Tuesday 20 February 2018

Stockpile of pre-reg cars offers hope of bargains

Discounts for buyers may be €2,000, but registering cars prior to sale could cost industry up to €12m, says Martin Brennan

The sales of new cars this year could be as low as 64,000, although as many as 70,000 may be registered by year end. This figure has been put forward by a major importer and suggests that pre-registering cars by many of the big companies is reaching epidemic proportions. "Pre-registrations are masking the true level of sales figures. The situation is very grave for the industry."

According to industry sources, importers are being forced by factory bosses to meet targets and are anxious to create the impression they have gained or are maintaining market share. The market has dipped right across Europe, and there is pressure to keep the production numbers up or factories will have to cut back on staff and production.

Last year, when there was a stockpile of unsold cars, the Society of the Irish Motor Industry figures showed about 79,500 cars were registered with number plates and VRT paid, but the Central Statistics Office said that only 74,000 new cars had been taxed to go on the road. This indicates a 7 per cent stockpile of unsold cars. With a further shrinkage of the market expected this year the prediction of at least 6,000 pre-registrations would amount to an increase to a 9 per cent stockpile of unsold cars at the end of December.

This year, the trend to pre-register as a means to improve 'sales' chart figures was evident again when 2,500 cars were registered on the last day of January – which greatly distorted the figures for cars actually sold in the first month of the year, seen as critical for gaining sales.

The figures were similar for the last day of February when, astonishingly, 24 per cent of the registrations for the month took place. "It is not possible that this amount of business took place in one day," a Dublin garageman admits. "The figures are being massaged."

Pre-registering is a costly strategy for the motor industry – these pre-registered cars go on sale with big discount stickers, as they are technically secondhand with a previous owner, usually the garage, already named on the log book.

It is estimated that across a range of models the average discount could be in the region of €2,000 – and if the prediction that 6,000 unsold pre-registered models is accurate the cost to the industry would amount to €12m in Ireland alone.

The big winners here are cash-strapped motorists who value every euro taken off the purchase price. But the sting in the tail is that the residual price will suffer because of the extra name on the log book when it comes to trading-in or selling on privately, even though the car may have had 'delivery-miles-only' when bought.

A ray of hope for the industry is that with the new 131 registration plate format, which switches to 132 from July, there will be a mid-year bounce in sales as it will indicate the younger age of the car. But many predict that this may take a few years to make a significant difference in residual values. A development which is helping to get more motorists into new models is the steady growth of PCP rental agreements where monthly payments are fixed, with residual prices guaranteed should the motorist decide to eventually purchase the vehicle.

Garages admit they are under pressure from importers to meet targets and there are often incentives to make sales. The slump in sales in Europe has threatened factories in France with closures and thousands of job losses. New car sales are sluggish even in Germany which is seen as a major worry to the whole European car industry.

Manufacturers openly admit that China, India and South America are helping to shore up production figures but increasingly the major companies are moving production facilities to these countries where labour costs are significantly lower.

Irish Independent

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