Eco City Vehicles, the developer of the Mercedes-Benz Vito London taxi, said sales increased significantly at the end of 2011.
In an update on recent trading, ECV said despite continued difficult conditions in the automotive sector in 2011, the group saw slightly improved vehicle revenues during the second half and closed the year with a strong finish in new taxi sales.
"As expected, demand for the new model Euro 5 London-licensed Mercedes Vito gained increasing momentum as the taxi trade faced the onset of new age limits in London and more stringent EU vehicle emission legislation from 2012. The Vito Euro 5 complies with the new EU emission standards, as well as provides other benefits such as improved fuel efficiency, comfort and six seat capacity," it said.
An autumn campaign, supported by Mercedes-Benz, introduced a highly competitive HP scheme and other promotional initiatives to spur sales, leading to robust sales in November and December, and the momentum has continued into January, the company said.
Based on Public Carriage Office data, Eco City Vehicles increased its market share of new London licensed taxi sales to 23% for 2011 as a whole, up from 21% reported for the first half of last year. Based on the latest three months sales, the Vito's market share has increased further and is estimated in excess of 30%.
The group estimates the new rules affecting the London licensed taxi industry will create a potential replacement market of approximately 3,000 vehicles in London, providing a solid growth opportunity for 2012 and beyond.
During 2011 the Group was impacted by higher-than-expected warranty costs incurred by One80 Ltd, its intellectual property subsidiary.
As a result, EBITDA for the second half is expected to be broadly neutral, compared with an EBITDA positive result expected by the Group previously.
The warranty issue affecting One80 has since been addressed and is expected to have little impact in 2012.
A major restructuring programme across the Group including One80 has already been implemented and expected to realise annual cost savings of approximately £0.5 million in 2012.
These cost savings, together with an anticipated increase in new taxi sales, are expected to contribute to a return to positive EBITDA in 2012.
The cash position remains tight due to the challenging conditions in 2011 and ECV is reviewing its funding arrangements with the full support of its bank and the KPM-UK Taxi Plc Discretionary Pension Scheme.
As first announced on 3 June 2010, a loan facility is provided by the Pension Scheme, whose beneficiaries are Peter DaCosta, Michael Troullis and Keith Marder, all executive directors and shareholders of the group.
To date the pension scheme has provided ECVa long term loan in total of £1 million. A further announcement will be made in due course.
The group has increased its shareholding in One80 from 58.8% to 76.6% as a result of subscribing in a £0.23 million rights issue by One80. In August 2011 One80 also raised a loan of £0.25 million which has been utilised along with the rights issue to decrease the liability outstanding to ECV.
The group expects a reduction in ongoing warranty costs compared to last year, resulting in a significant EBITDA contribution to the Group this year.