Peter McDonald, head of fleet and business sales at SEAT, gives an insight into the Spanish car maker’s growing presence in the industry’s turbulent times including emission issues and VED upheavals
THE demonisation of diesel cars over their health-damaging emissions of nitrogen oxides and particulates is already causing a significant shift back towards petrol-powered alternatives by business and private buyers alike, if the experience of Volkswagen group’s SEAT brand is typical.
“We’ve had a number of big customers in the past few months who historically have had diesel-only policies but which have now changed them to allow in petrol; and quite a number of user-choosers have done the same,” says Peter McDonald, head of fleet and business sales at the Spanish car maker rescued by VW three decades ago. “I think the whole market’s moving that way.”
With London Mayor Sadiq Kahn lining up a hefty pollution charge for older diesels on top of the city’s congestion charge – taking the potential daily total to £24 – and up to 32 smaller cities considering similar plans, “there is a degree of dread about what a diesel might end up costing you,” observes Mr McDonald.
“If I was to ask my team what’s the biggest thing concerning them it has to be the consideration of diesels and their potential whole life costs.”
SEAT is on something of a roll in the UK, not least with business car users.
With inevitable uncertainties stirred over potential further restrictions, VED, BIK and other possible rule changes and charges, with whatever knock-on effects there might be on residual values, it is becoming a major headache for SMEs and larger fleet users as to what should be on their fleets in four years’ time.
“Two or three years ago fleet sales were 30-40 per cent diesel in the subcompact market. But our recent sales of Ibiza (SEAT’s subcompact) have been 95 per cent petrol. That’s how quickly the market has moved.
“We had some months last year when we moved from being a 60-40 predominantly diesel proposition on (VW Golf rival) Leon to being 60-40 petrol. I think it’s smoothed out a little over time and we think it’s around 50-50 now. But that’s really been quite a significant change.”
Despite such uncertainties, SEAT is on something of a roll in the UK, not least with business car users. After four years of continuous growth – to reach 47,400 total UK sales last year – this year’s first quarter saw a further 29.1 per cent year-on-year rise to a record 11,200 registrations. Of huge importance to McDonald, within the total there was a leap of 85 per cent in true fleet sales following a record 10,000 units last year.
The likeable Aussie, whose career with VW group has included stints at Wolfsburg HQ and as head of planning for Volkswagen China, suggests there should be a lot more growth to come as a number of new models arrive over the next year or two to broaden SEAT’s product range.
SEAT’s biggest ever product offensive
They will form part of SEAT’s biggest-ever product offensive, following the recent launches of the Ateca medium SUV; a new Ford Focus-rivalling Leon hatchback and estate plus hotshoe Cupra variant; a new Ibiza subcompact due in summer and the company’s first crossover, the Arona, due before the end of the year. A larger SUV, as yet unnamed, is also in the production schedule, although it will not appear until the end of next year.
SEAT’s inroads into the fleet and SME business user sectors may still be modest by the standards of the biggest players such as Ford. But progress has been such that pivotal ties have been formed with some of the biggest guns in the leasing world.
“The most successful leasing companies for us are LeasePlan and Lex Autolease,” observes McDonald. “We won one of Leaseplan’s biggest customers a few years back – Zurich – alongside Audi, which was the first time the two VW-owned brands had come together for a deal. We still maintain that tie with Zurich.
“Then we won another of their biggest customers, one of the major supermarket chains. And once you win deals like that and you get to know the big leasing companies, then you become to them a trusted partner. We now have two dedicated managers concentrating purely on growing leasing company relationships and increasingly we’re being introduced to end-user customers.”
McDonald is the first to acknowledge that gaining fleet and SME business user ground is far from easy, however, pointing out that larger fleets want only a small number of partners because it’s more efficient to work with them and they want a certain amount of leverage on discounts, too.
“We tend to get a situation where a fleet customer says ‘we work with Ford, BMW, Nissan and Vauxhall’. And if you want to get on their list you need to knock one of those guys out. That’s tough. It may well be that the Leon is a better car than its competitor but you’re facing Insignias, Mondeos – the whole vast breadth of those manufacturers’ model ranges.”
Which makes McDonald particularly thankful for late last year’s arrival of the Ateca SUV. “It’s bringing a new level of attention to the brand and a new awareness of its desirability. It’s really changed things; it’s helped to open doors.
“The SUV segment is a really good segment to be in. And the Ateca’s the right size; people are downgrading from the 3 Series market and upgrading from lower segments as well. When you look at the success in the sector of Kia, Hyundai, Nissan – it’s a segment which doesn’t actually require a premium badge on it to be successful.”
SEAT’s pitch to fleet and SME users has largely been emphasis on its broadening of model ranges for growth; its cars often being award-winning and based upon VW engineering and production; being good from a P11D perspective and – perhaps oddly – a lack of ostentation in the brand. The last, says McDonald, has turned out to be a plus factor in winning business with companies such as Centrica, the utilities group, where any appearance of conspicuous consumption is an issue.
“The brand has evolved, though; it’s become much more desirable and we can directly compete,” says McDonald. Indeed, in this year’s first quarter SEAT ranked 12th among manufacturers in fleet and SME provision after overtaking Renault, amd Honda. “So when you take out BMW, Mercedes, Audi and Land Rover at one end and the really big players Ford, Vauxhall, VW and Nissan – we’re doing quite well.”
Building relationships with brokers
If there is one area where SEAT appears still to have a small mountain to climb it is in its relationships with the fast-growing and ever more important leasing broker sector.
McDonald claims varying relationships with some 30 of the 550-and-rising brokers now playing such a large role in users’ acquisition requirements. But he acknowledges they are more ad hoc project-by-project ties or in specific niches such as taxis, driving schools and local authority users, not strategic collaborators.
Nationwide and Fleet Alliance are big players representing partial exceptions; but nevertheless it is still more a question of building relationships with brokers – and not providing direct terms. “Brokers are growing in the market and we understand why people would rather deal with a broker than a dealer – so we will continue to nurture those relationships.”
That has not stopped SEAT continuing to make good progress in the SME sector, which in little more than a year has seen its share of SEAT sales rise from 33 per cent to around 40 per cent, helped by a local dealer business development scheme focused on 25 of SEAT’s 125-strong dealer network. “That’s in a consolidation period,” says McDonald.
“Launched 3-4 years ago it was small and has taken time to build up. We wanted to make the scheme desirable from the dealers’ perspective rather than having to cajole them.” The 25 dealers, he insists, provide good geographical coverage with no immediate need to expand the network.
‘Bonkers’ March registrations and new VED impact
All this is taking place within a UK new car market in which “the March registration data was bonkers”, says McDonald. “From it you could extrapolate a 3m market.” Much of the activity can be written down to brokers and other business interests buying forward to escape the April 01 VED changes which will entail significantly increased VED costs for most cars registered after April 1. But for buyers and funders alike, that still means problems.
“How do you differentiate between that (pre-April 1 ) 17 plate and a later one? Because the VED changes don’t affect just year one but years 2, 3, 4 and 5 as well. It’s quite a pressure on costs – for us about £6 a month average on our rental,” says McDonald.
Which raises the question of new car pricing, and the economic uncertainties which may or may not buffet them.
“Are there the same clouds we had back in January? Yes. There’s foreign exchange and the lower pound’s effects and since most of the cars are built in the EU or their components are, you’re threatened not just by exchange rate movements but what might happen to UK inflation.
“So if UK inflation takes off and goes above 3 per cent and the Bank of England has to respond and increase interest rates, that will really tighten everyone’s disposable income quite quickly, affecting cars and houses.”
SEAT, as part of the VW empire and like most major car makers, has hedged sterling forward against the euro for some time ahead. However, some manufacturers’ price rises of around 3 per cent in and around January did not go unnoticed – “and on present trends there is a real threat of further ones,” warns McDonald.
