Vehicle supply shortages due to WLTP

Car manufacturers suffered a 20.5% decline in new registrations last month as challenges surrounding the implementation of newly-introduced WLTP emissions standards meant they simply had no cars to sell.

Lead times have been an issue for certain manufacturers since March, as they struggled to re-homologate their model ranges in time for the September 1 deadline.

Fleet operators have been especially affected as leased vehicles reached their end of contract date but replacements were not available.

According to a recent Fleet News poll, 89% of fleet decision-makers felt lead times had not improved since the WLTP deadline.

Vehicles that failed to meet the new standards by September could not be registered, and production lines had to adapt to produce modified or new engines in order to comply.

Some model variants were ditched altogether, such as the BMW 520d Efficient Dynamics, while others were taken off sale temporarily like the Volkswagen Golf GTE.

September is a plate-change month – one of the busiest times of the year– but 87,000 fewer cars were registered than in 2017.

Fleet registrations were even lower, with a 22.4% decline.

Worst affected were Volkswagen (down 55%), Audi (down 53%) and Nissan (down 41%). VW Group brands Seat and Škoda also suffered, with falls of 36% and 31% respectively.

However, reductions in registrations elsewhere were not necessarily due to WLTP, according to one experienced manufacturer boss.

Tony Whitehorn, managing director at Hyundai, described the market as looking “fragile for the full year”, but said some manufacturers were “hiding behind WLTP”.

He believes the market is poised for major structural reform as the levels of profitability from selling cars in the UK falls.

“Historically, we (the motor industry) overcooked it and at last people aren’t making enough money,” Whitehorn said.

Previous registrations slumps have been cyclical, he added. “If the pound versus the euro stays where it is, this time it’s structural.”

Manufacturers will target the least profitable areas, primarily rental vehicles and brokers deals which “will please leasing companies”, Whitehorn said. “Rental will be first to go because it’s the most expensive and that will have some residual value benefit.”

Quarter three rental figures show a 15% fall in volume, the third consecutive quarter of year-on-year decline, compared to private (down 11%) and leasing (down 10%).

Hyundai, itself, has reduced rental volumes by more than 20% in Q3, although its total sales are down by just 1.8%. Meanwhile, Ford cut more than 4,000 cars from rental, a fall of 59%, and Nissan took out 5,500 (down 86%), which accounted for a large wedge of its near-16,700
Q3 drop in registrations.

Mike Hawes, Society of Motor Manufacturers and Traders (SMMT) chief executive, tried to put a brave face on the situation.

“With the industry given barely a year to reapprove the entire European model line-up, it’s no surprise that we’ve seen bottlenecks and a squeeze on supply,” he said.

“These are exceptional circumstances with similar declines seen in other major European markets. The good news is that, as backlogs ease, consumers and businesses can look forward to a raft of exciting high-tech cars and a market keen to recover lost momentum.”

Hardest hit

Volkswagen was the hardest hit in September, as many of its best-selling cars have yet to be approved under the new test regime.

One fleet manager told Fleet News they were quoted a 40-week lead time for a new Volkswagen, while another is now considering alternative brands due to long lead times.

The brand’s registrations were 55% down. In fleet, it suffered a 72% decline, with key models such as the Golf and Passat down 80%.

Volkswagen board member for sales Jürgen Stackmann said: “Developments in September were a setback, but we had been expecting this following the records in the summer. October will also be affected by the changeover to the WLTP test procedure.”

The manufacturer says it now has approval for “high-volume variants of all 14 Volkswagen brand models” and expects the changeover to be “virtually completed” by the end of the year.

“From November, we will be ready for the end-of-the-year sprint in Europe,” added Stackmann.

Discontinued variants

Audi suffered a similar decline, down 53% overall and 74% in fleet. The carmaker is planning a number of changes to its model line up.

In a statement it said: “Some engine/transmission variants with low demand will be discontinued and will not be replaced. In many cases, similar variants will remain available to our customers. For example, variants with a manual gearbox may be discontinued although the same engine may continue to be available with a dual-clutch gearbox. As soon as one of the variants which is affected has sold out, no further orders for that variant will be taken in the system.”

Audi’s premium brand rivals Mercedes-Benz and Volvo were among the first manufacturers to re-homologate their model ranges. While Mercedes lost a number of derivatives, most noticeably its plug-in hybrid C and E-Class  through model refreshes, both managed to record increased fleet sales in September.

Colin Thompson, senior pricing manager at Lex Autolease, said: “We saw the number of quotable vehicle derivatives drop by more than a third between March and August. We are now seeing a recovery as more vehicles achieve WLTP-certification, but we do expect choice to be limited in the long term.

“For drivers, there is a degree of confusion because some models have been withdrawn from sale – either permanently, or while its WLTP emissions figure is pending. Some are prepared to wait, others are choosing an alternative, more readily-available model, where they can be more confident about its longer-term tax position.”

Quotable vehicle numbers start to rise

Zenith removed all non-compliant vehicles from its quoting platform in July to maintain transparency for customers. Now, the company says it has seen a growth in the number of quotable vehicles.

“The number of quotable cars available on our systems continues to increase as each manufacturer releases data on new models,” said Ian Hughes, managing director of Zenith.

“We have seen an increase of 20% in the number of vehicles available for quoting since August, but there is still a way to go.”

For some fleets, lead times aren’t an issue because many companies are simply not ordering cars for a variety of reasons linked to WLTP.

Suzanne Phillips, national fleet consultant at Hitachi Capital Vehicle Solutions, said: “People are deciding to hold fire for six months, either using mini leases or six-month extensions, even 12-month extensions, to buy some time.”

Most of the uncertainty is related to how benefit-in-kind (BIK) tax bands will be adapted to suit the higher CO2 emissions of cars under the new test.

Drivers are also unhappy with the lack of availability, either due to homologation or emission figure increases taking vehicles out of policy.

No rate book; reworked TCO structure

David Fisher, fleet manager at Rexel, said: “Due to manufacturers not fully releasing their figures we are unable to run a rate book. This, coupled with the looming changes to BIK being announced in the Budget, means we will need to completely rework our TCO-based structure.”

He doesn’t expect to be in a position to place orders until next year.

As a result, rental companies are seeing an increase in fleet business.

Adrian Bewley, assistant vice president of business mobility at Enterprise Rent-A-Car, said: “Demand for rental is definitely increasing as organisations look for alternative options to support their company car fleets. Companies are looking for a short-term solution that gives them flexibility and keeps employees on the road.”