FOCUS: CRISIS ON THE FORECOURT: Who wants a new car? Not us

The public's realisation that UK motor prices are the highest in Europe has led to a dramatic slump in new V-reg sales - and a dash for bargains on the continent

With only a week to go for dealers and manufacturers to meet their September target for selling the new V-registered car, tens of thousands remain unsold. Although the motor industry will not admit it, sales figures for the first month of the new V-plate are disastrous, according to an analysis of the figures by experts in the trade, exclusively for the Independent on Sunday.

This year the registration of new cars moved to twice a year, in March and September, after pressure from the industry to spread production more evenly instead of sales being concentrated during the annual August bonanza.

In August 1998, 505,000 new cars were registered; in March 1999, 370,000; and manufacturers were predicting between 400,000 and 450,000 would be registered this month. But analysts at Glass's Guide, known in the trade as the motor industry's "bible" for used car values, say the forecasts have been wildly over optimistic. According to their research, based on figures for sales and registration figures reported by dealers so far, the actual number of registrations by the end of September will be just 370,000. And this figure, they predict, will be achieved only by manufacturers artificially boosting registrations by employing the practice known in the business as "pre-registration".

Under this system the dealers, who receive incentives - or sometimes the makers themselves - register the car or cars in their own name at the Driver and Vehicle Licensing Authority in Swansea. The car is then sold on to a customer as "nearly new", thousands of pounds cheaper and with just delivery mileage on the clock.

Adrian Rushmore, Chief Car Editor of Glass's Guide, explained: "Every manufacturer has to predict the market and provide cars to meet demand. The greater the shortfall, the greater likelihood for manufacturers to force the market with pre-registrations. The manufacturers are not proud of this; the dealers will tell you about it, but it's difficult to get accurate figures for how many."

Mr Rushmore estimated that around 20 per cent of the registrations in the peak months of March and September would be pre-registrations. This means that as many as 74,000 new cars registered by the end of September were pre-registered by dealers and the real number of car sales to the public is just under 300,000.

The Society of Motor Manufacturers and Traders (SMMT) refused to confirm that car sales have been lower than predicted so far, but a spokeswoman said forecasters had not revised their prediction downwards from 400,000. She declined to say how many of these would be pre-registrations. But, she said, current forecasts for car sales in 1999 had been revised upwards to 2.225 million; about the same as 1998.

The last minute rush to pre-register cars likely to occur this week will lead to a flood of nearly new cars in the used car forecourts. Dealers and makers are also likely to offer extra financial incentives to new car buyers in the last few days of September. So if you are looking for a new car, this is the week to buy - big discounts of up to 10 per cent, pounds 1,000 cash backs, interest-free finance and free servicing deals are all likely to be on offer.

The slump in genuine sales to the public reflects a wider crisis of confidence in the motor trade as manufacturers come under unprecedented attack from consumer groups and competition watchdogs at home and abroad for over- charging their British customers.

Sales of the V-reg are a crucial indicator of public support for the British car industry after a year of bad publicity about the high prices we pay for cars in the UK compared with the rest of Europe and the United States. The trade has been particularly hard hit by a campaign by the Consumers' Association which exposed "The Great British Rip-Off" and called on people to boycott new car sales to pressurise manufacturers to lower their prices.

Another reason for the poor September sales figures was confusion caused by a surprise "price promise" announcement by Ford, following press speculation that car makers, led by Ford, were planning imminent car price reductions under pressure from the European Commission.

Ford announced it had no plans to lower prices before the end of the year, but that if forced to by competitors, customers who had paid the higher price would be reimbursed. Many people interpreted this to mean that prices would indeed fall, and therefore decided to wait before buying their new car.

The British car industry is currently under investigation by the Government's Office of Fair Trading, the Competition Commission (formerly the Monopolies and Mergers Commission), and the European Commission. Allegations range from operating a European-wide price fixing cartel to charging inflated prices and unfairly restricting customers who want to shop around in other countries.

Last week, European Commission inspectors made dawn raids at the headquarters of Peugeot, the French carmaker, to investigate restrictive sales and pricing practices. The action was in part triggered by complaints from UK buyers.

The case resembles an earlier investigation in which Volkswagen, the German carmaker, was fined a record pounds 65m in January because its Italian dealers were prevented from selling Golfs and Passats to Germans - the same cars were far more expensive in Germany.

Renault also faces an investigation after its Irish dealers - allegedly under pressure from the manufacturer - refused to sell cars to British customers. Daimler-Chrysler and the German-US group Adam Opel have also been investigated.

Earlier this month the European Commission launched a new inquiry to "assess price differentials" and service quality for consumers.

The Commission must decide within two years whether to extend a special "block exemption" which allows car makers to opt out of key articles of European competition law giving them power to decide who can sell new cars and effectively fix prices.

This has led to manufacturers charging whatever they want, wherever they want in Europe. The makers insist their dealers, including franchise dealers in other European countries, charge a fixed, recommended retail price which can vary from country to country.

The latest figures from the EC show that the UK remains the most expensive market for 62 of the 75 best selling models examined.

One of the reasons for the price disparities is the different level of taxes paid in each country. Car makers insist dealers sell at a fixed, pre-tax price. For instance, in Holland taxes on cars are 45 per cent whereas in the UK VAT is 17.5 per cent. The pre-tax price in Holland is fixed much lower than in the UK, so a British customer buying in Holland pays less for the car. Taxes in Denmark are also high, hence the Danes have some of the cheapest pre-tax car prices in Europe. Little wonder that car makers refer to the UK as "Treasure Island."

Another reason UK car buyers pay high prices at home is to subsidise the huge discounts of between 15 and 35 per cent given on fleets of company and hire cars.

Gilly Filsner, a motor industry analyst with consultants Ludvigsen Associates, said: "The manufacturers have seen the UK as a gold mine and long resisted official pressure on prices. They have been making hay while the sun shines. The private buyer has been subsidising the fleet buyer. If there is a slump in sales the manufacturers have only themselves to blame because they haven't responded quickly enough to increased consumer awareness."

In a statement defending the industry, the Society of Motor Manufacturers and Traders said British car buyers benefited from offers such as long warranties, free servicing and subsidised finance not available in other European countries.

The statement said government figures showed the price of new cars is falling in the UK against the Retail Price Index; and the strength of sterling, introduction of the euro and varying tax levels accounted for differing prices.

As the British car buyer wakes up to how the car market works and the difference in prices in Europe a growing number are travelling abroad to buy. A new, Essex-based company called Broadspeed Engineering, which offers a Car Cruise package with a ferry company sailing from Harwich, helping people to buy and import cars, is handling up to 300 cars a week from Holland, Germany, Belgium and Sweden. It has also sold 37,000 DIY guides to buying from Europe. The potential import market is enormous - 250,000 people have visited the Broadspeed website in just six months.

TALK OF THE TRADE

BMW DEALER, WINCHESTER

"In this area, Renault dealers are pre-registering a lot of cars because they are under pressure to meet targets."

FORD DEALER LIVERPOOL

"The year has been good so far, but this month sales are seriously down. September hasn't been as big as we all thought it would be."

TALK OF THE TRADE

ROVER DEALER, SLOUGH

"Across the industry, sales have been down this month and this was not helped by negative press speculation that prices might come down."

FORD DEALER, NORTH WEST

"The millennium is having a big effect. People would rather wait for the 2000 model."