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February sales soar but steep fall now expected
publication date: Mar 5, 2010
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author/source: Robin Roberts
With the government's scrappage incentive due to expire at the end of the month UK car companies are predicting new vehicle sales to fall by as much as 10 per cent this year to between 1.7 and 1.8 million.
As well as the end of scrappage there are other issues which could come into play such as new showroom taxes starting April 1, the possibility of a new government and a rumoured hike in VAT to 20 per cent. A rise in VAT is the biggest concern, with bosses at the Geneva Motor Show saying such a move could be "disastrous" for business. New showroom taxes will hit high emission vehicles hardest but additional VAT will hit all big ticket items. While they have to wait and see what the future holds, car chiefs are for now focusing on the ending of the scrappage incentive and looking at other ways of boosting sales. Some are to offer their own version of scrappage, offering big discounts or trade-ins on old vehicles - fast becoming known as swappage. Peugeot UK boss Jon Goodman does not plan to head down the swappage route relying on some key new products being introduced by the company following its re-branding at the beginning of the year. He said: "We have made a storming start to 2010 with sales up year on year. We have got good offers available through our dealers and great new vehicles in the 3008 and 5008. "I don't think it's sensible to speculate over increases in sales tax. It might make things tough in the second half of the year but it is not impossible to adapt." He added that Peugeot is making a big investment to win more fleet business. "We have taken on nine new people in our fleet department so that we can get in front of more customers." Fleet business is one reason why Ford of Britain managing director Nigel Sharp is optimistic. "Fleet managers have been extending leases in the current economic climate but they can only do that for so long. They will have to refresh their fleets before they lose out on residual values. "Light commercial vehicle sales remain a disappointment and overall we are expecting sales to fall around 10 per cent this year from 300,000 vehicles in 2009. "The important thing is that Ford and its dealers make money so we have got to ensure that we keep good control over vehicle stocks." Kia managing director Michael Cole said: "We are still deciding what to do post scrappage but have made no firm decisions as yet. As far as VAT is concerned I think the market accepted a return to 17.5 per cent at the beginning of the year because it was what people had been previously used to. "A move to 20 per cent would be potentially damaging. Car buyers are going to have to come to terms with that because it is going add quite a bit to the price of vehicles." UK car sales in February were up by 26.4pc compared with the same month last year, according to the Society of Motor Manufacturers and Traders. There were 68,686 new cars registered last month and private buyers led the growth in sales. "Scrappage has generated eight consecutive months of growth," said the SMMT's chief executive Paul Everitt. Demand for smaller cars is still rising. The most popular this year are the Ford Fiesta and the Ford Focus. Toyota's sales in the UK in February were up 15pc on last year to 3,439 vehicles, despite the problems caused by the carmaker's global recall of more than eight million cars. However, its share of new car sales dropped from 5.5pc to 5pc. "Compared with last year, the industry is off to a strong start in 2010," said David Raistrick, automotive partner at Deloitte. "However scrappage has only boosted the private buyers' market and we now need to see an improvement in the fleet market in order for growth to be sustained." The UK's scrappage scheme is due to finish this month, but its impact could continue for some while. New cars ordered before the scheme ends might not be delivered - and therefore registered - until June or even July. The scheme, which pays motorists £2,000 to trade in an old car for a new one, accounted for almost one in five car sales in February. Sales of new cars in March are also likely to be boosted as new registration plates come out this month. |
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