Rental Downturn Causing DAF Concern
"DAF is not only market leader, but also the fastest growing truck marque in the UK. Overall registrations for the industry have risen by about 8% in the first nine months of the year, but our sales have increased by 27%," he said.
"For us, it's the sixth year of sustained growth year on year and we are achieving market leadership in every sector of the UK truck market where we compete, which is something we've never done before and is a good indication of consistency rather than some 'flash in the pan' result.
"On top of this we have had production constraints that extended lead times, but we have now increased capacity in Eindhoven, Westerlo (Belgium) and Leyland."
But will the demand be sustained beyond the Euro 3 'pull forward'? Stuart Hunt admitted to receiving mixed signals at present:
"On the one hand the stock market is looking buoyant and interest rates suggest they will drop further as the next step. 'On the other hand, High Street seems to have slowed down which is reflected in one traditional barometer sector, the rental fleets, where business seems to have changed down a gear recently."
"So some of our normal indicators are flashing green and red at the same time making forecasting even more difficult than usual. What is clear is that the Euro 3 'pull ahead' effect will be at least as pronounced as Euro 2 in 2001. And that's not surprising, because the capital cost of everybody's Euro 4 trucks will be significantly higher than today's vehicles, however a number of those Euro 4 trucks will be cheaper to operate, offsetting the higher purchase price."
DAF estimates that initial prices could rise by as much as 10 to 15% for the new XF105 at Euro 5. This premium, which is the cost of the new technology needed to achieve Euro 4 and 5, is turning the European truck market into a two-tier sector, reckons Stuart Hunt.
"On one hand there is the Maut markets, essentially Germany and bordering countries, where operators are prepared to invest now to go straight to Euro 5 and avoid the uncertainty and expense of Euro 4 altogether. On the other hand, there's the rest of Europe led by the UK, which is happy to stay with Euro 3 for as long as possible.
"That's why DAF could comfortably introduce the XF105 at the RAI Show as an additional model, available only in Euro 4 or 5 format and not as a replacement for the XF95 which stays at Euro 3 and will remain in production as long as there is a demand for it."
DAF only expects around 10% of XF sales in the UK to be for the 105 over the next 12 months although this will increase as the 6x2 goes into production from April next year offering, confirmed Stuart Hunt, up to 4% better fuel efficiency, 10% lower repair and maintenance costs, 15% higher resale value and service intervals extended to 150,000km.
11/11/2005
Legal Brief