Why twin peaks will smooth the car boom

Record attendance at the Motor Show signals soaring car sales. Tom O’Sullivan asks how twice-yearly registration will affect the August rush.

There are 12 months in every year to buy a car. Yet the UK car industry is still geared to selling 25 per cent of its annual volume, over 500,000 vehicles, in one month – in fact, in about three days at the start of August.

Logistically it puts pressure on all aspects of the manufacture and distribution for the car industry – from getting the cars off the production line to supplying dealers and then storing the vehicles.

It also forces some manufacturers to falsely inflate their August sales figures by registering cars that have not actually been sold because no marketing or sales director at a car maker can afford a “bad” August. In short, the August 1 date distorts the market, which means that months such as July and September are comparatively barren.

Additionally, car marketing and media buying are artificially geared to a single month, adding to media inflation and reducing manufacturers’ room for manoeuvre.

In truth, the situation has begun to change with cars now as likely to be launched in March, such as the Peugeot 406 last year, which means that marketing spends are more evenly spread across the year. Next year will see the new Vauxhall Astra launched in March or April, a single launch for the Ford Cougar, and a Ford Escort replacement hit the market in the autumn.

But June, July and August remain the key months for TV ad spend. “There is an attitude in the motor industry which says no matter how bad a year I am having, August will be a stormer,” says a source at one manufacturer. “That is no way to run a modern distribution industry.”

The industry, which gathers this week for the bi-annual London Motor Show, is on an up. Total sales for 1997 are expected to top 2 million cars, over 400,000 people will visit the Motor Show in the next ten days and they will see over 500 models displayed – some new, some revamped, but all destined for the UK market within the next year.

Adding to that happy picture is the industry’s expectation that the Government will announce the ending of the August registration system before the year is out.

The Department of Transport consulted the motor industry earlier this year. A decision on the future structure is now awaited from a quartet of departments: Transport, the Home Office, the Treasury – because it will cost money – and Trade & Industry. There could be an announcement as early as next month’s Budget.

“There have been discussions between the departments,” says a Whitehall spokeswoman, “but there has been no decision about which system or how soon it will be implemented.” While the type of system has to be decided there is no longer any doubt that change is on the way. And nobody now believes it will damage total sales.

The Society of Motor Manufacturers & Traders (SMMT) has long argued for twice-yearly registrations, in March and September. Some manufacturers including Toyota have argued for a more radical change, with four registrations eventually leading to a complete phasing out of any identifying letters or numbers.

“We feel that twice-yearly is an improvement,” says Toyota spokes-man Scott Brownlee, “but we would like to see no year identification and the removal of all artificial incentives.

“If it is only reduced to two dates, dealers will still concentrate on those two, because the industry has grown up with that attitude. A lot of advertising has nothing to do with August. But even trying to market something out of that period is difficult, because the August rush takes people out of the market for months and affects buying decisions.”

Ironically, one of the main barriers to greater car buying at other times of the year, once the August rush has been banished to history, could be psychological.

“It is likely that you will still see a sales peak in August for two or three years,” says Phil Teeman, board director at Ogilvy & Mather’s The Network, which handles media buying for Ford. “There will be a number of finance schemes that will have to run their course, and after 30 years it will take consumers a little while to adjust.

“In media buying terms there will be a greater need for manufacturers to develop communications platforms exploiting the opportunities that media owners increasingly offer.” Car makers are developing plans for sponsorship, direct marketing and most are also looking at the implications of digital TV.

The most likely scenario will be a switch to two annual registrations in 1999. In theory it should reduce marketing costs, along with those for distribution and manufacturing. But with the UK market showing little sign of giving up its title as the most competitive in Europe, it is difficult to see how the industry is going to get out of a cycle of spiralling costs that has seen annual marketing spend in the UK rise above 600m.

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