By JPM Sandie
Last time out, I went through three major stories from MG Motor UK in 2016. We saw the demise of the MG6 and final assembly at Longbridge with the GS crossover coming in to make up for it.
In truth it marked a year of retrenchment from pie in the sky unobtainable targets as MG decided to accept a more modest position in the meantime. Of course, the important thing is performance against key indicators like registration numbers and size of the dealer network and this is the scope of this second article.
Possibly the greatest standing joke from the comedy club that is MG Motor UK is their sales targets. Over the years, we have seen some comedy gold in this area usually followed by a resounding failure to meet the target being slowly demonstrated with each passing release of registration figures. Can you believe that at one time they expected to sell 5,000 MG6s per year? However, as I argued in my last article, 2016 saw the start of a re-focus with the company cutting back and – for the moment – setting more modest goals.
So, with that in mind, what was 2016’s target? At the GS launch, sales and marketing director Matthew Cheyne gave this as 5,000 “sales” aided by an increase of dealer numbers to 90. Much like I found in 2014, they failed to meet both targets with a final total of 4,192 registrations and 71 dealers.
Scottish giants Arnold Clark were persuaded to take on a franchise in September which was spun as a successful development for the franchise. However, they are at odds with the qualities MG were previously looking for in dealers. Namely small independents2 without other franchises to distract them3. Those descriptions fitting Britain’s largest dealer group to a tee and giving the impression that rather than having a strategy for the MG franchise Longbridge make it up as they go along.
The reasons for MG’s continued failure to hit targets for the dealer network are many, varied and mostly obvious. Whilst over 4,000 registrations sounds like a lot when you divvy it up between 70 dealers and over 12 months you end up with an average of 1 or 2 cars per dealer per week. That’s assuming that each registration is a sale which is obviously far from the truth between pre-registrations and demonstration vehicles. Some minor brands with sales figures in the same region, like Abarth and Alfa Romeo, actually have fewer dealers than MG.
If the return on an MG franchise is starting to sound worryingly small the next issue to consider is margins. The vast majority of MG sales come from the MG3 which is a car that costs around £10,000 with slim profit margins. For comparison, over the year Subaru registered 500 fewer cars than MG, however, their most popular model is the Forester which, in its most basic form, costs over £26,000 and consequently generates larger margins. Even the cheapest Subaru, the Impreza (yes, that thing is still going), retails at nearly £19,000. Similar tales of premium rather than value priced products also apply to Abarth and Alfa Romeo. Therefore to hit ambitious plans for network growth, MG either need to increase sales (which leads to a chicken or egg situation with expanding the network) or increase margins by increasing sales of more expensive models or the prices of cheaper models.
In truth, achieving around 80% of their projection for registrations is a success by MG Motor’s standards. Back in 2014, registrations were less than 60% of their expectations. It’s worth noting, however, that back then they were anticipating 10,000 units from 100 dealers in 2016. See what I mean about comedy gold? As we know, these projections were built on shifting sands with sales and network expansion proving below expectations and their considerable aspirations for the GS being reduced since.
Why did MG once again come up short of a publicly disclosed target? It wasn’t because of the MG6 which sold as well as expected with a final result of 366 registrations. Targets could not be higher as they only had limited stocks available. Sales value was poor, however, with heavy discounts needed to shift the final stocks of the unsuccessful hatchback.
As for the GS, registrations totalled 583 over 7 months on sale. This being short of their unambitious target of 7-800. There was a moment of profound bafflement in December as MG issued a gushing press release claiming the GS had broken national sales records. A claim based around the rather arbitrary measure of being the quickest MG to hit 500 registrations4. Isn’t that like being the tallest delegate at the dwarf and midget conference? Especially considering it took nearly 6 months when Nissan probably sell 500 Qashqais in about 6 days. The total included demonstrators being sent to every dealer and a fair number of pre-registered vehicles. A significant number of which went to pile ’em high sell ’em cheap merchants Arnold Clark who pre-registered consignments in both September and December.
One can assume that the remainder of the 5,000 target was to be borne by the MG3 which in the end reached 3,243 registrations. That was an increase of a quarter for what was its most successful year. I don’t think it’s fair to criticise the MG3’s performance which was achieved as a product heading to its third birthday (fifth if we take day zero as its launch in China) and with minimal advertising. The lame GS advert accounted for the vast majority of the marketing spend in 2016.
Is it just me that finds it strange that the marketing budget was spent mostly on trying to sell a product that was only intended to account for less than a fifth of sales whilst expecting their core product to thrive without much promotion at all?
That status as core MG product is not in doubt. When both were available, the MG3 outsold the MG6 by a margin of nearly 6 to 1 in 2016 and the GS by a margin of over 4 to 1. With that in mind one of MG Motor’s biggest tasks for 2017 is to keep the MG3 successful.
Conclusion and Outlook
It’s undeniably positive that MG registrations have once again increased. However, it’s also undeniable that 2016 marks another year of missed targets, failure to make a breakthrough and, as described last time out, general uselessness. Missed targets were coming at a time where the brand has retrenched after a few years of underwhelming (albeit improving) results. Targets have been reduced from a few years ago and costs have been cut through things like ceasing local “production” and seemingly not putting the GS through full type approval. Be under no doubt that these were sound business decisions.
What should we look out for in 2017? It’s once again being sized up as another breakthrough year (like every year since 2011). Hopes are being pinned on a full year from the GS. However, it’s foolish to expect too much there. Whilst it will no doubt perform better than the MG6 the putative type approval cap means registrations are limited to 1,000. Last year’s large MG registrations numbered 949 between 366 MG6s (effectively replaced by the GS) and 583 GSs so there’s not a huge amount to be gained. A facelift GS has been unveiled in China but whether it will launch here in 2017 remains unclear. Expanding appeal and sales from larger, more expensive products would probably be the easiest way to make an MG franchise more compelling to the good people of the motor trade but this doesn’t seem likely to happen in the short term.
Long term hopes will be best pinned on the XS B-Segment crossover. Stated for a reveal (in UK spec) at the London Motor Show in early May and a launch at the end of the year I have already wrote about how it has a chance to be the first Chinese MG to be well suited to UK market due to its efficient GM engine and positioning in a growing sector. It should also, due to expected sales and a slightly higher price point, encourage new dealers to the fold. Matthew Cheyne has already stated that he expects the XS to be the motor for a quintupling of MG sales to 20,000 by 2020 so they have high (one might suggest bordering on delusional) hopes for it. However, at the earliest it won’t arrive to the latter part of this year limiting the impact it will have on this year’s performance. If the gap between Chinese and British launches continues on past form we might not see XSes on forecourts this year at all.
That leaves the MG3, the car that is the heart of the MG marque in Britain and, until the XS comes and they have something else saleable, it has to be their focus. Any serious declines in MG3 sales will eventually have an impact on monthly MG totals with the likely limited impact of the GS. Word is, that a refreshed MG3 is on the way – but not until 2018. This leaves MG needing to either do some promotion or relying on blind faith that MG3 sales will keep growing because they have done every year so far. Generally, in the global car industry that’s rare without something to inject new appeal. January registrations for MG overall dropped by over a third and, whilst it’s an isolated figure resulting from a number of factors, I’d be surprised if that wasn’t down to lower MG3 sales. Time will tell whether this is a one-off or a trend, however 2017 may prove to be a year where MG’s market performance suffers for neglecting the MG3.
For more on MG’s registration figures, there are regular updates of figures and analysis from the Macdroitwich forums panel of panel of industry experts* here: viewtopic.php?f=11&t=55
This series will conclude soon with a third piece that provides a précis of MG’s international performance.