 % 4 % Buy a new car Book your car in for a service Buy a used car Book your car in for an MOT Have new parts such as windscreen wipers fitted Have new tyres fitted on your car 08

Manufacturer Recall Confidence and Trust: In addition to answering the five main objectives the survey gave the NFDA data on consumer confidence in manufacture recall confidence and trust, a noteworthy topic following the Volkswagen scandal in late 2015. The survey also outlined consumer trust in dealerships ability to service a car with an alternative powertrain (such as hybrid, electric or fuel cell). The surveyed revealed that across the board consumers felt franchised dealers, independent garages and franchised national chains would all have a similar level of awareness when it came to manufacturer recalls. Those consumers who only use a franchised dealer were considerably more likely to think that an independent dealership would not know about recalls. An interesting statistic in regards to safety was revealed by the survey. When asked whether a car or a smart phone had more technology in it only 57% of consumers thought a car had more technology. When teamed with the fact that 60% of consumers would consider driving their car without a software update it is clear there is a lack of understanding around sophisticated modern vehicles. In the mind of the consumer franchised dealers are trusted far more than independent garages or non-franchised national chains when it comes to servicing a complex modern vehicle such as a car with an alternative powertrain like hybrids, electric or fuel cell vehicle. Figure 10 shows that for petrol and diesel vehicles franchised dealers and independent garages are broadly similar in terms of consumer trust. However on all cars with an alternative powertrain franchised dealers score highly. This data demonstrates that with the gradual market shift towards cars with alternative power trains the franchised dealers are well placed to take market share. Figure 10 From a safety viewpoint, which of the following companies do you think it would be safest to get your car serviced by? From a safety viewpoint, 62% of respondents agree that it would be safest to get their car serviced at a franchised dealership 62 % 62 % 60 % Franchised dealership Independent garage 42 % 38 % 42 % 38 % Non franchised national chain e.g. Halfords/Kwik Fit 9 % 8 % 10 % 6 % 8 % 7 % 9 % 5 % Petrol Diesel Hybrid Electric Hydrogen fuel cell 09

Conclusions: The NFDA Consumer Attitude Survey led to a number of conclusions from the five main objectives set out when the survey was commissioned. Consumers had firm opinions on what non franchised national chains, such as Halfords and independent garages offered but there was a lack of clarity around the role of a franchise. The main reason behind current consumer aftersales behavior was revealed by the survey as value for money. Independent garages were the most used for servicing because of the lowest cost of servicing; at 135 this compares with an average cost of 163 for a franchised dealer The survey demonstrated that if a service plan or warranty was in place then the customer is significantly more likely to retain a franchised dealer for their aftersales. This in turn led to the conclusion that once a consumer had used a franchised dealer they were likely to use it after the warranty or service plan had expired. Convenience was also a major factor in influencing consumers aftersales decision making. Consumer opinions of the aftersales offering at franchised dealerships was very high with 87% being either satisfied or very satisfied with their experience. By contrast the survey revealed that 34% of consumers were dissatisfied with their last service at an independent dealer. This demonstrates that once a consumer uses a franchised dealer they are likely to be impressed by the overall level of service. The survey revealed consumers awareness of the role of franchised dealers in the UK market. Consumers were comfortable with the idea that you could buy new and used cars but were less aware of other kinds of servicing available at franchised dealers. As well as providing information on the five main objectives the survey shed light on consumer confidence and trust in manufacturer recalls and cars with alternative powertrains servicing. Whilst consumers trust all types of aftermarket care when it comes to servicing a modern car with an alternative powertrain the franchised dealers score far higher than independent garages or nonfranchised national chains. This trend is something that will be of even greater interest as the number of cars with alternative powertrains driven in the UK continues to rise. Overall the NFDA has gathered a great deal of data through the commissioning of the Consumer Attitude Survey. The data, gathered twice annually, will demonstrate trends and help all members target areas of weakness and improve on areas of strength. 10