Fleet News

Experts question new car sales potential of internet

THE boss of the UK's biggest motor manufacturer and leading economic experts have cast doubts over the internet's potential to replace traditional dealer-based new car retail operations.

Ford UK's chairman and managing director Ian McAllister said retail buying via the web was 'unlikely' to take off in Britain and would merely complement the existing relationship customers have with dealerships.

A report from the Economist Intelligence Unit - 'Automotive retailing in the new millennium' - also says online suppliers are 'struggling' to grow fast enough to survive in an unstable market.

Fleets have already voiced their indifference to the promise of huge savings because of the lack of a benefit-in-kind tax incentive in Euro-sourcing via the net and the feared impact on residual values.

And at an informal Society of Motor Manufacturers and Traders' lunch, said: 'Cars are not baked beans. Dealers need to understand the product to be able to serve them up to the consumer and the consumer wants to deal with a salesman who understands the product.'

He also pointed out that proposed European legislation giving consumers the right to return the majority of internet-purchased goods - including cars - after delivery would stunt the growth of independent internet car sales sites.

Under the directive, which is being amended by the European Union, consumers will have the right to cancel an order up to seven days after receiving the car and to keep it until they have received a refund.

'The internet will change the way the consumer reacts. It will complement, but not replace the dealer,' said McAllister.

The report by the EIU says: 'It remains to be proved whether a single extra vehicle has yet been sold because of the internet.' It also labels internet auto-retailing as 'immature and unstable'.

The EIU says: 'While the potential for the internet ultimately to help transform auto retailing is becoming more real with each passing day, prudent managers will have to do their homework in assessing some of the claims being made by web participants. So far the emphasis has been on meeting current demand better, not on growing demand.'

The report says the savings to customers from buying cars on the internet may not be as great in some cases as promised.

The latest Glass's Commercial Vehicles Guide editorial also picks up on the hidden costs of web-sourcing. It says: 'There will be a hefty delivery charge placed upon the initially low price and vehicle specifications could differ. This alone could lead to a poor residual performance if the owner tried to sell such an imported van to a trade that will simply not be interested.'

Despite the scepticism, Virgin Cars, launched by entrepreneur Sir Richard Branson, announced £1 million of orders in the seven days following its launch.

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