The impact of London’s ULEZ on dealerships in the capital – where are we now?

The Ultra-Low Emission Zone (ULEZ) expansion in London is now in effect, and it's having a profound impact on car dealerships in and around the capital. Initially, there was a lot of speculation about how the changes would influence both the value and demand for different types of vehicles. Now that we are post-launch, clear trends have emerged that dealers should be aware of to optimise their operations and capitalise on new opportunities.

Here are some key insights:

1. Non-Compliant Part Exchanges

Reported in Car Dealer Magazine this week, one of the most immediate effects of the ULEZ expansion is that dealerships in London have started to turn away non-compliant vehicles as part-exchanges. Given the daily charges these vehicles would incur for driving in the expanded ULEZ, their resale value and demand have plummeted. Consequently, they are now difficult to sell on.

2. Bigger Margins on Compliant Vehicles

On the other hand, the value of ULEZ-compliant vehicles has surged, and there is now an opportunity for higher margins. Demand for vehicles that meet stricter emission standards (including Euro 4, 5, and 6 for petrol and Euro 6 for diesel) as well as fully electric and hybrid vehicles has skyrocketed. Dealers should capitalise on this opportunity when setting their pricing strategies.

3. Selling Non-Compliant Stock to Buyers Outside London

For dealers who still have non-compliant vehicles in their inventory, sales are happening almost exclusively with buyers from outside of London or through online sales to customers who don't reside in the capital. For those dealers who have online sales journeys, this is a relatively easy hurdle to overcome. However, the smaller independent dealers who rely on local trade could struggle in this respect.

4. Increased Awareness and Education

Sales teams should continue to be well-informed about ULEZ regulations to provide accurate information to customers. As the scheme is now live, there may also be common questions and concerns from customers that should be anticipated and addressed proactively.

5. Finding Affordable ULEZ-Compliant Cars

Despite the heightened demand and increased values of compliant vehicles, it is still possible for customers to find bargain prices. Those who are willing to do some research and perhaps venture outside their immediate vicinity are likely to find competitive offers. Dealerships can use this as a selling point to attract budget-conscious buyers.

6. Opportunities for Growth

Just as before the ULEZ expansion, there remain business opportunities for those who can adapt swiftly to the new market dynamics. Whether it's promoting electric or hybrid vehicles, offering attractive trade-in deals for non-compliant vehicles, or expanding services to include retrofitting older cars, agile dealerships can find various avenues for growth and innovation.

In summary, the new ULEZ landscape presents both challenges and opportunities. Dealerships both inside and outside London will need to adapt their strategies to meet changing consumer demands and regulatory conditions. But for those who can navigate this complex environment, the potential rewards are significant.