Issue no. 480 This week’s news for company executives July 12, 2012
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Residual value update_________________________________________LCV values fall, but year-on-year values still rising AVERAGE used light commercial vehicle values in June fell to their lowest point since last August, according to the latest report from BCA. Month-on-month values fell across the board by £199 (4.5%) to £4,171, with average age rising slightly to 58.21 months and mileage falling (76,661). There were value falls in all three main sectors of fleet and lease, part-exchange and nearly-new and CAP performance declined by half a point to 97.7%. However, year-on-year, June 2012 was ahead by £31 (around ¾ of 1%) compared to the same month in 2011, despite the average age climbing by over six months (up 13%) and average mileage increasing by 7,500 (up 11%). Performance against CAP slipped year-on-year, but only by a quarter of a point. Duncan Ward BCA’s general manager - commercial vehicles, said: ‘The market tends to slow down in the early summer and we have also had a short-term hangover from the Jubilee double Bank Holiday. ‘In fact, June brought a much needed reality check to the used commercial sector. There was almost an expectation from vendors that dealers will continue to pay ever higher prices for older, higher mileage vans because stock is short in supply. However, buyer confidence in the wholesale market is quite fragile and there is an increasing reluctance to buy poorer condition or excessively travelled vans because of the investment required to get these vehicles ready for retail. ‘In many ways the trade buyer is being squeezed from above and below. Competition for stock has forced prices up, while the retail customer - the small business or sole trader - wants even more van for their money when they walk onto a forecourt. ‘In many ways, the dearth of stock has kept values high as economic confidence is still reported to be flatlining. Small businesses are being particularly hard hit as they have no excess to trim back, so cost-cutting often takes the form of deferring expenditure - and if a replacement van was on the agenda for 2012, maybe that will be reviewed and postponed for another 12 months.’ Ward added: ‘We have been advising our sellers for some time to review their remarketing activity to ensure their vans are presented in the most saleable condition. Vehicles must be appraised sensibly and methodically and valued in line with market sentiment. Pre-sale preparation and presentation is important, and all the documentation and service histories should be present when vans are sold.’ Unsurprisingly, says BCA, values in the fleet and lease LCV sector declined from May’s 24-month high, falling by £148 (2.9%) to £4,965. Performance against CAP dropped by around a quarter of a point to 97.8% over the month, while retained value against manufacturer recommended price over 44 months and 70,000 miles was 31.68%, down a point on last month. Despite the month-on-month fall, the year-on-year figures again highlighted, said BCA, the longer term value growth across the fleet and lease sector. June was £352 (7.6%) ahead of the same month last year - despite the average van being two months older and 7,000 miles higher this year. Used car mileages tumble due to rising fuel prices EVER-increasing fuel prices are starting to have an impact on the mileages of used cars appearing at auction, according to the latest analysis from Manheim Auctions. The company’s valuation services manager Daren Wiseman said: ‘While the age of the vehicles is increasing, the average mileage is tending to fall, suggesting that people might be endeavouring to drive fewer miles while hanging on for their vehicles for longer. ‘This is a trend which may well start to make an impact in two or three years’ time when current ‘new’ vehicles hit the used vehicle marketplace.’ Manheim’s latest monthly analysis reveals that the number of all cars available for sale across fleet, dealer part-exchange and retail fell dramatically the past year. Wiseman added: ‘Values have increased over the last 12 months; however, the fall in available stock has led to choice becoming more limited and buyers may well be snapping up stock they probably wouldn’t have looked at six months ago just to make sure they have enough out on the forecourts. ‘The stock pool is likely to shrink further over the next six months and this, combined with an once-in-a-lifetime summer of sport and distractions, means it will be very difficult to predict retail demand going forward.’ Kia Picanto and Rio star in BCA ‘virtual sale’ KIA has held its first ‘virtual sale’ with BCA with its franchise dealers and Live Online bidders participating. The special event was staged at the world famous Kia Oval Cricket ground and marked the official used market debut of the new Picanto and new Rio. The auction of 70 cars took place via a giant screen at the Kia Oval where BCA’s auctioneers and the Kia dealers were gathered, with live images and audio of the sale simultaneously available to BCA Live Online bidders. With strong bidding throughout the event, nearly 90% of the entry was sold for an average of 105.67% of CAP ‘clean’. Prices for the Picanto averaged 111.46% of CAP ‘clean’ with the Rio averaging 105.34% of CAP ‘clean’. BCA sales director Mark Hankey said: ‘By averaging 105% of CAP ‘clean’ at a time when wholesale prices have been under some pressure, Kia clearly has a product range that is proving very attractive to retail customers.’ Politics and regulation_________________________________________Government told to make U-turn on low emission vehicle tax changes CHANGES to company car tax and first year capital allowances impacting on zero and ultra-low emission cars and due for implementation from 2015/16 should be reversed by the Government. That’s the view of the influential Committee on Climate Change, an independent body that advises the Government on emissions targets, and reports to Parliament on progress made in reducing greenhouse gas emission. In the spring Budget the Chancellor of the Exchequer George Osborne announced that:
The Committee in its ‘Meeting the Carbon Budgets - 2012 Progress Report to Parliament’ said in relation to the planned increase in company car tax and the decision to end first year allowances for leased business cars: ‘This could have a significant impact on purchases. ‘The removal of the company car tax exemption could increase the cost of electric vehicles by around £2,000 compared to conventional alternatives. Given the promise of this sector, the need for early take up of electric vehicles, and the very limited revenue generated by the Budget changes, we strongly recommend that the Government should reverse this decision. ‘The company car tax and business cars first year allowance exemption for electric vehicles should be extended to support the development of the electric vehicle market.’ The report says that there has been good progress in reducing new car emissions, but less progress in reducing new van emissions, and significant cuts were required across vehicle modes in order to achieve future carbon budgets. Average new car carbon dioxide emissions fell from 144.2 g/km in 2010 to 138.1 g/km last year and were on target to meet the 95 g/km target for 2020, said the Committee. However, it warned: ‘As the economy recovers, there is a risk that previous shifts in purchase behaviour could be reversed. Financial incentives, such as further differentiation in Vehicle Excise Duty (VED), increased VED and higher fuel duty may be required in future if progress in reducing car emissions is to be sustained.’ However, average emission from new vans fell just 0.5% between 2010 and 2011 relative to the 3.1% annual reduction required between 2010 and 2020 if targets are to be met. As a result, the Committee said: ‘It may be necessary for the Government to provide additional fiscal incentives for purchase of more efficient vans.’ The Committee also wants to see greater encouragement for eco-driving saying it could make a ‘significant and cost-effective contribution’ to meeting carbon budgets. However, it says that progress has been limited and has recommended eco-driving is included as a key element of the practical driving test. It also wants the Government to consider options to increase eco-driving training and other opportunities to provide information on fuel consumption and the benefits of eco-driving. Meanwhile, Government proposals to increase the speed limit to 80 mph on motorways and potentially dual carriageways would significantly increase emissions relative to the alternative of enforcing the current speed limit, and sends a negative signal about the Government’s commitment to meeting carbon budgets, says the report. As a result, the Committee says: ‘Given the need to reduce emissions from cars and vans, the Government should consult on enforcing the existing speed limit, including a full assessment of the costs and benefits of this option.’ The Committee has calculated that battery electric and plug-in hybrid car penetration in the UK will reach 1.7 million in 2020 (5% of all cars and 16% of new cars). In relation to vans the power form will account for 135,000 units in 2020 (4% of all vans and 16% of new vans). Europe proposes tough new car and van emission targets TOUGH new car and van carbon dioxide emission targets have been proposed by the European Commission amid warnings that vehicle list prices could rise by several hundred pounds. The proposals will cut average emissions from new cars to 95 g/km in 2020 from 135.7 g/km in 2011 and a mandatory target of 130 g/km in 2015. Emissions from vans will be reduced to 147 g/km in 2020 from 181.4 g/km in 2010 (the latest year for which figures are available) and a mandatory target of 175 g/km in 2017. The mandatory targets for 2020 are already envisaged in existing legislation but require implementation. Following thorough technical and economic analysis by the Commission, the proposed Regulations establish the manner by which the targets would be achieved. Connie Hedegaard, European Union commissioner for climate action, said: ‘With our proposals we are not only protecting the climate and saving consumers money. We are also boosting innovation and competitiveness in the European automotive industry. And we will create substantial numbers of jobs as a result. This is a clear win-win situation for everyone. This is one more important step towards a competitive, low-carbon economy. ‘More reductions beyond 2020 need to be prepared and these will be considered in consultation with stakeholders.’ The Commission says its analysis shows that the 2020 targets are achievable, economically sound and cost effective: the technology, it says, is readily available with its cost substantially lower than previously thought. The Commission calculates that increases in manufacturer production costs to meet the emission targets will be more than offset by fuel savings. Each new car will on average save its owner around €340 in fuel costs in the first year, and an estimated total of €2,904-€3,836 over the car’s lifetime (13 years), as compared with the 2015 target, according to the Commission’s calculations. For vans the average fuel cost saving is estimated at around €400 in the first year and €3,363-€4,564 over their 13-year lifetime. Overall, it is calculated that consumers will save around €30 billion per year in fuel costs and it is estimated that the targets could increase European Union GDP by €12bn annually and spending on employment by some €9bn a year. The proposals, it is suggested, would in total save 160 million tonnes of oil - worth around €70bn at today's prices - and around 420 million tonnes of carbon dioxide in the period to 2030. However, the average additional manufacturing cost is estimated at around €450 per van and €1,100 per car in 2020. Even if the full additional cost is passed on through higher prices, the Commission’s impact assessment shows that this extra cost to purchasers will be outweighed several times over by fuel cost savings over the lifetime of the vehicle. Fuel efficiency is expected to have a beneficial effect on employment as fuel efficiency increases the value of cars manufactured and leads to proportionally higher labour demand since vehicle manufacturing is labour-intensive, says the Commission. The proposals will now be submitted to the European Parliament and the Council for discussion and adoption under the normal legislative procedure. The European Automobile Manufacturers’ Association (ACEA) said that it would now work with its members to conduct a full analysis of how the proposed targets should be reached as well as their feasibility, and what they meant in practice for the industry as a whole. ‘It is clear that emission levels from vehicles have to continue on their downward trend and the industry is committed to deliver on this’, said Ivan Hodac, ACEA secretary general. However, he said, that the proposal to reach a fleet-average target of 95 g/km for cars and 147 g/km for vans by 2020 would remain extremely challenging. He suggested that measures needed to achieve the emission targets would increase manufacturing costs in Europe, creating a competitive disadvantage for the region and further slowing the renewal of the fleet. In the context of declining car sales for the past five years running, the proposed targets would place an extra strain on manufacturers, said ACEA.
‘Considering that most manufacturers are losing money in Europe at the moment, the industry needs as competitive a framework as possible. Targets - while ambitious - must be feasible,’ said Hodac. ‘The industry is diverse; the emissions-legislation is complex, and the cost implications are huge. ACEA and its members will now take the time they need to investigate the details of these proposals and their envisaged consequences.’ ‘Feebate’ scheme is the way forward for electric vehicles, says charity A NEW kind of financial incentive scheme is needed to encourage more people to switch to low carbon vehicles, according to the Campaign for Better Transport, which has launched a report into the possibility of a ‘feebate’ scheme in the UK. A ‘feebate’ scheme works by giving buyers of low emission cars a significant rebate - potentially several thousand pounds - while buyers of high emission gas-guzzlers pay an extra fee. With the UK Government committed to reducing greenhouse gas emissions 80% on 1990 levels by 2050, electric and hybrid vehicles are one of the main planks of the Government’s carbon reduction strategy. However, despite several financial incentives designed to encourage the uptake of low carbon cars, including graduated Vehicle Excise Duty (VED), Plug-In Car Grants and graduated company car taxation rules, there has been little take up so far, with just over 1,000 vehicles bought through existing incentives. With the Government currently reviewing VED, the Campaign for Better Transport believes the time is right to look at how it could be used to promote greener vehicles and a ‘feebate’ scheme, says the organisation, should be one of the options considered. Stephen Joseph, the Campaign for Better Transport’s chief executive, said: ‘The UK has the opportunity to become a leader in electric and hybrid vehicles, which could help the Government meet its aim to rebalance and green the economy. ‘Our report suggests that now is the perfect time to consider a more radical approach and a ‘feebate’ system could work. The Treasury could learn from the operation of a similar scheme in France and develop one that is cost-neutral and encourages the take-up of low emission vehicles.’ Fears mount over drivers failing to obtain CPC before 2014 deadline CONCERN is mounting that some light goods vehicle and passenger carrying vehicle drivers may lose their jobs in 2014 because they have failed to complete their Certificate of Professional Competence training. The Driver CPC is for LGV and PCV drivers who drive professionally throughout the UK. It was launched in 2009 to improve the knowledge and skills of professional LGV and PCV drivers throughout their working life. There are two parts to the legislation:
The first five-year time frame will be reached in September 2014 and as the deadline approaches there is likely to be an excess of demand for training over the available supply leading resulting in the possibility that some people may lose their ability to drive and an inevitable increase in prices for appropriate training. Driver CPC was top of the agenda at the Freight Transport Association’s National Council meeting this month. Many issues relating to Driver CPC were raised during the meeting including the need for a clear definitive description of what Driver CPC is, and the proposal that trainers should be required to complete certification themselves. The FTA has also expressed its concern over the reluctance of companies to invest in Driver CPC training as the 2014 qualification deadline draws nearer. Although training is compulsory it has been suggested that only 70% of drivers may be qualified by 2014. Another point raised was whether a higher standard of Driver CPC training was required and if a proposed further voluntary accreditation was something to be considered; in conclusion it was agreed that there was a need for a plan to take forward a ‘checklist’ to establish what a ‘good’ Driver CPC should be. James Hookham, the FTA’s managing director - policy and communications, said: ‘With the deadline in sight - two years to go for freight drivers, and just 12 months for bus and coach drivers - we believe it is critical within that time that it is organised and managed best, and therefore, FTA felt it important to consult with its members on what they think a good Driver CPC course should look like.’ Lenient sentences for dangerous drivers, reveals IAM research DRIVERS are receiving ‘short’ sentences for some of the most serious motoring offences, according to research by the Institute of Advanced Motorists (IAM). The average sentence for causing death by dangerous driving is just four years - 62% shorter than for manslaughter, according to a Freedom of Information request made by the IAM to the Ministry of Justice. The average sentence length of manslaughter is 6.6 years. Those sentenced to prison for causing death by careless or inconsiderate driving are given an average sentence of 1.3 years. Causing death by careless driving when under the influence of drink or drugs has an average sentence of 4.35 years. Fifty-three per cent of those convicted of causing death or bodily harm through driving offences were sentenced to immediate custody (260 people) in last year. The figure has dropped from the 83% sentenced to immediate custody in 2001. Fines for drink-driving are also lower in real terms than they were 10 years ago. In 2001 the average fine for drink-driving was £203 - the average £240 fine in 2011 was equivalent to just £178 in 2001 prices - a 12.3% decrease. The average fine for careless driving is £138, 27% less in real terms than it was in 2001. Dangerous driving is the only area with tougher fines. The average fine is £518 – 30% more in real terms than in 2001. IAM chief executive Simon Best said: ‘We recently discovered that the number of prosecutions for motoring offences has fallen. Now it is clear that drivers are also receiving short sentences for some of the most serious driving offences. ‘Magistrates are handing out fines for drink-driving that are less than 5% of the maximum amount possible, giving the message that drink-driving only warrants a slap on the wrist. Only sentences that reflect the seriousness of the crime will act as a proper deterrent.’ Dealer news__________________________________________________ General motor industry news___________________________________ Private demand fuels new car volumes with fleet sales static NEW car sales in the first six months of 2012 are 2.7% ahead of last year buoyed by increased private demand, while fleet sales are static and sales to small business remain in the doldrums. Last month new car sales grew 3.5% to 189,514 units (June 2011: 183,125) - the fourth successive monthly rise. It means that registrations over the first half of the year increased to 1,057,680 units (2011: 1,029,638). Private demand recovered in the first half of 2012. Sales in June increased 9.8% to 79,916 (June 2011: 72,790) to take half-year 2012 volumes to 476,283, up 8.7% on the same period last year (438,196). Fleet sales last month dipped 0.5% to 101,675 (June 2011: 102.209) with half-year registrations almost static year-on-year at 537,176 (2011: 537,816). However, sales of new cars to companies operating less than 25 vehicles fell 2.5% last month to 7,923 (June 2011: 8,126) to leave 2012 volumes 17.5% down at 44,221 (2011: 53,626). Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, which compiled the figures, said: ‘Driven by demand from private buyers, June new car registrations grew 3.5% to push 2012 half year volumes through the one million mark. ‘Despite domestic and international economic concerns, UK motorists are responding positively to new products and the latest fuel-efficient technology. The industry has performed better than expected in the first half of the year and we will now need to work hard to sustain growth.’ Technological gains helped average new car emissions fall 4% to 134.1 g/km in first half of 2012. That is down 4% on a year ago and 2.9% compared with 2011’s full year figure of 138.1g/km. During the period under review sales of alternatively fuelled vehicles increased 12.3% to 14,626 (2011: 13,026). Although new car registrations are increasing they are some 15% below the 2007 outturn, prior to recession, but some 2.5% ahead of average June volumes for the previous three years. Registrations in the second quarter of 2012 rose 4.8% and over the first half of the year have risen 2.7%. It means the new car market was some 5% ahead of the SMMT’s forecast for quarter two (as set in April) with the annual running total at 1.97 million units in June. The growth, said Everitt, was encouraging, given the subdued economic setting and compares with the full year 2011 total of 1.94 million units and a full year 2012 forecast of 1.95 million units. The Ford Fiesta was the best-selling model in June (9,063 units) and is the market-leader over the first half of 2012 (59,570 units). Ford is also the best-selling new car manufacturer this year with sales 4.08% ahead of last year at 150,378. New car prices continue to accelerate THE average price of new cars increased in June by 0.288% or £83 from £28,777 to £28,860, according to figures from Driven Data, which calculates the retail prices of every car model currently sold in the UK. It is the ninth time prices have increased in a year. The average annual price since June 2011 has increased by 2.296%, or £648 (from £28,212 to £28,860), but that is lower than in the 12 months to June last year when the underlying pace of inflation in car prices was 4.794%. 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