Holden reduces rental fleet sales

HOLDEN has halved the amount of cars it sells to rental fleets in one year.

Sales figures obtained by GoAuto reveal Holden sold has sold just 2.18 per cent of its cars to rental fleets so far this year, as opposed to 5.05 per cent for the same period last year.

The reduction is part of an overall move to reduce the company’s reliance on rental fleets, which typically demand a very low purchase price.

GM Asia Pacific president Nick Reilly confirmed last week that the rate of VE Commodore rental sales was down significantly on the VZ model, which was a good thing for the company.

“It has dropped significantly in 2007 versus what we had done before,” Mr Reilly said.

He conceded this would be cost the company some market share, but added that was better than an over-reliance on rental sales.

“It is not that those sales are bad, it is that too many of those sales are bad,” he said.

“Not only for the profitability of the original sale, but also because of resale value.”

Mr Reilly said Holden’s share of the rental market should not exceed its share of new car sales.

So far this year, Holden has achieved a 15.2 per cent share of new car sales and substantially reduced its market share of rentals down to around 15 per cent.

Mr Reilly said he would be happy for Holden to maintain that share of the rental market.

“That would be fine. If it was 30 per cent or so, which it has been in the past then that would be a problem,” he said.

Left: Ford Falcon and Toyota Corolla.

Sales figures obtained by GoAuto reveal other car-makers have maintained or increased sales made to rental fleets.

So far this year, Ford has sold 5.29 per cent of its sales to rental companies, which is roughly the same amount as the same period last year.

Rental fleets are important to Toyota, with 8.75 per cent of all its cars purchased as renters, up from seven per cent last year.

Mitsubishi is the local manufacturer most dependent on rental buyers, which have bought 9.82 per cent of its sales so far this year, as opposed to 6.91 per cent last year.

Some car-makers including Subaru and Audi are also starting to sell into the rental fleets.

Several car-makers view selling some cars to rental fleets as a positive marketing move.

The argument is that many new customers are exposed to the latest product, which can hopefully lead to sales.

Director of operations at Innovation Sureplan, Tony Robinson, told GoAuto that rental fleet sales have previously been used to inflate sales numbers.

“The rental car market has frequently been used as a dumping ground to get volume and market share,” he said.

Mr Robinson said Holden, along with other key players, was no longer prepared to buy cars back from rental operators or slash their prices.

He said the reduction on Holden rental sales had already had a small, but positive, effect on used VE Commodore values.

While the company is currently reducing its reliance on rental fleets as it ramps up production for booming export sales, including the major deal to ship Commodores to the US, Mr Robinson said there was no guarantee the policy would stay in place in the long term.

“The rental car market is a good fallback if your exports suffer or retail sales reduce,” Mr Robinson said.

“The rental market ebbs and flows, so there’s nothing to say that in 10 years they won’t be back in at the previous rate.”

Holden’s reduced dependence on fleet sales is in line with General Motors in the US.

Mr Reilly that part of the restructuring plan that saw the company move from a “pretty difficult situation” two years ago to posting a $1.3 billion profit for the first quarter of this year, was a reduction in fleet sales along with staff reductions, plant closures and the arrival of new products.

“In particular, there has been a big cut-back on sales to rental companies and some other fleets in order to boost profitability and resale values and that has had a good financial impact, although it had meant losing a bit of market share,” Mr Reilly said.

Holden might be cutting back on its rental sales, but it is still very much interested in fleet sales, which form the core of Commodore sales.

While it would not disclose its fleet numbers, the company admits they are down in 2007, thanks largely to a reduction in government fleet purchasing that continues to bite into large car sales.

The flipside is that slipping fleet sales mean the share of private sales in the Commodore numbers improves, which is a good thing, said Mr Reilly. “The overall segment for large cars is down as you compared to a few years ago, but Holden retail sales are doing extremely well and what that has done is given us a much better mix,” he said.