Mercedes Ireland executive unleashes unprecedented attack on new car market 'pre-regging' practice
The new-car sales bubble is in danger of bursting because dealers are artificially inflating ‘sales’ figures, it is claimed.
Dealers and distributors are being blamed for registering thousands of cars at the end of each month to bolster ‘sales’ figures - even though they have no ‘real’ buyers for them.
The practice, perfectly legal, is called ‘pre-regging’. The ‘pre-regged’ cars are usually sold for thousands less over subsequent months as ‘nearly new’ or ‘newsed’ vehicles.
But now a senior Mercedes Ireland executive has unleashed an unprecedented attack on the practice – accusing several brands of ‘reckless trading’ and forecasting a crisis for dealers and consumers.
Ciaran Allen, passenger sales manager for Mercedes in Ireland, didn’t specifically name any brand but warned that the law of supply and demand will “bring down the house of cards” on several dealers because the practice is not sustainable.
At a special briefing, he produced figures to show how, so far this year, thousands of cars have been registered in the final three days of each month so marques could keep their positions in the official best-sellers’ league.
The figures show how 8,500 cars (22pc of total) were registered in the last three days of January; 40pc of the total for February and 44pc for March and April.
One unnamed brand ‘sold’ 48pc of their monthly total in the final three days of January.
Mr Allen said: “We are being asked to believe that 34,000 people who bought a car this year did so in the last three days of the month.”
And while the new-car market is officially down 14,000 - 10pc to 125,000 - to the end of August, Mr Allen believes the real figures represent something closer to a 14pc decline.
He compared the situation with the housing bubble of 2006/7 when houses were built with no one to buy them.
He fears the ‘ever increasing dependency’ on hire-drive and ‘pre-regging’ is making the car business “more precarious” by the day.
“Sterling (Brexit) is a threat but not the biggest threat. At least people want to import a car. The biggest threat (to businesses) is ‘pre-regging’ and ‘hire-driving’ 34,700 cars that no one wants.”
“When this finds its own level, people will definitely get caught out. “And when it happens, people will ask how a single brand could register 700/800 cars on the last day of a month (with no buyers).
“It is reckless trading and the single biggest threat to the motor industry. They can’t beat the logic of supply and demand.”
Mr Allen was backed by Mercedes Ireland chief executive Stephen Byrne who warned that the first impact would be at dealer level, especially those who are backing PCPs because used-car values could fall heavily.
From a consumer’s perspective there are good and bad sides to the practice. Those who buy at the beginning of a month may feel cheated but those who purchase the ‘same’ car as a ‘nearly new’ motor for thousands less the following month will feel they’ve done well.
The Irish Independent has raised ‘pre-regging’ with several companies. They were all adamant it is part of a strategy to sell cars in a tough environment and claim it is not unique to Ireland. Several sources described it as a ‘tool’ of the trade.
They also argue that other brands use promotions and deals which are at least as costly as pre-registering to implement.