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Question mark on diesel sales future

Industry opinion is divided over whether diesel sales will soar later this year before new company car tax rules no longer exempt drivers from a 3% benefit-in-kind penalty.

Some commentators are convinced diesel sales will surge later this year before the reduction is removed for cars that meet Euro IV emissions, meaning higher tax bills for drivers.

But others say diesel sales are on the increase anyway and will not be affected by the new rules, which come into effect from January 1, as many companies will be unable to bring their orders forward.

Executives at GE Commercial Finance, Fleet Services has already noted some fleets changing their buying patterns to take the change into account.

Managing director Rich Green said: 'The 3% saving is a big enough incentive for company car drivers to pressure their employers into bringing forward the replacement of their car by a few months where possible, and we are sure that this will see a noticeable increase in demand.

Fleet managers are already expecting this to happen and talking to us about the issue.'

The view that diesel sales will increase this year is shared by bosses at ALD Automotive.

Deputy managing director Nigel Fletcher said: ‘We expect a surge in diesel orders from September onwards as businesses look to beat the tax rise deadline on behalf of their drivers. But I don’t think fleet managers will be in a position to pull forward orders from early in 2006 to beat the tax rise as they will incur early termination charges.’

Some companies are concerned that there is already a backlog of orders for Euro IV models – not helped by a shortage of particulate filters, claims Lex Vehicle Leasing pricing manager Steve Jones.

He said: ‘With the added demand by companies to get their drivers into Euro IV cars registered by the end of the year, there could be many cars that don’t meet the 3% waiver cut-off point. This will lead to drivers facing higher tax bills.’

Lex estimates that about 100,000 drivers taking delivery of a new company car in the first quarter of next year could be looking to bring their order forward to the end of this year.

And Terry Bartlett, managing director of Inchcape Fleet Solutions, said diesel orders were strong anyway and that the tax change will not impact significantly on demand.

He said: ‘With fuel prices high and the likelihood of them increasing further, diesel is not only the tax-effective choice but is also the choice for fuel efficiency, particularly with more and more employees paying for fuel used privately.’

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