The new car market has reached a level where the industry is being damaged by such high volume being pushed into the UK.
That was a warning from Audi UK director Andre Konsbruck, who added that profits are being put at risk when the UK is required to absorb so much volume.
“The market is more challenging than in previous years, it’s unnatural growth. There seems to be a push to go for a 2.6 million level, for whatever reason.
"It’s reached a level now where it’s really damaging," he told AM during the Frankfurt Motor Show.
"We’re already starting to see an impact on residual values of used cars, the new car offers are so attractive that used cars are suffering, and in order to hit these ambitious targets we’re seeing a lot of self-registration in the marketplace, which is damaging margins on both sides.”
Konsbruck believes the market is suffering around 150,000 forced registrations of new cars that have no end customer.
He talked of seeing one manufacturer recording 43% of one month’s registrations in the last day of the month.
He is also concerned that the market has been attracting consumers through low interest rates and strong residual values which will not be sustainable.
“All these customers who bought a couple of years ago are coming to parity at an early stage now, but all this will change when values drop, which is inevitable, or interest rates go up.
Return on sales has dropped
"Then we will have to see how people behave if they’re not offered a change after 18 months when they’ve started to get used to it, and how manufacturers will behave when there’s some volume pressure, and how dealers will behave when they’re asked to sign up to unrealistic targets.
“I want a sustainable business, but I can’t have that if my dealers are not profitable,” he added.
The Audi network’s average return on sales has already dropped from 2.3% to 2.0% this year.
The worrying thing is that the brand and its dealers can do everything right, yet factors outside Audi UK’s influence will damage the business, he said.
Future residual values are a worry for Konsbruck. He doesn’t want to be faced with the worst case scenario when values drop, whereby Audi has to put more tactical money into the market in order to support the renewal of PCP customers.
Yet he cannot guarantee that won’t be necessary.