Fleet News

Registration change: for and against

THE fleet industry was this week grappling with the implications of the Government's proposed changes to the vehicle registration system. The Government has pencilled in two age-identifier plate changes a year, starting in September 1998. A final decision is due to be announced later this year but Transport Minister Gavin Strang's proposals have already caused consternation.

The intention is to even out new car sales, avoiding the current August bulge, and few doubt this will be achieved in the longer term. But in the short term the impact could be extremely damaging. The first in the firing line will be car manufacturers and importers, which will need to gear up production to meet September, then March, demand.

Until the Government casts in iron the new plate changes manufacturers are powerless to make any definite plans, but a September plate change could prove troublesome purely in chronological terms. The shutdown of plants in late July and August would have to be postponed to meet the later delivery demands, but it is virtually inconceivable for car makers to oblige their workforces to take their breaks outside the school holidays.

Rental companies would find themselves little better off with an S-plate launched next September, forcing them to contend with the logistical problems of de-fleeting their peak summer fleets while dealers are focused on serving the busiest retail month of 1998.

MANUFACTURERS are divided on whether a move to twice-yearly plate changes would be a good thing. While some fully back the move, others see problems on the horizon and one fleet chief has even questioned whether there should be a year identifier at all.

Peugeot fleet and leasing director John Taylor told a question and answer session at last week's Association of Car Fleet Operators' Fleet Business Day that manufacturers were not happy with a year identifier because it distorted the market 'so much'. March, he said, would become the key month for both manufacturers and fleets if the changes went ahead as outlined. For many companies the month is the end of the financial year and fleet departments would be looking to spend their budgets as any money left over could be 'lost'.

Manufacturers expect the August new car sales bonanza, which results in 25% of sales during the month, to be replaced by about 20% of sales taking place in March and September, with January remaining pretty strong at about 10%. The August buoyant market would collapse.

Volkswagen fleet marketing manager Bernard Bradley said a move to more frequent plate changes would help the manufacturer meet demand. 'We would welcome a move away from August only. August has never been one of the strongest months for Volkswagen in fleet - it has always been more retail. Having demand ahead of supply causes demand problems in August. For fleets there is already a peak in January and anything which separates demand over the year is an improvement,' he said.

THE daily rental industry will suffer the brunt of any teething problems arising from a switch to two registration plates per year. There is concern that if the new system comes into play next September, as proposed by the Government, it could upset residual values. A September change would see rental companies de-fleeting their summer vehicles in the same month as dealerships focus on the retail market's clamour for the new S plate.

With forecourts clogged with new cars and part-exchanges, and dealers tied up with pre-delivery inspections and serving retail customers, the danger is that demand for ex-rental nearly new stock will not resume until October. Faced by this worst case scenario, rental companies would have the choice of maintaining their policy of selling in September and risking a residual value hit, or biting the cash flow bullet and stockpiling the cars for an extra month.

David Willsher, EuroDollar's fleet director, said: 'Ideally we would like to kick off in March 1999, and it would be far better in 1998 to keep the plate change in August.' If the S plate does arrive in September he feels the public will delay the August fever for a month, with the consequent bulge in registrations, and piling used stock into dealerships at a time when they are least able to cope.

Rental companies cannot begin to plan for the changes until a final date for the first new registration system is concerned, and further difficulties arise in trying to forecast the impact on residual values of two plate changes a year. This will have a greater effect on rental companies than standard fleets because with six-month holding cycles rental companies will no longer be able to sell cars featuring the current registration prefix, denying the nearly new car buyer the 'snob' value of having an apparently new car on their driveway for up to six months.

FLEET managers will face increased pressures to ensure their vehicles are well maintained and that their databases are accurate and up to the minute if registration plates change twice a year. Used car buyers will place more emphasis on the quality and condition of a car in the longer run as the proposed new registration system dilutes the value of the year-identifying letter prefix.

This places even greater onus on fleet operators to ensure their vehicles are well serviced and maintained throughout their fleet life, and means drivers will have to take greater care of their company cars if the fleet is to maximise residual values.

The changes to the system will mean fleet managers have to be right on top of their operation if they are to maintain control since customary rules of thumb will no longer apply.

Anne Giberson, fleet manager of Thorn UK, said problems already arose under the current system. She said: 'Only the fleet managers who know what they are doing will be able to keep a grip on what is happening with used car prices.' She predicted a twice-yearly plate change could lead to two large peaks in new car buying, with very little business in between.

The key factor for fleets would be availability of the latest model year - currently introduced in the autumn - which could see companies overlook the September plate in favour of the new model year in October.

THE motor industry is flexible enough to cope with whatever registration changes the Government imposes, however tough the short term implications appear. Laurie Leader, managing director of National Car Auctions, pointed out that the industry conducted business perfectly well prior to the introduction of an age identifying letter prefix, and would continue to do so.

'Two things affect the value of a vehicle, one of which is the change of year, and the other is the change of letter,' he said. 'My view is that there is a degree of depreciation that takes place in any one cycle, so if we now have three factors - the year and two different registrations - the depreciation will divide over the three cycles.'

With manufacturers and rental companies having worked so hard to improve the residual values of the nearly-new sector, he said it was inconceivable that either party would hold the other to contracts which seriously damaged the prices of ex-rental stock.

RESIDUAL value forecasters say daily rental companies on six-month replacement cycles would be worst hit by a move to twice-yearly plate changes - but believe there could be wider implications for the entire used car market. CAP chief economist Mark Cowling said the changes would force daily rental companies to re-examine the way they operate.

He said: 'It is going to cause problems. Daily rental companies will never be selling a currently-plated vehicle. This topic has been around for many years now. The manufacturers driving this through are looking primarily at new car sales and the supposed cost to them, without looking at any effect

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