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Manufacturers under pressure to rethink fleet discounts

Up-front fleet discounts could be reduced with companies receiving other benefits to make up the cash difference as manufacturers seek to keep in check dealer buying terms following publication of the Supply of New Cars Order 2000.

Motor manufacturers have broadly welcomed the new directive from the Department of Trade and Industry but, privately most manufacturers admit to being unsure of the impact the legislation will have.

The Government's aim is to see car prices cut by around 10% - in line with the Competition Commission's New Car Pricing Inquiry findings earlier this year - and to ensure dealerships obtain the same volume-related discounts as fleets.

Mark Hall, general manager, fleet sales, for Toyota, said fleet discounts were likely to fall. 'This could have serious consequences. I think in the market fleet discounts will go down. If manufacturers need to discount to fleets to keep sales up, it means they will have to offer the same large discounts to dealer groups, which means they either cut discounts and lose sales, or keep the discounts and lose revenue.' Stewart Whyte, director of ACFO, said: 'Fleets will see the discount gap with retail buyers closing because it is so visible and so political. But fleets will benefit in other ways because volume is important to manufacturers in a competitive market.' He believes that in return for reduced up-front discounts fleets will receive other benefits such as improved specifications which could see metallic paint, uprated stereos, alloy wheels and improved warranty terms being given at no cost to fleets and, effectively, replacing the reduced discount. Under the terms of the legislation, manufacturers must tell their dealers at least quarterly of the terms and conditions, including discounts available, on which they are prepared to supply cars to dealers for purchase outright. By effectively reducing the up-front discounts available to fleets and making up the 'lost' discount by other mechanisms, manufacturers would be able to ensure fleet transaction prices remain unchanged and, it is believed, circumvent the legislation. Vauxhall chairman and managing director Nick Reilly said the manufacturer would immediately respond to the legislation on fleet discounts for dealers and was working to put in place a structure to allow dealers which buy cars outright equivalent terms to those offered for an 'identical deal' to fleet buyers. Ford said a range of offers had 'pre-empted much of the effect of the order' with savings of up to £3,000 and chairman and managing director Ian McAllister said: 'We will continue to work with the DTI and the Office of Fair Trading to ensure the new order will mean attractive offers which are now available in the marketplace will be maintained after September, continuing to produce transaction prices well below the recommended retail prices.'

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