THE motor industry is heading for crisis, with the supply of new cars set to massively outstrip demand thereby throwing residual value calculations into chaos, it is claimed.

Production capacity has increased well in excess of both fleet and consumer demand, and will continue to do so with more manufacturers fighting for share in a static market. As a result, any accurate predictions of residual values - the cornerstone of vehicle wholelife cost calculations - will be jeopardised. And there is no end in sight to surplus production while market share and volume remain key measurements of success or failure for many manufacturers, according to Brian Mahony, Toyota's director of corporate business.

Distress marketing and further floods of nearly new stock are the inevitable consequences, and they had a crippling effect on the residual values achieved by daily rental companies in the second half of last year (Fleet News November 24, 1995). And even more manufacturers are set to join the fray, creating a nearly new parc, which could have damaging residual value ramifications throughout the motor industry.

Car makers have cut supply to the rental industry by 50,000 cars this year over last, down to 250,000 units, but that has not solved the surplus. Indeed, perhaps the real problem lies with manufacturers' own captive registrations - this year's figures are running slightly ahead of 1995's 109,000, compared to 70,000 in 1990, it is claimed.