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Inchcape (LON:INCH) |
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WIKI ANALYSIS
Inchcape (LON: INCH) is a multinational automotive and services company based in the UK, where it acts as a importer and distributor for leading international automotive brands. It has operations in 26 countries and its geographic segments (in order of contribution to company profit) are Australasia (Australia and New Zealand), Europe, North Asia, South Asia, United Kingdom, and Russia & emerging markets. Its main automotive brand partners include Audi, BMW, Jaguar, Land Rover, Lexus, Mercedes-Benz, Porsche, Subaru, Toyota, and Volkswagen.[1] Because Inchcape's main automotive brand partners are luxury brands, demand for its cars fluctuate drastically with the economic environment. However, Inchcape manages to mitigate the effects of economic downturns with revenue from emerging markets and Asia, where growth of a middle class drives increased demands.
Business Growth
- Revenue: For FY 2010, revenue increased 5.4% from £5.6 billion in 2009 to £5.9 billion.
- Net income: For FY 2010, net income increased 31% from £155.1 million in 2010 to £214 million. This profit was only 9% away from 2007's peak, due to growth in Inchcape's emerging market sales and its focus on increasing or maintaining operating margins.[2]
Trends and Forces
Demand for luxury cars fluctuates with economic environment
Inchcape's main automobile partners are luxury brands, such as Lexus, Porsche, etc. Demand for luxury brands fluctuate according to shrinking household budgets, which are impacted by the economic environment. With increased government austerity measures and the weakening euro, European markets have been slow to recover, leading to less disposable income for consumers to spend on luxury items. As a result, Inchcape's European businesses have been negatively impacted by weakened demand. However, with increased diversification to other geographic regions, such as emerging markets, Inchcape has reduced dependency on a single revenue stream.[1]
Inchcape's growing presence in Asia Pacific and Emerging Markets geographic regions improves sales
The majority of growth in population is expected to come from countries in emerging markets and Asia. Along with increased population and economic prosperity comes a growing middle class (estimated to be over 700 million in the next decade) in these countries.[3] These markets will demand more cars for their increased needs, estimated to be 65% of global car sales by 2015.[4] Inchcape is well positioned to take advantage of this increased demand as 21 of Inchcape's 26 markets are in fast growing Asia Pacific and Emerging Market economies.[1] As of 2010, Inchcape's North Asia, South Asia, and Russia & Emerging Markets geographic regions commanded 41.1% of total profit.[1]
Competition
Inchcape doesn't have many large competitors that exactly matches its services. Instead, it competes with subsidiaries of car companies (outside of the ones that Inchcape already partners with) that may distribute and retail their own cars. Among the companies in UK's car dealership industry, which includes Pendragon, Inchcape is the largest. However, in its expansion to other international markets, Inchcape encounters competition, such as Jardine Cycle and Carriage in Singapore. The industry is highly fragmented and no company commands more than 20 percent of the market share.[5]
References
- ↑ 1.0 1.1 1.2 1.3 Inchcape Annual Report 2010 - Company Overview
- ↑ Inchcape Annual Report 2010 - Financial Statements
- ↑ http://www.economist.com/node/17493411
- ↑ http://www.ihs.com/products/global-insight/industry-economic-report.aspx?ID=1065930111
- ↑ http://sg.finance.yahoo.com/q?s=C07.SI&m=SI
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