A slight fall in motorcycle sales figures in 2013 was followed by sustained growth across the beginning of 2014.
In 2013, total registrations of motorcycles and mopeds fell 1.9%, from 93,667 to 91,910. In particular, moped sales fell by a fifth, while motorcycle sales rose slightly (1.2%) from 80,255 to 81,180.
Kirk Franks, head of national sales at Alphera Financial Services UK, says: “While there were challenges for the whole of the motorcycle sector in 2013, many marques continued to perform well.”
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According to Franks, Alphera was no exception: “At Alphera, we delivered sustained growth in the marketplace throughout 2013, helped by a strong product portfolio and flexible pricing policy.”
Indeed, some of the industry’s major players saw 2013 as a good year, and have set out in 2014 with high hopes for growth in both sales and finance deals.
Steve Kenward, chief executive officer of the Motorcycle Industry Association (MCIA), says: “We are cautiously optimistic that the market has bottomed out post recession and we are starting to see an increase in demand for new bikes.
He adds that the annual bike enthusiasts event Motorcycle Live, held last November, had a considerable amount of buzz about it and that it is: “traditionally used as a barometer by manufacturers as to how they expect new sales to pan out for the year ahead,”
Dave Macey, franchise development manager for motorcycles at Black Horse Finance, confirms: “Overall finance in the motorcycle market, year-on-year, is increasing.
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By GlobalData“The market was 2 to 3% down at the end of last year, but we were ahead of the market, and point of sale finance in general was ahead of the market. So it was a good year last year.”
Continued growth
Turning to 2014, he says: “We’ve seen some real growth, real activity, and we’re expecting that to continue, including finance performance as well.”
Commenting on the growing confidence expressed by providers such as Black Horse, BMW and Alphera, MCIA’s Kenward says: “This optimism seems to be justified at the moment and a willingness to ‘trade up’, after ‘making do’ during the recession is being stimulated by some very exciting models coming to market, which are new for 2014.”
Indeed, positive outlooks for 2014 seem well founded. Total year-to-date registrations rose 10.4% in January, 3.8% in February and 12.6% in March, with sales totalling 14,653 in March 2014 alone, an 18.2% increase on the same month in 2013.
Franks confirms the positive figures have been felt by the industry: “A large number of the dealers we work with have experienced record sales in the first quarter of 2014. This is mainly down to new product hitting the market, record new vehicle registrations and some innovative finance deals being made available by lenders.”
Macey offers an explanation for the discrepancy between sales figures in 2013, and the industry’s hopes for 2014: “Compared to the car market, he says, the weather does have an impact on the motorcycle market, without a question.
“If you look at the first quarter of 2013, the temperatures and the weather were horrendous. So although we look at 2013, we look at 2012 as well because that was a comparable year [to 2014] weather-wise and market-wise, and the good news for March this year is that the motorcycle market is up over 18%.”
Phil Thornton, regional manager of motorcycles north at BMW Group Financial Services also dismisses the idea that last year’s slight decrease was a bad omen for business in 2014. He says: “For BMW, certainly on the car side, it was a record-breaking year, and bikes certainly followed the trend.
“We’ve had another record-breaking year in terms of the deals we’ve written, and performance has effectively been improving year-on-year. Certainly we haven’t seen any dip at all in the last four to five years.”
“So if you look at where we were five or six years ago, I don’t know the exact number but we gained position and market share.”
Both BMW and Black Horse say they outperformed the market to register growth in 2013, and that indeed their performance reflects the long-term trend in the industry.
The positive outlook seems to reflect that witnessed within the auto market over the past few months, but the two industries continue to present significant differences in the type of purchase decision they rely on. Thornton says: “It’s quite interesting. One thing to bear in mind is that we compete in the ‘500cc and above’ market, so with regard to motorcycles it’s a premium segment which we occupy, where motorcycles are a luxury purchase, rather than a necessity.
“If you look at a car, most people need a car, whereas the majority of motorcyclists choose to own a motorcycle. The motorcyclists who have to have a motorcycle are most definitely in the minority.”
As such, he explains, patterns in motorcycle finance have tended to differ between bikes and their four-wheeled cousins,
including the strength and rapidity of their respective industry’s return to growth.
Thornton continues: “Comparing cars and bikes, we were certainly slower to recover from the recession than cars were. But now we’re witnessing much more sustained levels of confidence, and we’re certainly seeing a lot more people through the doors of the dealerships as well.”
His view is confirmed by Alphera’s Franks: “The majority of motorcycle sales – new and used – are to the leisure sector and, as a result, it’s taken slightly longer for the market to pick up after the recession. However, continued growth in the latter months of 2013 and the first quarter of 2014 suggest that confidence is returning.”
Customer types
Black Horse’s Macey adds: “I would split the motorcycle market into two categories: you’ve got the commuter and you’ve got the people who take the bikes for pleasure, and both of those areas have improved, but we’ve definitely seen a big shift this year and, comparing it to 2012, an increase on that period as well.”
Though finance penetration in the motorcycle industry is increasing, it’s still higher within the car finance industry, says Thornton: “I think you would probably see more cars financed than you would motorcycles. With a motorcycle, even top of the range, you will see a lower balance than compared to a vehicle, a car.
Macey says that although it depends on manufacturers’ promotions, “the average finance penetration in the motorcycle market is around 30%”.
Thornton adds: “If you’re looking at the more entry-level motorcycles, with a lower purchase price, some people are able to purchase them without finance, whereas you’re looking at a much larger balance to finance someone who is purchasing a car, and
normally people would need to finance that.
“I think what I’m trying to say is a lot of people need to finance a car, but maybe not so many people need to finance a motorcycle and some people choose to pay for it out of their own savings.
Alphera’s Franks explains that some products are more popular than others among customers looking to finance their motorcycle purchases: “The motorcycle finance market has changed dramatically in the past five years, with an increase in the lending options available to consumers.
“While HP has been the traditional route, products like PCP are becoming much better known and utilised. This is because they can offer greater flexibility for certain customers and the enhanced ability for dealers to generate retention.
Black Horse’s Macey adds that the smaller difference in price is also a factor in determining the market penetration of finance in the motorcycle industry, as well as the types of finance popular among consumers.
“The motorcycle market is made up of motorcycle and scooter, really,” Macey says. “And you don’t have the on-the-road price differential you would get in the car market.
“Your average motorcycle price sold using PCP is typically £7,000 or £8,000 for lead-in models going up to £18,000, £19,000, £20,000 for higher priced models, so you tend to find the motor finance product split is between the HP or the PCP route.”
He adds that it’s usually the motorcycles at both ends of the spectrum, the higher-end and the entry-level models, that tend to be “the most popular” products for PCP deals.
Monthly repayments on top models on PCP tend to be positioned below £200, and finance for more lower-end models is around £100, and, as such, much more advantageous than borrowing the money directly from a lender, he explains.
“It’s very similar to the car market in terms of product split: traditional HP or PCP. The car market has definitely been ahead of the market with PCP, but the motorcycle market is now starting to catch up.
“Over the past three to four years, we have certainly seen a big increase in PCP. I can’t quote for the whole market, but I just know that it has massively increased over the last three to four years and we’ve seen that into Q1 this year as well.
Thornton reports that PCP deals are also popular with BMW customers, significantly outstripping HP.
Speaking about which is the company’s most popular finance product, he says: “For BMW Financial Services it’s Select, which is our PCP product.”
He adds: “Significantly more than three-quarters of the new motorcycles we finance are on Select, and over two-thirds of the used motorcycles which we finance are on Select. So it seems to be a primary product, and that’s been growing year-on-year.
Further, there’s evidence that the UK motorcycle finance market is becoming increasingly competitive, with several players joining over the past few years.
Macey says: “There are new entrants that have come into the marketplace – some manufacturers have their own, so BMW has BMW Financial Services, Honda has Honda Finance, and then there are independents as well, so there are four independents that are operating within the motorcycle market, in addition to the two manufacturer ones.
This is confirmed by Thornton: “There are a couple of news players in town, that’s for sure.”
Franks says he believes 2014 is likely to be “a big year for the motorcycle finance industry”, and adds: “2014 started well and we’re now looking at ways in which to support dealers looking to capitalise on the record performance of the new market by delivering competitive and innovative finance options for quality used stock.
“Over the coming months, we will be working closely with our dealer and broker partners in the motorcycle arena to further develop the product and marketing solutions which drive new sales and also push quality used bikes into the market. The new FCA regulation provides for greater choice for the consumer and this is exactly what we are looking to achieve with the developments in our flexible PCP finance offering.
Speaking of Black Horse’s plans for the year, Macey says the company will maintain the drive to increase awareness of finance at the forefront of its agenda in 2014.
He says: “The key thing is that we’re part of the Motorcycle Industry Association, and it’s our part as one of the major players in the market to drive the awareness of finance and increase growth to the benefit of the motorcycle industry – that’s a key part of what our objective and strategy is, for everybody really.
So that’s a key part of what we’re looking to deliver and continue to do this year.”
Optimism for growth
Thornton at BMW says the company is optimistic about the coming months, and says: “We’re looking for continued growth along similar levels to what we achieved in 2013. We expect to perform at least as well as the market – I hope we outperform it quite significantly.
He attributes this confidence in part to the fact that 2014 sees BMW Motorrad, the motorcycle arm of BMW, launch five new product lines, which are “effectively core models”.
He says: “One of the things that we see when we launch a new model is that there are always people who want to have a new bike as soon as it’s available, and often it’s regardless of how old their existing motorcycle is.”
As a consequence of this, he adds: “We’re going to be seeing more people in the show-room looking to upgrade their existing bikes. They want the latest technology; they want the newer riding experience.
“So we often see some quite young part exchanges coming into the showrooms as well, and with them having a higher ticket price, because they’re obviously a lot younger, with a lot less miles on, we’ll be seeing more used purchasers coming in and looking and often wanting to take the funding option to spread the cost of their purchase.”
Thornton adds that he thinks that finance is therefore “something to be aware of” for both the industry and customers.
“I think it’s one of the reasons why it has gained popularity, because people can actually have a newer motorcycle than maybe they anticipated, so they sometimes surprise themselves on what they can afford.”
As consumer spending continues to grow in the UK, growing confidence among finance providers within the luxury industry seems increasingly well-founded, and according to some of its biggest players, the motorcycle market is perfectly placed to take advantage of the climate of optimism in 2014.
MCIA’s Kenward confirms: “A combination of good finance deals and exciting new models should help keep the market buoyant for 2014.”
