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Scrappage scheme puts freeze on fleet

Date: 05 May 2009   |   Author:

"Customers are normally happy to wait and we can deliver most cars within 10 weeks, but it seems - anecdotally - that customers are looking to take cars out of stock," Vince Kinner

Lord Mandleson's scrappage scheme looks set to compound a new car stock shortage, leaving businesses picking up the costs as fleet managers have to resort to short-term rental to cover for delayed vehicles.

That's the message from one of the UK's leading industry chiefs.

VW fleet boss Vince Kinner is warning the unique combination of recession, extended contracts and the scrappage scheme could cause havoc for fleets as manufacturers have reduced stock levels and are needing around 8-12 weeks between order date and delivery.

Nearly all manufacturers have now cut back on production and cleared the excess stock that dogged their start to the year, although the consumer demand potentially created by the scrappage scheme could combine with the unknown quantity of when fleets will replace cars currently on extended contracts to create a shortfall.

According to a new report from consulting giants PricewaterhouseCoopers, 26% of fleets have taken action to extended contracts.

There is already evidence of the situation beginning to manifest itself.

"We don't have the huge stocks we'd expect to carry at this time of year," VW fleet boss Vince Kinner told BusinessCar.

"Customers are normally quite happy to wait and we can deliver most cars within 10 weeks, but it seems - anecdotally - that customers are looking to take cars out of stock."

The situation is currently being driven, at least in part, by the small-scale resurgence in used prices, meaning fleets buying outright have seen an opportunity to dispose of cars, then struggled to replace them.

But in the longer term, Kinner is concerned a significant number of fleets are holding off on new car orders, and if too many move at once, car makers won't have the stock or production capacity available to respond.

"It worries me, so many clients are putting decisions off to later this year and not leaving themselves enough time to get the cars they want," he said.

"If people keep postponing there will come a point when they have to change and if they're all at the same time there will be problems."

"We're trying to predict when people will come back but it is a challenge," he continued. "Leasing companies are the key, we can't get a feel which are deliberately extending contracts and which are marketing for new business."

Kinner's worry was backed up by another manufacturer, which said 8-12 week lead times will be the norm so fleets need to plan carefully and not expect late orders to be fulfilled, potentially leaving them needing to use short-term rental to fill a gap.

The Society of Motor Manufacturers & Traders agreed stock could be a problem if the scrappage scheme is as effective as is hoped. "If you are thinking of changing, give due warning," said an SMMT spokesman. "If it has the desired impact on registrations, businesses will need to take that into account."