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Investigation: Is pre-reg rife? The manufacturers give us their views

Time 8 years ago

Screen shot 2014-02-04 at 17.33.15

WITH the mainstream media reporting an ‘all is rosy’ picture in the car industry and ‘sales’ said to be back to pre-recession levels, we ask car manufacturers some awkward questions.

We contacted every car manufacturer listed in the SMMT registration figures and asked them four questions:

  • Do you believe that pre-registrations are rife in the UK car market?
  • Do you believe pre-registrations damage the UK car market?
  • Would the UK car market be better off without pre registrations?
  • Are you aware, and do you take action against, your dealers pre-registering cars?

Here are their responses – including the questions dodgers

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Screen shot 2014-02-04 at 17.25.47AUDI
Paul Sansom, head of sales
Total sales for 2013: 142,040

The manufacturer refused to answer our questions directly, but Sansom said: ‘Audi is generating genuine desire from retail and fleet customers for our products, which is demonstrated by being the number one premium brand in both retail and true fleet sales in 2013. Audi will continue to pursue this strategy of sustainable and profitable growth.’

Screen shot 2014-02-04 at 17.26.19CITROEN
Linda Jackson, managing director
Total sales for 2013: 78,358

In my experience the pre-registration of vehicles has been a feature of the UK car market for many years. Because of an absence of any meaningful industry statistics, it would be wrong for me to speculate about the extent of pre-registration volumes in the UK today. Speaking purely for Citroen, our dealer partners, as independent businesses in their own right, are naturally at liberty to pre-register cars to achieve their own commercial goals. However, this is not a major part of our business or strategic approach.


Screen shot 2014-02-04 at 17.26.26Screen shot 2014-02-04 at 17.32.46DACIA AND RENAULT
Ken Ramirez, managing director
Total sales for 2013: 63,319 (comb’d)

The information on the market registrations is published on a monthly basis by the SMMT. We neither encourage nor suppress pre-registrations. The UK remains one of the most competitive car markets, which ultimately benefits the consumer, and we audit our dealers periodically in order to assess their compliance.

Screen shot 2014-02-04 at 17.26.33FIAT GROUP
(Abarth, Alfa Romeo, Chrysler, Fiat, Jeep)
Steve Zanlunghi, managing director, Fiat Group Automobiles UK
Total sales for 2013: 71,981 (comb’d)

We do believe pre-registrations are rife in the UK car market. They can be viewed as a form of incentive: the more it happens, the more it lowers the transaction price and subsequently resale value of vehicles. Pre-registrations are a reality in the industry today. If there were none there would be a more accurate view of the natural industry. This would also mean less discounting, which would reduce the overall registrations as the transaction prices would increase. We are aware that it happens, but dealers are independent business entities and make decisions to run their business. There are specific lines/brands where we ‘encourage’ dealers not to pre-register.

Screen shot 2014-02-04 at 17.26.53FORD
Andy Barratt, Ford of Britain, sales director
Total sales for 2013: 310,865

With excess production capacity and European markets in decline it is inevitable that some manufacturers will look to a buoyant UK market to sell this extra capacity. This can result in manufacturers ‘pushing’ sales, potentially increasing pre-registrations, rather than relying on the natural ‘pull’ of the market. Pre-registrations have existed for a number of years in the UK and they have established themselves as a unique channel within the market place, with some customers preferring to purchase pre-reg vehicles. In view of the excess capacity in the European industry, and the fact that the combined market share objectives for all manufacturers is greater than the level of natural demand, pre-registrations are inevitable for the foreseeable future. Our dealers are independent businesses operating in their own commercial environment and Ford is restricted legally from interfering in their business decisions.

Screen shot 2014-02-04 at 17.27.34HONDA
Spokesman
Total sales for 2013: 55,660

Pre-registration is not an activity Honda is directly involved in, and not something we actively encourage, so it is therefore difficult to comment. Every registration is at the individual dealer’s discretion. There is always a requirement within a dealer business for self-registered cars in the form of demonstrators and courtesy cars. Our focus is to provide customers with cars to their individual specification, direct from the factory to the customer.

Screen shot 2014-02-04 at 17.27.41HYUNDAI
Tony Whitehorn, president and CEO
Total sales for 2013: 76,918

We do not think pre-registrations are rife. We do not think pre-registrations damage the car market and don’t think the market would be better off without them, because it isn’t rife. It is a dealers’ decision when they register vehicles.

Screen shot 2014-02-04 at 17.29.18INFINITI
Spokesman
Total sales for 2013: 386

At present our volumes are too small for this to affect us.

Screen shot 2014-02-04 at 17.29.27LOTUS
Spokesperson
Total sales for 2013: 256

First of all, at Lotus, our registration figures are true consumer retails, with the exception of dealer demonstrators. However, in the volume sector, there has been a historical prevalence of pre-registrations, especially towards the end of each quarter to meet retail targets. As the UK car market continues to recover, the need for a continuous improvement in retail performance will drive target-seeking behaviour, thus bringing pre-registrations back to prominence. We do believe they damage the market. With the supplement of pre-registered cars obscuring the true picture in other market segments, it’s difficult to ascertain true trends. Financially, it goes without saying that pre-registrations can be ruinous to residual values.

We think the car market would be better off without them. An accurate view of the number of retail consumers actually buying new cars is invaluable for manufacturers and dealers as well as market analysts and economists. We have a very close relationship with our dealers, and ensure that performance incentives are linked to true retails rather than pre-registrations. Any incentive programmes must be related to specific cars, at specific times, to ensure stable growth and protect residuals.

Screen shot 2014-02-04 at 17.29.42MASERATI
Peter Denton, regional manager, Maserati North Europe
Total sales for 2013: 319

I can only comment from a Maserati business perspective, and naturally, given the brand’s luxury product range, pre-registration is not a practice we have any visibility on, nor one our hand-picked retail partners would engage in with our product. It is therefore difficult to offer any comment in this instance on the points you originally raised in your January issue column.

Screen shot 2014-02-04 at 17.30.11MERCEDES-BENZ
Spokesman
Total sales for 2013: 109,456

I’m afraid I can’t comment for the rest of the car industry, but I can tell you what we do. While we have quiet days and busy days in our retail network, every registration submitted by our retailers follows the Supply of New Cars Order from back in 2000. Any cars pre-registered are reported to the SMMT.

Screen shot 2014-02-04 at 17.30.20MITSUBISHI
Lance Bradley, managing director
Total sales for 2013: 9,044

‘Rife’ is probably too strong a word, but there are certainly a number of manufacturers who offer significant incentives for their dealers to pre-register a number of vehicles. It’s hard to estimate just how many because the evidence is largely anecdotal. I don’t believe it damages the market – it’s just a discount by any other name. As a policy, we at Mitsubishi don’t encourage it because it can damage residual values and dampen demand for new vehicles the following month, but if other manufacturers want to go down that route it’s up to them. In the end, the pre-reg cars all get sold, usually to a customer who came in looking for a new car, so it’s not like they’re significantly artificially increasing the market stats – they’re just moving the measure of true demand from one month to another. Why would we take action against a dealer for pre-registering a car? If they’ve got a target to hit to earn £X thousands of bonus money and they’re one unit short, they’re going to register a car to earn their bonus. Dealers can change a demonstrator, or a courtesy car, or add another one to their fleet. Or they might just pre-register it and put it on their used car lot. At Mitsubishi, we almost never offer incentives to pre-reg (I think once last year, and that was typically two or three cars per dealer), so it’s not a big issue for us. The key is, like most things, if you’re going to do it, do it in moderation.

Screen shot 2014-02-04 at 17.30.31MG
Guy Jones, sales director
Total sales for 2013: 504

We believe that pre-registrations do take place, but that they only account for a small minority of overall registrations. The level of pre-registrations fluctuates as demand exceeds supply for new cars. In most circumstances, they don’t damage the UK car market and we don’t think things would be better off without them. We are not aware and do not take action against dealers that pre-register cars. At MG we don’t incentivise our dealers to hit stretching volume targets in order to achieve substantial bonuses. We plan carefully to balance supply with demand, so we do not require pre-registration.

Screen shot 2014-02-04 at 17.30.44NISSAN
Jim Wright, managing director
Total sales for 2013: 117,967

You have said that pre-registration means ‘dealers registering cars in bulk’. This is quite different to the definition of the term given in the Supply of New Cars Order 2000. As requested, we are responding to your questions on the basis of the meaning you have stated. Dealers register cars in bulk for a number of reasons. SMMT produces registration figures based on DVLA data that combines manufacturer and dealer registration data. Nissan does not have a clear picture of the total number of dealer bulk registrations in the UK car market so cannot comment on whether it believes they are ‘rife’. It would be difficult to assess whether dealer bulk registrations damage the UK car market without complete information about volumes and the purpose of such registrations. Dealer registrations are a matter for dealers. In terms of the Supply of New Cars Order and any pre-registrations falling within the order, Nissan endeavours to ensure that it, and its dealers, comply with the order at all times.

Screen shot 2014-02-04 at 17.31.07KIA
Stephen Kitson, director of corporate communications
Total sales for 2013: 72,090

Kia Motors (UK) Limited does not encourage or persuade its dealers to undertake self-registration on an occasional or regular basis for any reason whatsoever. We are aware that some dealers may occasionally register one or two additional courtesy cars or demos in order to meet specific monthly targets but that is their individual decision as business owners and managers. Kia has no particular view on the practice, whether or not it is undertaken by other manufacturers or dealers, and has no particular view on its impact on the market in general or overall terms. Kia simply restates that it does not encourage this practice and it certainly does not seek to persuade dealers to do this. It is not a part of our business strategy and consequently is of no interest to us.

Screen shot 2014-02-04 at 17.31.13PEUGEOT
Tim Zimmerman, managing director
Total sales for 2013: 105,435

Every car market in Europe generates a certain amount of zero mileage used cars as manufacturers clear out ‘bin-ends’, dealers manage their stocks or need one or two more vehicles to hit targets. It is important not to confuse ‘month-end’ registrations with ‘pre-registrations’. In Peugeot’s case, for example, a disproportionate amount of our new vehicles are received into the UK in the second half of the month, so registrations are bound to build as the month progresses. The UK market is currently one of the healthiest in Europe and customer value for money is strong. In the highly mature UK market there has always been a section of the population that demands nearly-new cars, believing them to represent better value and a simpler, quicker choice. Our dealers are independent businesses who know their customers well and they choose how to retail their new and used vehicles, although we will always encourage them to focus on new, especially as our latest range of cars offers such a great opportunity for them to grow their businesses.

Screen shot 2014-02-04 at 17.31.40PORSCHE
Peter Mahon, head of operations
Total sales for 2013: 8,260

Porsche has a long-standing and successful policy of ‘building one car fewer than the market demands’, with the consequence that we are able to balance our production with sales. This situation is supported by strong global demand and plants operating at maximum capacity. A further benefit of such careful management of the process from order to delivery is our highly-prized residual values.

Screen shot 2014-02-04 at 17.31.49SSANGYONG
Steve Gray, marketing & communications director
Total sales for 2013: 662

‘Rife’ is a strong word, but we believe that pre-registrations have a strong influence on the alleged strength of the UK market. We think that pre-registrations create a false impression of the size/composition of the UK market. The market would probably be better off without them, but our opinion is unimportant while the European markets remain soft. We do not encourage dealers to pre-register vehicles.


Screen shot 2014-02-04 at 17.32.07SUBARU
Spokesman
Total sales for 2013: 2,271

Yes, pre-registrations are happening and they have been for some years, but they do not necessarily damage the UK market as, for some brands, they provide an alternative route to market, offering value to customers who perhaps would only buy ‘new’ vehicles on these terms. However, some pre-registration by some brands, usually specialist or prestige, could be damaging. And to an extent they can distort the market where manufacturers are chasing volume targets. We are not convinced the UK car market would be better off without pre-reg as, almost certainly, overall volumes would fall. We are not aware of our dealers pre-registering cars.

Screen shot 2014-02-04 at 17.32.16SUZUKI
Dale Wyatt, sales and marketing director
Total sales for 2013: 33,088

We believe pre-registrations are a fairly common industry practice. There are two schools of thought on whether they damage the market. The first would be pre-registered cars provide a stepping stone between new and used cars and have created a new category of nearly new. The cars are often sold to used customers and help to grow the new car market. They represent great value for the consumer, and dealers often benefit from enhanced bonus for registering these cars. But also, the other thinking is that bulk deals create an unbalanced market. Pre-registrations weaken the residual value, undermine the core retail offer and generate a two-tier market, with the cash-rich dealers benefiting. It is a drug that, once taken, it is difficult to stop. We don’t think the UK car market would be better off without them, though, as this assumes that supply will always be in line with demand. If pre-reg stopped, manufacturers and dealers would find another way to hit their targets. Here at Suzuki we do not encourage any bulk pre-reg activity. We prefer to focus on strong consumer offers. This ensures that the market is orderly and sales-led. We actively encourage our dealers to meet stretch retail objectives and reward them accordingly.

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Screen shot 2014-02-04 at 17.32.26VOLKSWAGEN
Spokesman
Total sales for 2013: 194,085

The manufacturer refused to answer our questions directly. Instead, VW director Robert Hazelwood said: ‘Volkswagen UK’s strategy is focused on generating genuine awareness and desirability for our products.’

Full report: Is pre-reg rife?

 

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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